Brussels suspends the current Hungarian advertisement law

Two days ago it was announced that Dirk Gerkens would step down as CEO of RTL Klub in Hungary. His departure had long been rumored since Gerkens’ fierce defense of the television station’s independence from government interference greatly irritated the officials of the Orbán government. Irritation was translated into action. On June 11, 2014, the Hungarian parliament passed the Advertisement Tax Act. It hit RTL Klub the hardest because the tax rate was progressive: small companies would pay nothing while the largest would pay a 50% tax, not on profits but on revenues. RTL Klub was the only company that had to pay half of its advertisement revenues to the government.

It was obvious from the very beginning that the European Union would not let this Hungarian action go unanswered. It was also clear that if the case was ever litigated the Hungarian government could only lose. So, after lengthy negotiations, the Hungarian government expressed its willingness to change the most objectionable part of the law, its progressivity. Viktor Orbán was adamant, however, that the budget couldn’t forgo the money the tax law would generate. He was ready to give up the progressive feature of the law in favor of levying the tax on all media organs, regardless of size. János Lázár, who has been handling the RTL Klub case, mentioned several possible figures but most often talked about a tax of between 5 and 10% across the board. I assume that this lower tax rate would also be levied on advertising revenues, not on profits. It seems that the price of the deal was the departure of Gerkens.

Meanwhile Brussels began to investigate the June 11, 2014 tax law and indicated that the progressive taxation system contained therein is in breach of European Union laws. Hungary was given until February 16 to offer an acceptable alternative version of the law on advertising. February 16 came and went. Eventually Margrethe Vestager, EU commissioner in charge of competition policy, seems to have had enough and today released a statement announcing the opening of an in-depth investigation into the Hungarian advertisement tax. The question is whether “Hungary’s advertisement tax introduced in June 2014 complies with EU state aid rules.” Investigations in the European Union usually last so long that countries not in compliance can sometimes achieve their objective before the final ruling is handed down. But in this case the statement Vestager released added the following “suspension injunction”: “The Commission has … taken a separate decision prohibiting Hungary from applying progressive rates until the Commission has finished its assessment.”

Margrethe Vestager, the new antitrust commissioner with a steely reputation

Margrethe Vestager, the new antitrust commissioner with a steely reputation

Let me say a few words about Margrethe Vestager who, according to a Financial Times article, “has a steely reputation.” She has been in politics ever since the age of 21 when she was appointed to the central board and executive committee of the Danish Social Liberal Party (Radikale Venstre). Since then she served as minister of education and later as deputy prime minister and minister for economic and interior affairs.

As Vestager sees the Hungarian situation, the problem lies not only with the progressive nature of the tax. She promised that “the investigation will look in detail both at how the advertisement tax applies currently as well as how it is amended, to make sure there is no unfair discrimination against certain media companies.

In practical terms this means that from this moment on the Hungarian government will be unable to collect any advertisement tax from any media outlet. The 7 billion HUF Orbán needs so desperately for his 2015 budget and that was supposed to come from taxing the Hungarian media outlets is in jeopardy.

The Orbán government had tried to postpone making any legislative changes to the current law as long as possible. With this “suspension injunction,” however, dragging out the procedure actually works against the interests of the government. The longer they do nothing the longer the suspension will remain in force. Moreover, even the speedy enactment of a new law will make no difference as far as this “suspension injunction” is concerned. It will remain in force while Brussels conducts an “in-depth” investigation into any unfair discrimination in the new version of the law. It seems that Brussels no longer trusts the Hungarian government because, as Ricardo Cardoso, spokesman of the European Commission, indicated, they will not only have to study the new or amended tax law but will also investigate whether “possible illegal state aid has distorted the market already.”

What is the Orbán government’s reaction? The Kormányzati Információs Központ (KIK/Governmental Information Center) announced that the cabinet will discuss the matter next week. The spokesman stressed, however, that “the government seeks dialogue but will defend the interests of Hungary.” The question is whether the normally belligerent Hungarian government will eventually cave or will simply ignore the verdict of Brussels. If the prime minister is foolish enough to launch another “war of independence,” Brussels would most likely take the case to the Court of Justice of the European Union, the body that interprets EU law to make sure it is applied uniformly in all EU countries. The Court has 28 members from the 28 EU countries. I have no doubt that if the case ended up before this court the verdict would go against Hungary. The only remedy, however, would be a hefty fine. The question is whether it would be hefty enough to make it economically unwise for the Hungarian government to ignore the EU and collect the tax money it needs to plug the hole in the 2015 budget.

