In addition to the classic tasks of a competition authority, the Hungarian Competition Authority ("HCA") is also entitled to take action against unfair commercial practices against consumers if such practices are capable of significantly affecting competition. Following the first market study in the field of consumer protection in 2019 relating to the application of digital comparison tools (DCTs), 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 of misleadingly advertising certain hotel rooms with "free cancellation" and engaging in pressure selling. This is now followed by a decision establishing unfair practices of the biggest local market player, Szallas.hu, a main competitor of Booking.com. However, this time no fine was imposed.
The established infringement
Consumer protection law prohibits aggressive trading practices, including the application of psychological pressure on consumers for a faster and less considered decision making, and threatens such conducts with heavy fines (up to 10% of the previous year's turnover of the undertaking concerned).
The HCA concluded that by depicting the following messages throughout the entire booking process with red highlight, szallas.hu put prohibited psychological pressure on consumers:
- "There are only 3 apartments left on our site!", "Very popular - There are only 2 rooms left on our site!"
- "Last booking 1 October", "Last booking 8 December"
- "3 reservations in the last 2 days", "2 reservations since yesterday", "5 reservations today"
- "13 people are watching", "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. The same was claimed by Booking.com in the prior proceeding. The HCA, however, pointed out that the fact that a message can be substantiated, does not in itself rule out that it can place undue psychological pressure on consumers, and it did not go into detail on evaluating the validity of the messages.
Even valid messages can constitute pressure selling, and this is assessed on a case-by-case basis by the HCA, taking into consideration e.g. the context, as well. In case of Szallas.hu not only the specific urging messages, but also the way in which the accommodation offers were displayed reinforced the image of popularity and limited availability, e.g. the rating of the accommodation, its place in the ranking, possible highlights, consumer reviews, etc.
Sanction – obligations imposed by the HCA; why does one case result in a record fine while the other one "only" in obligations?
The Booking.com decision of the HCA (and the enormous fine imposed on Booking.com), including the authority's views on similar practices were released during the proceeding against Szallas.hu. Following the Booking.com decision Szallas.hu decided to fully cooperate with the HCA. The company acknowledged the infringement, removed the examined urging messages and offered commitments to the HCA.
The HCA decided in this case that it cannot accept the offered commitments resulting in refraining from establishing the infringement, as applying urging messages in the e-commerce sector has become a widespread market practice. Therefore the HCA established the infringement also in this case, namely that Szallas.hu committed pressure selling, but instead of imposing a fine, it obliged Szallas.hu to perform the offered commitments as obligations on Szallas.hu. Pursuant to the HCA, this will cost the company approximately the same amount as the fine the HCA would have imposed.
Booking.com also tried to offer commitments in the proceeding against it. However, the HCA concluded that the commitments of Booking.com – as opposed to the commitments of Szallas.hu – were not tailored enough to the peculiarities of the Hungarian legal framework of aggressive commercial practices (but focused more on the validity of the statements, they were incapable of remedying the effects of the infringement. The HCA therefore decided in the Booking.com case not only to reject the commitments, but to disregard them even as potential obligations substituting the imposed fine. We also note that Booking.com also objected to uphold its proposed commitments for case the HCA would consider them only as a mitigating factor for the fine.
The obligations imposed on Szallas.hu consist of 5 steps. Szallas.hu must:
- engage a third party market researcher to conduct a detailed market research and identify the communications applied in the e-commerce sector which are capable of placing psychological pressure on consumers, and conduct a qualitative and quantitative consumer research with the identified communications to find out which messages are placing unlawful psychological pressure on consumers in reality.;
- amend its practices in accordance with the result of the research and the decision of the HCA;
- conduct an information campaign in 2021 and inform the market players on the decision of the HCA and the results of the research in a way that they will be able 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, releasing TV spots and YouTube advertisements;
- set up an independent expert board with 3 members which will exercise prior control over the application of new communication practices at the company for at least 3 years.
Based on the HCA's considerations, it is unlikely that a company engaging in similar prohibited practices would be able to escape the fine by offering commitments to the HCA in the future.
The Szallas.hu decision comes as next in the line of the HCA's novel decisions punishing pressure selling, after the Booking.com decision. By these decisions the HCA seems to take a stricter approach than most of the other regulators in Europe, which have focused on the validity of popularity messaging so far.
However, the current decision has failed to provide sufficiently detailed guidelines for the market on what would constitute an acceptable practice. For instance, the HCA has still not elaborated clearly the difference between the depiction of information considered useful for consumers (e.g. the number of remaining rooms) and prohibited pressure selling. In the Booking.com decision the HCA merely concluded that information on limited stock can only be displayed at a late stage of the search / booking process, namely after the specific hotel has been chosen for a specific date. In the Szallas.hu decision the HCA added that information on limited stocks can be displayed if it is presented in a neutral manner. Information on stocks or the popularity of a hotel should be provided in a way (taking into account their overall impact with other messages) that does not lead to consumers associating it with limited availability. E.g. in view of the HCA "last month / year Z of our guests stayed here" is acceptable, but "X reservations in the last Y days" under the circumstances may 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 market research will likely provide a better understanding of the consumer's actual views on the issue of pressure selling. It is only to be hoped that it may help to contribute to clarify the border between the lawful and prohibited communications to market players, as well as to consumers. Nevertheless, it is peculiar that the Hungarian regulator has practically outsourced its investigation of identifying potentially infringing practices to an infringing party.
By Anna Turi, Counsel, and Márk Kovács, Associate, Schoenherr