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12 November 2020
The Hungarian Competition Authority (HCA) has initiated an investigation into TikTok, the popular social media platform. TikTok's capacity to generate vast amounts of consumer data and shower its users with ads has already sounded several alarm bells as regulators attempt to make sense of the phenomena that is digitalisation. The HCA took the initiative to scrutinise the platform with a focus on consumer protection.
The overarching theme of the Hungarian investigation is TikTok's potential failure to adequately inform consumers regarding its functioning and policies, most notably the data collected and the ways in which TikTok later uses this data. In addition, the HCA raised concerns regarding the absence of information in Hungarian and the lack of effort to control the exposure of young people to certain ads.
The investigation is part of the HCA's digital consumer protection strategy (for further details please see "HCA publishes digital consumer protection strategy"), which has already resulted in several fascinating attempts to regulate platforms and e-commerce. The authority is especially focused on how undertakings communicate and inform consumers regarding their business models and data-related policies. In recent years, the HCA has voiced concerns that even when information regarding the collection and use of consumer data is technically available, the terms and conditions are often highly complex and therefore the underlying risks remain unclear. Paired with encouraging messaging and marketing, which distracts consumers from inherent risks in online services, this behaviour may qualify as unlawful under Hungarian law and result in a fine.
If the HCA's recent approach serves as a guide, TikTok is facing a long and detailed review of its practices where significant commitments or severe penalties cannot be excluded. There were many HCA cases to support this statement; this article highlights two of the most interesting cases.
In 2018 the HCA closed an investigation into Google and its messenger service. The authority took the view that Google had failed to ensure that consumers have a proper understanding of how their data is treated by the tech giant and therefore cannot make an informed decision regarding the nature and costs of the service. Google presented the HCA with a comprehensive commitment package, undertaking several measures to inform consumers regarding the collection and use of their data. After a two-year investigation, Google escaped penalties with this cooperative approach.
The HCA recently closed an investigation into the dating site Academic Singles. The authority established that the dating site had misled consumers regarding the necessity to pay for services, the subscription options and the cancellation policies. The communication of the dating site was confusing and lacked transparency, which resulted in several consumer complaints. As a result, besides a €4.5 million fine, the HCA obliged the undertaking to amend its practices fundamentally. Academic Singles had to send a correction notice to all of its present and former customers and publish the operative part of the decision on its homepage.
In addition to the above, the HCA has closed several investigations into e-commerce. Notably, it imposed significant fines on online retailers for not communicating diligently on the conditions of their campaigns (eg, Black Friday sales (for further details please see "Digital consumer protection – Black Friday success turns sour for major online marketplace")). The authority also fined Booking.com for using consumer psychology against its consumers and failing to present payment options comprehensively (for further details please see "HCA imposes record fine on Booking.com for unfair commercial practices"). In February 2020 the HCA initiated an investigation against Viber, the popular messenger service. In this endeavour, the authority aims to establish whether the statement "free and secure" is merited considering Viber's policies.
The HCA imagines the average consumer as a highly exposed individual with no means to obtain a complex overview of the implications of certain digital services. It also sees unfair competition and consumer protection as adequate tools to deal with some of the unprecedented challenges that digitalisation brings. The authority undoubtedly expects a high level of transparency from undertakings participating in this transformation and urges markets to devote more resources to consumer welfare for a healthier data economy.
Considering the swift dynamics of these markets, the HCA will likely continue to assert its digital consumer protection goals in the foreseeable future.
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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