New trend in HCA's practice
In addition to the usual tasks of a competition authority, the Hungarian Competition Authority (HCA) can take action against unfair commercial practices against consumers if such practices could significantly affect competition. Following the first market study in the consumer protection field in 2019 relating to the application of digital comparison tools (for further details please see "Digital consumer protection in action – HCA launches market study into digital comparison tools"), the HCA did not hesitate to apply its findings in practice. In early 2020 it imposed a record fine on Booking.com BV for unfair commercial practices after it misleadingly advertised certain hotel rooms with "free cancellation" and engaged in pressure selling (for further details please see "HCA imposes record fine on Booking.com for unfair commercial practices"). This has now been followed by a decision that Szallas.hu, the biggest local market player and a main competitor of Booking.com, engaged in unfair practices. However, this time, no fine was imposed.
Consumer protection law prohibits aggressive trading practices, including the application of psychological pressure on consumers to influence faster and less-considered decision making. Such conduct may result in heavy fines (up to 10% of the concerned undertaking's turnover in the previous year).
In this case, the HCA concluded that by highlighting the following messages throughout the entire booking process in red, Szallas.hu had put prohibited psychological pressure on consumers:
- "There are only 3 apartments left on our site!" and "Very popular – There are only 2 rooms left on our site!"
- "Last booking 1 October" and "Last booking 8 December".
- "3 reservations in the last 2 days," "2 reservations since yesterday", and "5 reservations today".
- "13 people are watching" and "One person is planning to book here".
- "Hurry, because the rooms are running out fast!"
Szallas.hu claimed that its messages were true and based on objective, verifiable facts. Booking.com had made the same claims in the prior proceedings. However, the HCA pointed out that the fact that a message can be substantiated does not in itself rule out the fact that it can place undue psychological pressure on consumers and did not go into detail on evaluating the messages' validity.
Even valid messages can constitute pressure selling. The HCA assesses this on a case-by-case basis, taking into consideration the context of the case, among other things. In the case of Szallas.hu, the HCA considered not only the specific urgency messages, but also the fact that the way in which the accommodation offers had been displayed reinforced the perception of popularity and limited availability (eg, the rating of the accommodation, its place in the ranking, possible highlights and consumer reviews).
How can one case result in a record fine and another only in obligations?
The Booking.com decision (and the value of the fine imposed on Booking.com), including the HCA's views on similar practices, were released during the proceedings against Szallas.hu. Following the Booking.com decision, Szallas.hu fully cooperated with the HCA, acknowledging the infringement, removing the urgency messages and offering commitments to the HCA.
The HCA decided in this case that it could not accept the offered commitments as an alternative to establishing the infringement, as applying urgency messages in the e-commerce sector has become widespread market practice. Therefore, the HCA established that the pressure selling had also occurred in this case. However, instead of imposing a fine, it ordered Szallas.hu to fulfil the offered commitments as obligations. According to the HCA, this will cost the company approximately the same amount as the fine that the HCA would have imposed.
Booking.com had also tried to propose commitments in the prior proceedings. However, the HCA concluded that Booking.com's commitments – unlike those of Szallas.hu – were insufficiently tailored to the peculiarities of the Hungarian legal framework concerning aggressive commercial practices (rather, they focused more on the validity of the statements). As such, they were incapable of remedying the effects of the infringement. The HCA therefore decided to not only reject Booking.com's commitments, but also disregard them as obligations to substitute the imposed fine. Notably, Booking.com objected to upholding its proposed commitments if the HCA considered them only a mitigating factor for the fine.
The obligations imposed on Szallas.hu consist of five steps. Namely, Szallas.hu must:
- engage a third-party market researcher to conduct detailed market research to identify the communications applied in the e-commerce sector which are capable of placing psychological pressure on consumers and conduct qualitative and quantitative consumer research using the identified communications to find out which messages are placing unlawful psychological pressure on consumers in reality;
- amend its practices in accordance with the results of the research and the HCA's decision;
- conduct an information campaign in 2021 and inform the market players on the HCA's decision and the results of the research in a way that enables them to amend their own practices accordingly;
- increase consumer awareness on pressure selling by conducting a media campaign. This must include the creation of an information website and the use of TV and YouTube ads; and
- establish an independent expert board with three members, which must exercise prior control over the company's application of new communication practices for at least three years.
Based on the HCA's considerations, it is unlikely that a company engaging in similar prohibited practices would be able to escape a fine by offering commitments to the HCA in future.
The Szallas.hu decision is the latest in a line of novel HCA decisions punishing pressure selling. In these decisions, the HCA seems to have taken a stricter approach than most other regulators in Europe, which to date have focused on the validity of popularity messaging.
However, this decision has failed to provide sufficiently detailed guidelines for the market on what would constitute acceptable practice, for instance, especially the difference between the depiction of information considered useful for consumers (eg, the number of remaining rooms) and prohibited pressure selling. In the Booking.com decision, the HCA merely concluded that information on limited availability can be displayed only at a late stage of the booking process (ie, after a specific hotel has been chosen for a specific date). In the Szallas.hu decision, the HCA added that information on limited availability can be displayed if it is presented in a neutral manner. Information on the availability or popularity of a hotel should be provided in a way that does not lead consumers to associate it with limited availability (taking into account other messages and the overall impact). For example, according to the HCA, "last month/year Z of our guests stayed here" is acceptable, but "X reservations in the last Y days" may, depending on the circumstances, be considered pressure selling. In any case, neither Booking.com nor Szallas.hu could successfully jump this hurdle.
The obligations imposed on Szallas.hu, including the obligation to conduct market research, will likely provide a better understanding of consumers' actual views on the issue of pressure selling. This will hopefully help to clarify the difference between lawful and prohibited communications to market players, as well as to consumers. Nonetheless, it is peculiar that the Hungarian regulator has practically outsourced its investigation of identifying potentially infringing practices to an infringing party.
This article was first published in International Law Office.