UPDATE 1-Argentina's top court backs media law suspension

* Supreme Court decision marks fresh setback for gov't

* President Fernandez says law to erode media monopolies (Adds Clarin share price, Kirchner quote)

BUENOS AIRES Oct 5 (Reuters) - Argentina's Supreme Court dealt a blow to a controversial broadcast reform law on Tuesday, upholding an earlier ruling that said media companies should not have to sell off certain assets within a year.

The government-backed anti-monopoly law was passed last year, deepening an acrimonious dispute between President Cristina Fernandez and leading media group Grupo Clarin (CLA.BA)(GCSAq.L), owner of Argentina's biggest newspaper and most-watched cable news channel.

Grupo Clarin is seen as one of the media organizations that stands to lose the most from the law, which center-left Fernandez says will break up monopolies and open the country's airwaves to new voices.

The law had ordered media groups to sell off some operations if there was judged to be a concentration of ownership in certain sectors, such as cable television.

Tuesday's Supreme Court decision, detailed in a statement, effectively upholds an earlier lower court ruling to suspend an article of the law that obligated the companies to sell some holdings within a year.

This suspension remains in effect while the lower court decides whether the law is constitutional.

In the meantime, the law as a whole remains in force. Former President Nestor Kirchner, Fernandez's husband and predecessor, said that meant Tuesday's ruling marked "a step forward" for the broadcasting reform.

The media law has faced a series of legal challenges since it was passed a year ago. [ID:nN0991295]

Fernandez's battle with Grupo Clarin has strained relations with business leaders, who have been increasingly critical of her government in recent months. [ID:nN0991295]

Clarin shares, which have been punished by the ongoing dispute with the government, closed up more than 6 percent at 16.5 pesos following Tuesday's decision. (Reporting by Nicolas Misculin; Writing by Helen Popper; Editing by Cynthia Osterman)