Misleading business-to-consumer information may lead to significant fines. Two recent decisions of the Hungarian Competition Authority (GVH) prove that it has maintained its position as watchdog of consumer rights, alongside that of fair competition.
However, cooperating with the authority and offering reasonable compensation to harmed consumers may significantly affect the outcome of the GVH’s proceedings, and not only result in a reduction of the fine, but also in the GVH refraining from establishing an infringement, as enshrined already by prior case law.
On the basis of the Scots proverb “many a little makes a mickle”, numerous consumer complaints led to the commencement of recent competition supervision proceedings against the airline operator Wizz Air Hungary Zrt., as well as the life insurance company 4Life Direct and its partners. The main reason for the GVH’s proceedings was the same in both cases: the companies omitting important information and thereby causing harm to consumers.
The GVH looked into the WizzFlex service of Wizz Air, available as of 2010. WizzFlex allowed the consumers to modify their flight tickets for free; however, the detailed terms including certain restrictions to the service were not reflected by Wizz Air’s communication.
The GVH uncovered certain rules which were not duly communicated to the consumers. These rules were in fact capable of preventing consumers from deriving full benefits of the payable WizzFlex service. For example:
• in the case of a return flight ticket, changing the return journey was not possible after the commencement of the outward journey;
• if two or more passengers purchased tickets under one booking number, it was not possible to individually change the flight tickets of passengers via the internet: all passengers’ tickets had to be changed simultaneously;
• consumers could not benefit from any positive price difference between the price of the purchased ticket and the new ticket, meaning that the new ticket was always offered for at least the price of the purchased ticket, even if the price of this new ticket was cheaper if the consumer purchased it separately. On the other hand, consumers had to pay the price difference if the new ticket was more expensive than their original one.
Wizz Air decided to cooperate with the GVH and offered commitments, including considerable compensation to all consumers who had purchased the Wizz Flex service since 2010:
• Lump sum compensation: the total amount of lump sum compensation offered by Wizz Air to the consumers might reach HUF 250 million (approximately EUR 780,000). Approximately 120,000-220,000 consumers are potentially affected by the infringement, and the average amount of compensation will be around EUR 8.3-per-passenger. The compensation will be available for five years in the Wizz Air accounts of consumers, who will also have the chance to transfer the amount to their bank accounts.
• Paying back the price difference: Wizz Air undertook to pay back to each concerned customer the price difference between the price of the original flight ticket and the price of the changed flight ticket, if the price of the changed flight would had been cheaper absent the WizzFlex service.
The GVH noted, among other things, that Wizz Air’s cooperation and the compensation offered to consumers played a significant role when deciding on the acceptance of the commitments. As a result, the GVH refrained from establishing Wizz Air’s liability for the infringement; however, it will keep a close eye on the fulfilment of the commitments.
Following a fine imposed on the insurance company 4Life Direct by the GVH in 2016, the company was targeted again by the authority after numerous consumer complaints. In this second competition supervision proceeding, the GVH revealed further unfair business-to-consumer commercial practices regarding two insurance packages offered by 4LifeDirect targeting the elderly: namely so-called “Security in Old Age” and “Hospital Care” services. According to the GVH, consumers were not sufficiently informed about:
• how previous health conditions affect the performance of the insurer; and
• under what terms consumers would receive a full insurance pay-out, as advertised by 4Life Direct.
Having receiving a substantial fine in the first supervision proceeding, 4Life Direct changed strategy for its second proceeding. This time 4Life Direct cooperated with the GVH and undertook commitments which included thorough compensation for harmed consumers totaling almost HUF 100 million (approximately EUR 310,000). Ultimately, the GVH accepted the commitments offered and refrained from establishing the liability of 4Life Direct. According to its decision, the GVH had particular regard to the compensation offered to consumers when it accepted the commitments of 4Life Direct.
It now seems that cooperation with the GVH and reparation of the damage caused is well worth the efforts. Mitigating the effects of the infringement by the investigated company is not only an attenuating circumstance. It may not only result in the reduction of any fine imposed, but also result in the GVH refraining from establishing an infringement, which sends a different message altogether to the market and to consumers, saving the company’s reputation.
The GVH has huge discretion in deciding whether the cooperative measures offered by a company are sufficient to avoid the establishment of an infringement. From the recent decisions, it can be ascertained that full compensation of the consumers harmed may serve the public interest to an extent which outweighs numerous other reasons for establishing an infringement and imposing a fine. Without doubt, these cases are positive examples for other undertakings involved in future competition supervision proceedings initiated in unfair commercial practice cases.
Anna Turi is counsel at Schoenherr Hungary and joined the firm in 2007 as an associate. Prior to that she has worked for the European Commission in Brussels. Turi is a graduate of ELTE University, Budapest, and also earned an LL.M. degree in German law at the Universität Regensburg (Germany) in 2006. She earned a further degree at the Pázmány Péter Catholic University, Deák Institute of Postgraduate Studies in competition law in 2010. She has 13 years’ experience as a lawyer, and nine years specializing in competition law. She represents clients in several ongoing merger control proceedings, cartel proceedings, and unfair competition proceedings before the Hungarian Competition Authority, as well as before courts. Turi also has experience in antitrust damage litigation. Moreover, she regularly holds competition compliance and dawn raid training sessions. She has acted for clients in numerous industries, including banking and finance, automotive, manufacturing, IT/Communication/Technology, air transport, the financial sector, insurance, construction, food, personal consultancy, etc. She has published a number of articles on Hungarian competition law in various international legal journals.
Márk Kovács is an associate of Schoenherr Hungary, where he contributes to the work for the IP and EU & Competition practice groups. He is a graduate of Pázmány Péter Catholic University. Before joining Schoenherr he gained experience in trademark and design law including advising on complex brand protection and IP litigation strategies at a Hungarian patent attorney. At Schoenherr, he continues to offer advice and assistance to Schoenherr’s significant clients, with a special focus on trademark and copyright litigation, achieving noteworthy results. While at Schoenherr, he has obtained a postgraduate degree in competition law and represents clients in several ongoing cartel and unfair commercial practice proceedings, merger control proceedings, as well as before courts. He has gained outstanding expertise, especially in cartel damage litigation.
Schoenherr Hungary was formed in 2008 when a well-established team of experienced legal professionals, now led by Kinga Hetényi, joined the firm in order to benefit from Schoenherr’s strong position in the CEE/SEE region. It has a long track record of representing foreign investors, mainly in acquisitions and greenfield investments, corporate, employment law, merger control filings and other competition matters, finance and insolvency matters as well as real estate transactional mandates, construction and development, including large-scale infrastructure and energy projects. Additionally, the team advises numerous sizeable corporate clients on an ongoing basis on issues such as general corporate, commercial and regulatory matters, real estate and employment law. Recently, the office has been attracting a growing number of international and domestic corporate clients in the energy, food, technology and banking and insurance sectors.