Korea Broadcast Advertising Corporation's Monopoly of Advertising Agency Work for Terrestrial Broadcasters Case

[20-2(B) KCCR 367, 2006Hun-Ma352, November 27, 2008]

In this case, the Constitutional Court decided that, Article 73 Section 5 of the former Broadcasting Act, Article 59 Section 3 of the Enforcement Decree of the former Broadcasting Act, Article 73 Section 5 of the Broadcasting Act, and Article 59 Section 5 of the Enforcement Decree of the Broadcasting Act, which provide that only the Korea Broadcasting Advertising Corporation and broadcast advertising agencies invested by the Corporation are permitted to function as advertising agencies for the terrestrial broadcasters, infringe the claimant's equality rights as well as freedom of occupational activity and therefore are not compatible with the Constitution.

Background of the Case

The complainant in this case is a corporation established on February 7, 2006 with the purpose of engaging in the domestic and international advertising agency business of terrestrial broadcasting, CATV, satellite broadcasting, and digital multimedia broadcasting (DMB) which currently performs as a broadcast marketing agency in CATV, satellite broadcasting, and DMB businesses.

However, Article 73 Section 5 of the Broadcasting Act stipulates that every terrestrial broadcasting business operator may not broadcast advertisements other than those entrusted by the Korea Broadcasting Advertising Corporation (hereinafter "KOBACO") or an advertising agency prescribed by the Presidential Decree, and Article 59 Section 3 of the Enforcement Decree of the Broadcasting Act limits the broadcast advertising agency prescribed by the Presidential Decree to a joint-stock company established to engage in broadcast advertising agency activities, and financed by KOBACO (hereinafter the "Provisions"). Therefore, the complainant company established without the funding of KOBACO is not permitted under the aforementioned Provisions of the Broadcasting Act and the Enforcement Decree of the Act to act as an advertising agency for terrestrial broadcasting companies. In this regard, the complainant filed a constitutional

complaint on March 16, 2006, arguing that the Provisions infringe its freedom of occupational activity and right to equality.

Meanwhile, Article 73 Section 5 of the Broadcasting Act was revised by Act No.8301 on January 26, 2007 to include in terrestrial broadcasting business operators any program provider who airs the terrestrial broadcasting in use of the channel after concluding a broadcasting channel use contract with any terrestrial broadcasting business operator. Also, Article 59 Section 3 of the Enforcement Decree of the Broadcasting Act was transferred to Section 5 after being revised by Presidential Decree No.20219 on August 7, 2007.

Summary of Decision

The Constitutional Court decided that authorizing only KOBACO and broadcast advertising agencies funded by KOBACO to conduct advertising agency work for terrestrial broadcasters is as good as in effect allowing the monopoly of KOBACO and thus is not compatible with the Constitution (6 voting for incompatibility, 2 for unconstitutionality, 1 for partial dismissal and unconstitutionality) for the following reasons:

1. Majority Opinion of Six Justices (Incompatibility)

A. Violation of Rule against Excessive Restriction

The Provisions in this case introduce limited competition to the broadcast advertising sales market for terrestrial broadcasting companies and, at the same time, authorize only KOBACO and the KOBACO-funded advertising agencies to engage in advertising agency work for terrestrial broadcasters in order to ensure fairness, public interest, and diversity of broadcasting.

However, it is to be doubted as to whether providing the license for advertising agency for terrestrial broadcasters limited to KOBACO and the KOBACO-funded advertising agencies as prescribed by the Provisions in this case have introduced competition to the advertising sales market for terrestrial broadcasters.

On the surface, the Provisions concerned introduce limited

competition to the market by extending the licensees of the advertising agency for terrestrial broadcasters from only KOBACO to also include the advertising agencies funded by KOBACO. Yet, not a single company has been invested by KOBACO for the advertising agency business since 2000 when the Provisions were adopted, and the monopoly of KOBACO will not give way if KOBACO continues to delay investing as has so far citing its managerial judgments. This is due to the fact that the Provisions concerned choose to permit the advertising agency for terrestrial broadcasters only to specific actors, namely KOBACO and the KOBACO-funded advertising agencies, without any criteria, instead of using reasonable and objective standards. It can hardly be said that even some limited competition has been introduced by leaving the matter of bringing competition to the advertising sales market for terrestrial broadcasters in hands of the discretional judgment of KOBACO as prescribed by the Provisions in this case.

