Misleading business-to-consumer information may lead to significant fines. Two recent Hungarian Competition Authority (HCA) decisions prove that the HCA has maintained its position as a watchdog of both consumer rights and fair competition. However, cooperating with the authority and offering reasonable compensation to harmed consumers may significantly affect the outcome of the HCA's proceeding and result not only in a reduction of the fine,(1) but also in the HCA refraining from establishing an infringement,(2) as enshrined by prior case law.
Numerous consumer complaints led to the commencement of recent competition supervision proceedings against airline operator Wizz Air Hungary Zrt and life insurance company 4Life Direct and its partners.(3) In both cases, the companies were investigated by the HCA because they had omitted to tell customers important information, which thereby harmed them.
Issues with WizzFlex
The HCA investigated Wizz Air's WizzFlex service, which has been available since 2010.
WizzFlex allowed consumers to modify their flight tickets for free. However, the detailed terms – including certain restrictions – of the service were not reflected by Wizz Air's communication.
The HCA uncovered certain rules which were not duly communicated to consumers. These rules were capable of preventing consumers from deriving the full benefits of the payable WizzFlex service. For example:
- in the case of a return flight ticket, the change of 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 online – all passengers' tickets had to be changed simultaneously; and
- 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 the new ticket would have been cheaper if the consumer had 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 cooperated with the HCA and offered commitments, including considerable compensation to all consumers who had purchased the Wizz Flex service since 2010. The commitments included:
- a lump sum compensation, whereby Wizz Air might spend HUF250 million (approximately €780,000) in total and, because between 120,000 to 220,000 consumers were potentially affected by the infringement, the average amount of compensation will be around €8.30 per passenger. Consumers will have five years to use the money via their Wizz Air accounts and also have the chance to transfer the amount to their bank accounts; and
- 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 have been cheaper without the WizzFlex service.
The HCA noted, among other things, that Wizz Air's cooperation and the compensation offered to consumers played a significant role when it decided to accept the commitments. As a result, the HCA 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 insurance company 4Life Direct by the HCA in 2016, the company was targeted again by the authority due to numerous consumer complaints. In this second competition supervision proceeding the HCA revealed further unfair business-to-consumer commercial practices regarding two insurance packages offered by 4LifeDirect targeting the elderly – namely, the so-called 'security in old age' and 'hospital care' services. According to the HCA, the consumers were not sufficiently informed about:
- how previous health conditions affected the insurer's performance; and
- under which terms consumers would receive full insurance payout, as advertised by 4Life Direct.
After receiving a substantial fine in the first supervision proceeding, 4Life Direct changed its strategy in the second proceeding and cooperated with the HCA. 4Life Direct undertook commitments, including a thorough compensation of the harmed consumers totalling almost HUF100 million (approximately €310,000). Ultimately, the HCA accepted the offered commitments and refrained from establishing the liability of 4Life Direct for the infringement. According to its decision, the HCA had particular regard to the compensation offered to the consumers when it accepted 4Life Direct's commitments.
It now seems that cooperation with the HCA and reparation of the caused damage is well worth the effort. Mitigating the effects of the infringement by the investigated company is not only an attenuating circumstance. It may not only result in a reduction of the fine imposed, but also result in the HCA refraining from establishing an infringement, which sends a different message altogether to the market and consumers, saving the company's reputation.
The HCA has huge discretion in deciding whether the cooperative measures offered by a company are sufficient to avoid the establishment of infringement. From the recent decisions it can be ascertained that a full compensation of the harmed consumers 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.
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(1) See Vodafone (Vj-12/2016).