We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
20 September 2018
Vodafone's voluntary compensation measures
Vodafone trend continues
Airbnb's price communication undertakings
Problematic conditions in major food delivery site's agreements
Kometa's healthy eating campaign commitments
Latest developments – even Google has undertaken commitments
In recent years, the Hungarian Competition Authority (HCA) has seemingly aimed to foster cooperation between itself and market participants. Recent case law shows that the HCA strives for cooperation even when market participants allegedly commit grave infringements of the competition rules. Market participants are advised to harness this tendency and the HCA's willingness to reach decisions more efficiently. This article examines a number of recent cases and the lessons learned.
In late 2017 Vodafone implemented significant compensation measures to counteract the effects of its allegedly unlawful behaviour. As a result, Vodafone managed to convince the HCA to reduce its fine for unlawful behaviour by more than 50%.
The investigation pertained to a promotional campaign in which Vodafone had failed to appropriately highlight that in addition to the (rather favourable) prices, consumers would also have to pay an additional monthly fee if they purchased a device as part of the promotion. While Vodafone did not acknowledge the infringement, it implemented significant compensation measures during the proceedings, including offering all consumers the option to terminate their contracts. This was a significant undertaking on Vodafone's part, as it had to bear immense costs concerning the devices which consumers had purchased based on favourable conditions, as the consumers terminating their contracts no longer had to pay the additional fees.
Having considered these measures, the HCA fined Vodafone HUF200 million (approximately €618,500) – less than half of the fine that it would have otherwise received.
The HCA emphasised that Vodafone's compensation of consumers and efficient use of its own resources were central to the authority's positive assessment of the mitigating factors and commitment proposals.
The Vodafone case was recently followed by another 60% fine reduction in the case of an SME which had failed to promote its food supplement product in line with Hungarian law. While certain market leading statements had simply been unsubstantiated, the SME had also failed to indicate that certain articles that it had published in medical magazines were in fact promotional materials.
The mitigating factors that the HCA considered included the SME's:
This led to the HCA issuing a fine which was less than one-third of the amount that would have otherwise been imposed.
The HCA once again confirmed that the admission of an infringement, the implementation of corrective measures, the payment of compensation and the implementation of compliance programmes may lead to significant fine reductions.
The HCA recently refrained from establishing an infringement by Airbnb, which undertook to amend the way in which it communicates prices to consumers as a commitment measure. The HCA had initiated the proceeding due to the allegation that Airbnb had misled consumers navigating and reserving accommodation on its website. The underlying issue concerned the incomplete communication of fees and costs.
Airbnb undertook to ensure that:
The HCA did not establish an infringement due to the above measures. The Airbnb case shows that the HCA is especially willing to cooperate with market participants to ensure that reasonable solutions are implemented for certain issues.
The HCA also initiated an inquiry into agreements between Netpincer, one of the largest food delivery sites in Hungary, and the catering businesses and restaurants whose offerings are aggregated on the site.
The issue revolved around a clause in the agreements which ensured that the restaurants offered the same prices and conditions on Netpincer as on their own websites. The HCA found that this had led to a market where prices were identical across all sales channels.
Netpincer undertook to amend the agreements so that the clause did not cover offline sales channels (eg, orders made by phone) and the occasional promotion. As a result, the HCA did not establish an infringement.
The HCA launched an inquiry into food and meat products manufacturer Kometa's practices relating to healthy eating campaigns. The HCA wanted to determine whether some of Kometa's claims in its ads and promotional campaigns – which had, among other things, asserted that high meat content and the absence of certain additives would ensure that a product was healthy – qualified as an infringement of the consumer protection rules.
Following a protracted investigation, the HCA accepted Kometa's complex commitment proposal, which included the following measures:
The HCA once again rewarded the investigated undertaking's proposal to cooperate, especially as:
Among other things, the HCA noted that the above commitments involved valuable informational benefits for consumers and once again refrained from establishing an infringement.
The HCA recently investigated Google's communication practices regarding its data processing activities connected with the Allo chatclients app. The investigation was aimed not at analysing compliance with data protection applications, but rather at establishing whether consumers had received the information necessary to understand the business model of Allo (and Google) and make an informed transactional decision. The essence of Google's business model is to process and market the (personal) data of its users through various algorithms rather than sell the various Google applications (including Allo) and services for money.
While the HCA originally saw no reason to terminate the proceedings and sought to establish an infringement in this respect, it eventually waived the fine on the basis of Google's commitments. The HCA found that the potential violation of the law could be efficiently remedied by the commitment package, which guaranteed the protection of public interest.
The commitments included the establishment of a separate page on Allo's data processing and sending a hyperlink to this page within the app to its users in Hungary. In addition, Google must publish a one-day graphical educational banner on its YouTube channel highlighting that it collects and processes consumers' personal data and recommending that consumers review their privacy policies and settings.
The HCA outlined that Google's commitment package constituted a substantive effort and the allocation of substantial resources, which was one of the main factors why it had accepted the commitments.
The above decisions – together with the HCA's respective guidelines – indicate that it is interested in ensuring that consumer benefits are attained in the easiest way possible during an official investigation. The preservation of the HCA's resources plays a major role in its decision making; therefore, undertakings should decide whether they intend to propose commitments during the investigation phase. Based on these recent cases, if consumers are compensated and the commitment proposal is reasonable, undertakings may expect a positive response from the HCA. If commitments are not an option, the HCA will still reward a company's cooperation and its willingness to compensate consumers with significantly lower fines. However, in such cases, the establishment of an infringement (and the imposition of a reduced fine) cannot be avoided. Nonetheless, it may still be worth it for companies seeking a win-win situation for all parties.
For further information on this topic please contact Anna Turi, András Nagy or Márk Kovács at Schoenherr Attorneys at Law by telephone (+36 1 8700 700) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Schoenherr Attorneys at Law website can be accessed at www.schoenherr.eu.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.