P.S. Breaking news: “The EU has blocked Hungary’s €12bn nuclear deal with Russia.” See http://www.ft.com/intl/cms/s/0/9a6467e2-c8c1-11e4-8617-00144feab7de.html?siteedition=intl#axzz3UCd1Ux7S

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Member
Why the EU’s Hands Are Tied (So Far) In Attempts to Return Hungary to Democracy From my understanding of Professor Scheppele’s lucid explanation last week of why the EU is so slow to do anything about Orban’s systematic departure from democracy and the rule of law in Hungary, it is because the matters over which the EC has power are only the economic ones codified in the old 6-member Common Market days of the EU. The rules pertaining to freedom, law, democracy came later, along the way to the much bigger 28-member EU, and depended not just on the EC but also on the EP as well as the Committee of Europe member-state MPs: The EC could refuse membership to countries that did not comply, but there was nothing (other than Article 7) that the EC could use with those who were already members, and then refused to comply. Only the economic rules still had a bite (economic). (As it stands, changing this to make the democratic measures enforceable would require the consent of all 28 members: so the violator could always veto any change.) This is probably why the specific violation of the advertisement rules was enforceable but the… Read more »
tappanch
Guest

How long does it take for the European Union to adapt these interpretations of European law? Ten years?

Member

Mr. Hernad, @tappanch, see my comment from yesterday.
It’s NOT realistic to expect any changes in the treaties of Europe. The “constitution” was a hard nut to crack and required such a level of obscurity that no one dares to repeat it any time soon. It would tear the Union apart.
The present government is against any creative interpretation of the treaties as we have observed that during the last European Parliamentary elections. Unfortunately too many member states are against that. Not because they like Hungary but because they like their own interests much more. See more here:
http://europa.eu/eu-law/decision-making/treaties/index_en.htm

Member

I will leave Prof Scheppele to explain the technical details of her proposal. I am quite sure it is not necessary to refer Prof Scheppele to the official documentation of the EU Treaties. She is thoroughly familiar with them. I will only point out, again, that this particular proposal is not primarily a recipe for changing the treaties of Europe; change can proceed apace in parallel with it. Nor do I think it is a recipe for “creative interpretation” of the treaties such as they are. It is a recipe for a systemic interpretation of individual violations of the current treaties such as they are, when those violations are part of a systematic, repeating pattern. This can raise the penalties and, more important, by deducting them at source from Hungary’s cohesion subsidies it gives the EU far more influence over the Hungarian government’s reckoning of the future consequences of systemic patterns if they persist.

tappanch
Guest

The Orban government wants to offer a record amount of European Union money, 8.8 (!) billion euros in tenders in 2015.

http://www.portfolio.hu/unios_forrasok/gazdasagfejlesztes/jonnek_az_unios_penzek_felkeszult_ra_az_orszag.3.211329.html

(roll down a lot for Lazar’s number: 2681 billion forints, an average of 20 billion forints a tender)

Paul
Guest

It’s ‘only’ the fuel supply (from Russia) that the EU are bothered about.

How likely is it that Orbán and Putin could rejig the deal so that Paks 2 went ahead, but the fuel came from somewhere else?

tappanch
Guest

Fidesz commissioner to the European Union, Mr Navracsics confirmed the EU’s decision to block Paks-2. The Russian-Hungarian agreement about the fuel rods goes against the EU rules.

http://index.hu/kulfold/2015/03/12/paks2_navracsics_megerositette_az_eu_vetojat/

lovass
Guest

The szocis realized that they like the atom after all. The Russians still have their old comrades in their pockets, we knew that, Laci Puch (who is still one of the most influential persons at MSZP, now as a shadow treasurer) made sure that MSZPniks want a part of the deal — so they want the deal. Fidesz can count on the szocis in this shady and corrupt deal just as usual. The usual szoci wirtschaft.

http://index.hu/belfold/2015/03/13/kitort_az_atomhaboru_a_szocialistaknal/

Webber
Guest

“szocis” means nothing in English. Try “Socialists.” Wirtschaft also means nothing in English. For those who don’t read Hungarian – the news is that
SOME of the socialists decided they like the atom (they always did). Others are fiercely against the expansion of the nuclear plant at Paks, and these factions are arguing.
That is a bit better than Fidesz-KDNP pro-Russian unity on this issue, if you ask me (not that I am terribly fond of the Socialists, mind).

