As the distribution/consumption of audiovisual content
shifts from television to the internet, the Brazilian National Film Agency
(ANCINE) has been attempting to extend its authority to the digital
environment. There has been a previous attempt to regulate the Video on Demand
(VOD) market, a still unfinished debate sponsored by ANCINE. In the meantime,
ANCINE has also turned its attention to digital advertising, the subject matter
of ANCINE’s Normative Ruling No. 134 issued in May 2017.
ANCINE was created, and its authority established, by Provisional Measure No.
2.228-1/2001 (MP 2.228-1/2001), which also puts forth several regulatory
obligations, including the payment of the Contribution for the Development of
the National Cinematographic Industry (CONDECINE) on the commercial use of
videos (whether advertisement or not) in specific market segments. The segments
specifically named in MP 2.228-1/2001 are movie theaters, home videos,
free-to-air television, pay-TV, and a very general “other markets”.
Under Normative Ruling 134 ANCINE attempted to create a market segment named
“internet audiovisual advertising” within the “other markets” listed in the MP
2.228-1/2001. This would expand CONDECINE payment obligation to advertisement
videos in the internet, at the same time that it would create additional
regulatory obligations such as to register the video and respective producer
with the Agency, adapt foreign ads to the Portuguese language and keep records
and make filings of documents at the Agency’s request.
Even though CONDECINE is called a contribution (to fund government
intervention), it has a tax nature. Specifically when it refers to tax matters,
the constitutional principle of legality has strict contours. Taxation will
only be valid if specifically foreseen in law, because “it is forbidden to the
Federal Government, the States, the Federal District and the Municipalities
to create or increase taxes without prior law”. While there is no law
amendment and a clear legal definition (not through Normative Ruling) of what
would be such “other markets”, tax authorities are prevented from collecting
CONDECINE based on the use of audiovisual works in markets that are not clearly
listed in the MP 2.228-1/2001 (such as the audiovisual advertisement in the
internet), otherwise it will be in violation of the Federal Constitution.
In response to claims from several market players, on July 13, 2017 ANCINE
issued a new Normative Ruling numbered 135 that amended article 7 of the
Normative Ruling 134 to delay to October 18 the effectiveness of the
obligations related to the use of audiovisual advertisement in the internet.
ANCINE also announced that it will undertake a Regulatory Impact Analysis to
evaluate the consequences of the proposed obligations. ANCINE’s action has not
gone unnoticed by Congress, where a Bill of Legislative Decree for Suspension
of Normative Act from the Executive Branch (PDC 681/2017) has been proposed to
suspend the Normative Ruling 134 based on the principle of legality.
This was not the first time that ANCINE attempted to extend the collection of
CONDECINE by means of a Normative Ruling. In 2012 the Agency published a
similar Normative Ruling to impose CONDECINE payments on the VOD market.
Likewise, the measure was highly criticized in light of the principle of
legality and, although still in force, there has been very limited actions to
enforce it. ANCINE itself acknowledged in the Report about the Public
Consultation Concerning the Notice on the Audiovisual Communication on Demand
launched in 2016 that “the regulation of VOD depends on the creation of a law”
and that “the legislative branch, and not ANCINE, is responsible for
conducting this market’s regulation process”.
Finally, it is important to note that that the obligations contemplated by
ANCINE in relation to the sale of advertising in the internet have an important
impact not only on digital advertisement producers or holders of licensing
rights for public communication – responsible for the ads registration and for
payment of CONDECINE – but to all platforms that show advertisement in the
internet. That is because the MP 2.228-1/2001 and the ANCINE Normative Ruling
109 establish that the exhibition, sale or publishing of audiovisual works
without prior registration is subject to fines. If the obligation to register
the ads becomes applicable also to the internet environment, internet vehicles
(for instance, news portals, social networks or ad exchange platforms) would be
subject to fines if they publish or sell ads not duly registered.
Implementing control mechanisms in this sense, however, may be a
challenge from a technical and operational perspective.