Meanwhile, authorizing the advertising agency work for terrestrial broadcasters only to KOBACO and the KOBACO-funded agencies as provided for in the Provisions at issue is neither an appropriate means to achieve the legislative purpose of the Provisions nor a way to minimize the restriction on basic rights. For instance, the legislature may choose one of the following methods to guarantee publicity, public interest, and diversity of broadcasting, to introduce substantial and limited competition, and yet to minimize the violation of basic rights: offer licenses limited to business operators meeting certain conditions, organization, and facilities; permit the establishment of private broadcast advertising agencies only to those who provide a certain amount of broadcast advertising to small and medium sized broadcasting stations; set a ceiling on the rates of broadcast advertising adopt a quota for programs according to genres and viewers; offer subsidies for the production of publicity-oriented programs through funds organized with the donation of broadcasting stations; or cancel a license in case of undermining the public interest and fairness of broadcasting. Notwithstanding the aforementioned options, the legislature breaks the rule of the least restrictive means in violation of basic rights by limiting the licensees to KOBACO and the KOBACO-funded advertising agencies.

In conclusion, the Provisions in this case contradict the rule against excessive restriction and thus infringe the complainant's freedom of occupational activities.

B. Violation of Right to Equality

The Provisions at issue introduce limited competition into the advertising sales market for terrestrial broadcasting companies yet confine the license for advertising agency for terrestrial broadcasters to KOBACO and broadcast advertising agencies funded by KOBACO in order to ensure publicity, public interest, and diversity of broadcasting.

However, there is no reason to allow only KOBACO and the advertising agencies funded by KOBACO to conduct broadcast advertising agency activities for terrestrial broadcasters. Achievement of the above stated legislative purpose is not determined by whether the business operator is KOBACO or one funded by KOBACO but by whether there is more than one advertising agency in substantially competitive relationship and whether there is a substantial system to enhance publicity, diversity, etc. regardless of whether the broadcast advertising agency for terrestrial broadcasters is public, private, or funded by the public sector. However, the Provisions concerned do not take such factors into account and gives license for advertising agency for terrestrial broadcasters only to KOBACO and the KOBACO-funded business operators, which lacks the proportionality between the objective and means of discriminatory measures.

Therefore, the Provisions infringe the right to equality of the claimant.

C. Extension of Subject-Matter to Review, Decision of Constitutional Incompatibility and Order to Temporarily Apply the Provisions

(1)The former Broadcasting Act and Enforcement Decree of the Act in this case have undergone amendments to date without changes to their contents, and the revised regulations are essentially not different from the former provisions of the Broadcasting Act. Therefore, the revised Broadcasting Act and its Enforcement Decree, along with the Provisions in this case, will be declared unconstitutional in order to

guarantee effectiveness of the decision of unconstitutionality, conformity to legal order, and lawsuit economics.

(2)However, if the Provisions subject to review lose effect immediately through a decision of simple unconstitutionality, the founding rule for regulating broadcast advertising agency for terrestrial broadcaster will disappear, leading to too big a pool of broadcast advertising agencies and thereby bringing disorder to the agency business for terrestrial broadcasters. As a result, it is decided that the Provisions concerned will be ruled incompatible with the Constitution. Therefore, Article 73 Section 5 of the Broadcasting Act and Article 59 Section 5 of the Act'sEnforcement Decree should be applied temporarily until their unconstitutionality is removed and be revised no later than December 31, 2009.