Member

I think the news is that while some Fidesz-KDNP members do not like the deal, but scared to death by Orban to speak up, those MSZP members who do like are not in fear to speak up. MSZP apparently do not mandate the herd mentality Fidesz demands from its members. I do not like the MSZP but embrace individual thinking. Very sad when Fidesz is enforcing the Rakosi/Stalin kind of voting and expression.

petofi
Guest

In Hungary, one must ‘cherchez la femme’…but do so in order to arrive at ‘l’argent’.

In other words, while the Fidesz-KDNP cadres must shut the hell up or be Orbanized, the reverse is true for the opposition whose cleverer members must voice up and be heard loud and clear in order to be eligible for a quieting payoff.

C’est tous.
C’est la vie Hungroise.

lovass
Guest

Of course those 7 billion forints to be received form this media tax is ridiculously small compared to what Orban spends on insane and useless pet projects.

Orban also has a special part of the budget amounting to hundreds of billions of HUF which he personally spends on subsidies to church entities to renovation of municipal buildings, cultural projects, on essentially whatever he likes (or whatever helps his constituencies).

National Bank of Hungary is spending some 300bn forints on corrupt real estate deals, I hear they have again agreed to purchase several new pieces of real estate (at an inflated price of course) form influential people.

Anything less then 50 bn is almost immaterial in the central budget amounting to some 14,000 bn forints.

This media tax has never been about the tax income, but about a (legalistic) tool to regulate the media.

zuzuzu
Guest

Kovacs Zoltan government spokesperson’s performance:

FT lied about Paks 2 but we can’t say anything else because everything else is classified information.

I wonder if everything else is classified how can Rotschield and Hengeler Muller work on the case?

Webber
Guest

This government has lied repeatedly, and never admits it lied. Like all newspapers, FT has made mistakes in the past, but always corrects them in print.
I’d go with FT’s version as the right one, until and unless FT corrects it.

petofi
Guest

‘Lying’ in Orban’s Hungary is not false, it’s just painting the truth in your own colours.

Webber
Guest

OT – but important: Students from a high school in Vac have been threatened. Activists from CÖF, the government-funded organization that runs the pro-government “Peace Marches” (békemenet) have sent a note to students of Madách High School warning them that if they do not take part in the pro-government rally on March 15, the activists will do everything in their power to prevent students from this school from getting university places.
I should note here that Hungary’s university admissions process is somewhat unique. Universities have no say over which students or how many they can admit to any given program. That is decided by criteria set by the government.
News in Hungarian here:
http://index.hu/belfold/2015/03/12/cof_aktivistak_fenyegettek_meg_a_madach_gimnazium_diakjait/

Webber
Guest

Silly for me to comment on my comment, but I think this is EXTREMELY important – now the Mayor of Vac, where that school is, has threatened the Principal and Vice Principal of the school where teachers have declined to take students to the government demonstrations on March 15th. I would not be surprised if these people were fired in the near future – simply for refusing to take part in a “voluntary” pro-government demonstration.
http://kettosmerce.blog.hu/2015/03/13/megfeddte_a_tiltakozo_vaci_iskola_vezetoit_a_fideszes_polgarmester

buddy
Guest
Guest

Time will tell if Origo or Second Opinion is correct.

Webber
Guest

Great – and the Mayor? (do you trust Origo these days? I don’t – but they might be right).

Guest

Back to today´s topic. This is what one would expect from a Danish commissioner. According to Transparency International Denmark is the least corrupt country in the world.

http://www.transparency.org/cpi2014/infographic#compare

buddy
Guest

I wrote this a few days ago on a different thread, but I would surmise that Dirk Gerkens has had his bags packed, ready to leave Hungary for a long time. We know that he already sent his family abroad a few months ago because he feared for their safety, so why would he want to stay here? He can now go somewhere else where he doesn’t have to deal with threats to his family and the government leaves him alone and lets his company make money.

