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24 January 2019
After a record-breaking Black Friday promotion, online retailer eMAG is now suffering the consequences. According to the Hungarian Competition Authority (HCA), eMAG may have failed to meet the standards of professional diligence by misleading consumers with its 2018 Black Friday campaign. After imposing significant penalties on major undertakings such as Vodafone and Media Markt, the HCA now appears to be taking aim at one of Central and Eastern Europe's leading online marketplaces. This action was one of the first to be initiated under the umbrella of the HCA's digital consumer protection strategy paper (for further details please see "HCA publishes digital consumer protection strategy").
Online retailer eMAG, a subsidiary of the Naspers Group, has contributed significantly to making Black Friday an annual event in the Hungarian market. Within the framework of Black Friday 2018, 2.7 million users visited eMAG's online store. This is a 40% increase compared with Black Friday visits to the same store in 2017. Further, users spent HUF6.8 billion (approximately €21 million) on more than 250,000 products.
Black Friday has been the focus of the HCA's attention since it became synonymous with large-scale promotions. Further, a few weeks before Black Friday 2018 – while most stores were finalising their preparations – the HCA published its digital consumer protection strategy.
As previously reported, the HCA is taking a determined stance on competition. It believes that consumers are highly vulnerable to certain tech giants and other online service providers. In addition, the HCA has taken on the role of guardian in today's digital era and has made a commitment to targeting undertakings which are central to digital industries. As such, it was easy to predict that the Hungarian watchdog would closely scrutinise online Black Friday promotions.
Such scrutiny is not unprecedented. In 2017 another major player, Extreme Digital, was fined for misleading consumers after conducting a strong pre-Black Friday campaign which offered substantial discounts. However, on Black Friday, only around 11% of products were discounted significantly, with most products benefiting from only modest discounts. Extreme Digital's Black Friday case indicated that the HCA would not overlook practices which aimed to booster consumer enthusiasm with false promises.
Considering the Extreme Digital case and the freshly published digital consumer protection strategy, the HCA's investigation into eMAG was not unexpected. In its press release (available only in Hungarian), the HCA indicated that eMAG had allegedly failed to "sufficiently plan with stocks adequate to the foreseeable consumer interest" (ie, certain highly discounted popular products were available only for a short time). The HCA highlighted that – considering eMAG's Black Friday turnover – this lack of professional diligence likely led to a mass distortion of consumer decisions and thus affected competition on the market.
eMAG is not the only player currently under investigation after Black Friday 2018. The HCA has also initiated proceedings against online retailer Alza.hu for reasons similar to those which resulted in Extreme Digital being penalised.
Considering the HCA's recent focus on consumer protection and the increasing severity of the fines imposed, it will be difficult for eMAG to emerge unharmed from this proceeding. One thing is clear: the HCA is deliberately seeking to establish case law which can serve as guidance in the digital age.
With the release of its strategy, the HCA once again proved that it is an innovative and responsive authority. Its focus on issues central to consumer society is greatly beneficial for market players and consumers alike. However, there are blind spots in the HCA's practice which have yet to be explored. For example, it is unclear how the HCA perceives the interplay between innovative promotions and the growing digital expertise of typical consumers. Further, the HCA may incur difficulties when assessing professional diligence in a constantly changing industry. As promotions and innovative online marketplaces are fundamentally beneficial to consumers, it might be better to allow these industries to develop organically rather than trying to establish standards on the basis of a level of diligence conceptualised by the HCA.
For further information on this topic please contact András Nagy at Schoenherr Attorneys at Law by telephone (+36 1 8700 700) or email (email@example.com). The Schoenherr Attorneys at Law website can be accessed at www.schoenherr.eu.
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