2. Separate Opinion of One Justice (Unconstitutional)

I agree to the majority opinion that the provisions subject to review in this case infringe the liberty of occupational activity and equality rights of the purely private broadcasting marketing agencies but believe there is no reason to hand down a ruling of constitutional incompatibility. Even though the founding rules for regulating terrestrial broadcasting marketing agencies are abolished through a simple unconstitutionality decision, I do not think, considering the cases of other types of broadcasting aside from terrestrial broadcasting, that increase in the number of private broadcasting marketing agencies, their mutual competition, etc. will critically damage the publicity and public interest of broadcasting and severely hamper legal stability in the rule of law. Therefore, the provisions concerned should be held plainly unconstitutional.

3. Separate Opinion of One Justice (Unconstitutional)

Article 73 Section 5 of the Broadcasting Act prescribes both the obligatory commissioning of advertising sales for terrestrial broadcasters (hereinafter the "Obligatory Commissioning") and restriction on the requirement for advertising agency for terrestrial

broadcasters (hereinafter the "Restricting Requirement"). Yet, the majority opinion subjects to review only the part regarding the Restricting Requirement and holds it incompatible with the Constitution. In this regard, I do not have any objection to the fact that the Restricting Requirement in Article 73 Section 5 of the Broadcasting Act infringes basic rights of the complainant, herein a broadcast advertising agency, but view that the portion regarding the Obligatory Commissioning, along with the Restricting Requirement, also infringes basic rights of the complainant.

The Obligatory Commissioning in Article 73 Section 5 of the Broadcasting Act prohibits the terrestrial broadcasters from directly concluding a broadcast advertising contract with the advertisers or advertising agencies and requires commissioning of broadcast advertising to the designated advertising agencies. As a result, terrestrial broadcasters cannot take orders for the advertisements to be broadcasted by themselves but should commission the work to the designated agencies, and the contents (screening), duration, methods, rates, etc. of broadcast advertising should also be left for the agencies to decide. Since this is as good as entrusting all the major income sources needed for terrestrial broadcasting business to specific designated advertising agencies, it is a critical violation of independent survival and autonomy of the terrestrial broadcasting business. Therefore, it is inevitable that the Obligatory Commissioning as prescribed by Article 73 Section 5 of the Broadcasting Act greatly violates the freedom (liberty of occupational activity and freedom of the press) of terrestrial broadcasting businesses.

Meanwhile, the Restricting Requirement exists based on the Obligatory Commissioning of broadcast advertising and, in combination with the Obligatory Commissioning, restricts the liberty of occupational activity of general broadcast advertising agencies. Therefore, it is necessary to review the Obligatory Commissioning as well as the Restricting Requirement in this case. The Obligatory Commissioning and the Restricting Requirement in whole violate the Constitution.

4. Separate Opinion of One Justice (Partial Dismissal and Unconstitutionality)

Article 73 Section 5 of the former Broadcasting Act only confines the license for broadcast advertising agency for terrestrial broadcasters to KOBACO or a broadcast advertising agency prescribed by the Presidential Decree, but the provision itself does not cause any direct restriction of freedom, imposition of obligations, or deprivation of rights or legal status of the complainant. Consequently, the petition concerning the above provision lacks the requirement for directness and is thus nonjusticiable.

Meanwhile, with respect to Article 59 Section 3 of the former Enforcement Decree of the Broadcasting Act, it should not be reviewed together with the Broadcasting Act provision as a whole; rather a separate review of unconstitutionality is required irrespective of the above Broadcasting Act provision. Therefore, the stated provision of the former Enforcement Decree which specifies "joint-stock company established to engage in broadcast advertising agency activities, and financed by KOBACO" disregards the rules of suitability of means, the least restrictive means, and balance of interests and thus infringes the complainant's liberty of occupational activity. Further, distinguishing KOBACO-financed companies from those not financed by KOBACO has no legitimate grounds, thereby violating the complainant's right to equality.

As such, I agree to the opinion of dismissal regarding the above Broadcasting Act provision and the majority opinion regarding the stated Enforcement Decree provision but differ in the methods and contents of their unconstitutionality review, so I hereby release a separate opinion.