I would guess that he has only stayed here in Hungary this long so RTL could give him away as a bargaining chip to the government and not have to give anything valuable away.

In other news, I learned last night from a very reliable source that André Goodfriend’s departure had nothing to do with the Hungarian government (as I always suspected), and everything to do with his personal life. So it wasn’t the result of any “deal” with the U.S.

ambator
Guest

I can confirm that, based on a most reliable source.

az angol beteg
Guest

Your guess re Gerkens’ reasons for staying are wrong however.

andysomos
Guest

Prevision for the next two years:
We no longer bobbing up and down. It’s now downhill all the way – while Orbán and Company rule the land.

Tough to know when we fall off the edge of Europa and join the masses of neighboring continents of very poor countries — while its getting closer day by day.

torm
Guest

European Commission: We’re not trying to block Paks deal

http://www.bbj.hu/politics/ec-were-not-trying-to-block-paks-deal_94159

“Brussels will not stop the planned expansion of the Paks nuclear power plant by Russian state-owned firm Rosatom – instead the European Commission is dealing with specifics on the contract for supplying fuel, the EC spokesperson for energy affairs Anna-Kaisa Itkonen said today.”

This is a big problem, it means that everyone that lied about the “blocking of Paks”, the “end of Paks”, “Paks is over and finished”, will have problems with credibility in the future.

Now that the lie is revealed in full, fewer and fewer people will believe the next lie about the “EU has blocked Paks”, when the Commission itself says “We are not trying to block Paks”.

Webber
Guest

Financial Times is sticking by its story – they’ve tweeted this: #Hungary says #Paks nuclear plant will go ahead but acknowledge #Euratom has demanded changes to fuel supply contract.We stand by our story.

spectator
Guest

It’s a ‘radiating’ good news!
Probably Lőrinc Mészáros ‘beaming’ with joy: he can start setting up his Geiger-counter business, the “National Gasmask” factory can be reanimated, even the Great Leader will ‘glow’ in every public occasion, the ‘rays’ of glory will be measurable by INES too!

Halleluiah!

ambator
Guest

My dear torm, you are grasping at straws. (And so does, by the way, the lying spokesman of Fidesz: Zoltan Kovacs)
The fact of the matter is that the fuel related aspect of the treaty is so integral to the whole that without it the contract is worthless. The provision of new fuel and the reprocessing of the used ones are representing approximately one third of the costs. Since, however, the Russians are not allowed to provide the fuel, but Westinghouse is unwilling and unable to do it, the banning of Russian fuel is tantamount to a “blocking” of the entire project. That would leave Siemens as the only possible substitute, but they announced last year that they are abandoning the nuclear industry all together.
Yes, the mills of the Union do grind slowly indeed, but when they do they are grinding thoroughly.

Member

Troll “torm”: Don’t exult too soon. We are still in the buffer zone after new information in which the Fidesz FUD machine is feeding disinformation and spin full force… (and your triumphalist tiddle is a standard part of it…)

torm
Guest

Troll “harnad”: Aren’t you cute? You are doing silly trolling and all the while you are accusing others of the same. Did you learn this at school or came up with this tactic all by yourself?

The point of your trolling is very transparent and silly. It was the European Commission that provided the information “We are not trying to block Paks”.

Or in your deluded “troll world” is the European Commission part of the “Fidesz FUD machine”?

Is the European Commission a servant of Fidesz disinformation and spin? Are you really this deluded and detached from reality? Are you this far gone? Come back to reality and try to look at the world with a sane mind.

Webber
Guest
Of COURSE the European Commission isn’t trying to stop the Paks deal! Shocking that anyone would ever suggest such a thing! Horrible. What cheek! All the commission has done is to annul part of the deal that isn’t in compliance with EU regulations…. Similarly, OF COURSE the EU isn’t against Hungary’s tax regime… it just found that the form taken by one of Hungary’s taxes to be in violation of EU law, and so suspended it. Similarly, the EU is checking two more parts of the Paks deal, and will bring decisions in the near future – 1st the lack of a tender, which may violate EU regulations. 2nd certain specifics of the deal and potential state support that may violate EU regulations. Note, if Hungary does not supply information about these specifics, citing national security and secrecy laws, Hungary will automatically be found to have violated EU regulations. But of COURSE there’s no desire to stop the Paks deal. Perish the thought! and yet… it might just be stopped. Part of the current contract with Russia has to be changed/re-negotiated already, that much is clear. I have a question for Fid. supporters. WTF??? Does this Hungarian government not read… Read more »
Cséni
Guest
Webber: Who on earth cares, prey tell, about the EU law? What naive question is this? Try to think like a Winner for the first time in your life. A real politician dares to decide, dares to be a decider. Law and timid legal interpretations constrain only lefties who forever apologize for their existence and want nothing better than to play Rechstaat, instead of being visionaries. A real ‘winner’ (including the reelected W. Bush) thinks fundamentally different. He dreams, decides first and then settles legal issues afterword, including amending the rules or packing the courts with loyalists. If there’s a problem with the EU then through negotiations and trickery, the issues will be sorted out, settled as usual. But the bottom line Orban always asks: what can the EU potentially do?? What? Send EU troops to Hungary to prevent Market Zrt. from erecting concrete structures and help sending the Russian helpers home?? Of course, the EU is powerless. This is how the EU was designed, and on purpose. Otherwise the UK might think the EU is too powerful. The EU is allowed to deliver resolutions and organize meetings attended by important people, but that’s all. There’s no physical or effective… Read more »
Webber
Guest

GRRRRR!!! The question was a rhetorical one for Fidesz supporters!!!! No matter how I look at your answer, I can’t put you in that pigeon hole.

petofi
Guest

@ torm

Is this the only job you could get? Spreading bullshit with every word. Harnad is a respected professor at a university in Montreal. What are you? Some 3rd rate clerk
in the basement of the KGB?

Member
Trollerei 101 Just to remind those who have forgotten or not noticed, today’s Turul (and Gamayun) politico-trolls are anonymous hacks, government-paid to distract, disrupt, disinform and spin on online discussion groups under the cloak of anonymity. (And although they rely on them more heavily, Orban and Putin do not have a monopoly on this artform.) Politico-trolls’ M.O. is yawningly familiar and repetitious, including when they are called on it: what they do then is they call their caller a troll (even when the caller is not anonymous — consistency and coherence are not trolls’ long suits) and all that’s left to them is tu-quoque, innuendo, and nyaa-nyaa. The more enterprising ones try to dig up some dirt on the caller and present it (no matter how ridiculous) as pseudo-evidence of pseudo-wrongdoings. (Here’s my personal favorite.) Sometimes the called trolls get carried away with the farce, and really start acting indignant, as if they have been insulted, or have had their (anonymous) reputations unfairly sullied (especially when they have been using the same fake-name repeatedly! Been through it many times. (See the Archives of the Hungarian Spectrum discussion especially before the last general election.) Usually mention in advance what the troll-response… Read more »
Guest

Many commenters have lamented about the passivity of EU towards the Orban government´s violations of EU rules. Today’s post raises a realistic hope that EU will finally take up the gauntlet. Surprisingly, the commenter’s reaction is: Let’s talk about somthing else.

The Paks case and the advertisment tax case are substantially different. There is no EU rule that prohibits Hungary from buying a nuclear power plant from whoever it choses as long as the plant conforms to certain safety standards and regulations about radioactive material.. The advertisement tax case, on the other hand, is about a violation as clear as day of EU competition rules.

I am very relieved that the new commissioner on competition takes major action. She cannot easily retreat. Her credibility is at stake.

matthias
Guest
Paks 2 is going forward. Nothing stops, the project is absolutely on. I hear that everybody have to redouble their efforts to work even quicker and harder. The EU has no competence in this project, Hungary is a sovereign country. If Hungary wants to build a totally unnecessary nuclear power station without any preparatory analyses with the Russians from Russian debt, then Hungary will do so, the Brusselites can’t prevent that try as they might. That’s the view on Kossuth-ter, there will be resistance until the very last bullet. I hear the ukaz around Lazar and Aszodi is that the project must go on and people should not worry, Orban and Lazar will handle the issue, there will be some negotiations (ie. peacock dance) with the EU – during which the project will be going on – and then there will be some compromise as usual. Remember that there were some problems with the EU subsidies, well, they’ve been sorted out, money keeps flowing, issues were settled, the EU is all about compromises. So never mind, these legal issues are for the lawyer politicians to sort out (ie. ignore), the underlings must continue to work and shut the f*** up.… Read more »
buddy
Guest

“the EU will realize soon that it can’t do a thing, because Orban is smarter and more powerful”

Not really. He just knows how to exploit their weaknesses caused by bureaucracy and the poor design of the EU system. The EU seems to have been set up on a trust basis and not to handle leaders like Orbán. That doesn’t make him smarter and more powerful though.

Webber
Guest

The EU has actually forced Hungary to change quite a few laws, has fined the government, and now has forcefully suspended the media law.
You don’t hear the Hungarian government admitting this. Instead, they just go from victory to victory, like the German army at Stalingrad.

petofi
Guest

And a few years down the road, when Orban and his family have long gone and decamped for the French Riviera or the British hinterland, the Hungarian yokels will bemoan how they were tricked, and goosed, and cheated…sob, sob, sob…

An
Guest

“Orban is smarter and more powerful.”

Unscrupulous is the word you are looking for.

Tiborc
Guest

Someone realized that Ildiko Vida, the embattled head of the Tax Authority and who is a strong and personal Simicska-ally must remain in her position.

Since last April Orban has been systematically getting rid of Simicska’s loyalists within the government – with one notable exception: Ildiko Vida, who was recently banned from entering the US and who is personally rumored to have been involved in numerous corrupt transactions.

But no matter how loyal Simicska supporter Vida is, any new head of the tax authority would be just too risky. He or she might just unwittingly initiate or authorize or fail to prevent the wrong procedure, the wrong tax audit. Only Vida has the comprehensive knowledge and memory to know where to check and which deals and companies to leave alone (until the statute of limitations runs).

Orban can’t have the risk that a new person made such a mistake. So Vida shall remain in her position.

spectator
Guest
Quite remarkable that people will put in writing their wholehearted support for an unscrupulous (thanks An!) moron indebting their country, their citizens and a few more generations to come for some obsolete crap, which in best case start functioning first sometime in 10 – 15 years, and would go on another 30 – 40..! In short, yesterdays technology what will stay with us well over of the middle of the century! If any of you was alive and somehow cognitive – say – 25 years ago, would you mind to recall, what was the situation of the mobile communication then? A receiver attached with a wire to a device, size of a briefcase, remember? Or what about a personal computer then? Anybody? Now, think about that at the moment my telephone have the computing power roughly equivalent with a truckload of those PCs had at that time. So, tell me “shiny happy people” on Fidesz payroll, are you really so def and blind that you haven’t the slightest idea where the technology IS today, let alone where it heading? What will you say, when in five years time the Russian foreman of the Paks 2 building project driving around with… Read more »
The vultures are circling.
Guest
The vultures are circling.

“Orban is smarter and more powerful.”

“Unscrupulous is the word you are looking for.”

Nope, try “scum”

ambator
Guest
Call him, Orban, what you will, it must be admitted that he played the ropes quite well so far. But as we all know, all lucky streak will come to an end sooner, or later. And, as it happens, I think it may just occurred this week: the ropes he played so skillfully so far, just tangled up all at once. Paks 2 is under attack, the advertising tax is dead in the water and the churches that sued the government have a confirmed claim, to the tune at least 1.2 billion plus interest. Their claim is now due and besides, the church law must be changed. There is also an other corruption investigation of a construction project downtown Budapest, where the government is liable to pay back some 900 billion forints to the union. I may be overly “optimistic” but if these fines and debacles come back all at the same time to vex the government, who were too inept to legislate properly without pressure, is going to crumble trying to deal with these disparate pressures all at the same time. They are trying to keep too many balls up in the air, juggling faster and faster, but they… Read more »
Istvan
Guest

If PM Orban is on the path to losing power then let us hope the lyrics to the Who’s “Won’t Get Fooled Again” don’t apply to Hungary. Especially these parts:

The change, it had to come
We knew it all along
We were liberated from the fold, that’s all
And the world looks just the same
And history ain’t changed

Meet the new boss
Same as the old boss

Paul
Guest

Churchill is supposed to have said (in relation to Lenin), “The Russian people were left floundering in the bog. Their worst misfortune was his birth: their next worst his death.”

I fear that, such is the mess Hungary is in (and will be in), much the same applies to Orbán.

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