1
LIDC – Amsterdam Congress
Question B
“Should the objectives of the rules on unfair competition be the protection of competitors, or consumers, or of other interests? How should any conflict between these objectives be resolved ?”
Hungarian National Report prepared by
Dr. Gusztáv BACHER (Head of the Working Committee),
Dr. Vilmos BACHER, Dr. János STADLER, dr. Pál SZILÁGYI,
Dr. Sándor VIDA, and Dr. Judit ZSOLNAY
I. General
1. Could you give a list of commercial practices that are considered as unfair :
a) by specific law or statute;
b) by case law.
a)The Act LVII of 1996regarding the Prohibition on Unfair and Restrictive Market Practices (hereinafter as “Competition Act”) provides that it is prohibited to conduct economic activities in an unfair manner, in particular, in a manner violating or jeopardizing the lawful interests of competitors and consumers, or in a way which is in conflict with the requirements of business integrity. (Section 2)
Some typically unfair activities are separately stipulated in the Competition Act:
-It is prohibited to violate or jeopardize the good reputation or credit-worthiness of a competitor by stating or spreading untrue facts, and by misrepresenting true facts, as well as by any other such practices. (Section 3);
- It is prohibited to gain access to or use business secrets in an unfair manner, and to disclose such secrets to unauthorized parties or publish them. It shall also qualify as gaining access to business secrets in an unfair manner where access to such business secrets has been gained without the consent of the entitled person through a party in a relationship of trust or business relationship with such person at the time of or prior to gaining access to the secrets. Business secrets are all facts, information, solutions or data related to the economic activities, in connection with which the entitled person has a justifiable interest in keeping them secret, and in the interest of keeping the above secret, the entitled person has taken the required measures (Section 4);
-It is prohibited to make an unfair appeal to another party which is aimed at dissolving an economic relationship maintained with a third party or at preventing the establishment of such a relationship (call for boycott) (Section 5);
-Without the express prior consent of the competitor, goods or services (hereinafter jointly referred to as: goods) may not be produced, placed on the market or advertised with such typical outside appearance, packaging or marking (including the indication of origin); or any such name, marking or indication of goods may not be used by which the competitor or its goods are normally recognized (passing-off) (Section 6);
-It is prohibited to interfere with the integrity and fairness of a bidding process, (in particular, public tender, invitation to tender), auctions and transactions effected on an exchange in any way (ensuring fairness of tenders) (Section 7).
Under a separate chapter, and not under the title of unfair market activities, the Competition Act regulates the prohibitions concerning the unfair influencing and misleading of consumers. The following shall in particular constitute the misleading of consumers:
a) in respect of the price and material qualities of the goods (in particular, the composition and use thereof, the effect thereof on health and the environment, the handling thereof, as well as the origin, place of origin, source or manner of the purchase of the goods), untrue facts are stated or true facts are stated in a manner capable of misleading the consumer, the goods are presented with attributes of goods capable of misleading the consumer, or any other information capable of misleading the consumer is provided in respect of the material qualities of the goods;
b)it is concealed that the goods do not satisfy the provisions of the legal rules or the usual requirements set in respect of the goods, and that the use thereof requires the implementation of conditions substantially different from the usual;
c)information capable of misleading the consumer is provided in respect of circumstances related to the sale and distribution of the goods and influencing the consumer's decision, in particular, in respect of the method of distribution, the terms of payment, the attached gifts, the discounts granted and the chances of winning;
d) misrepresenting a purchase as a highly advantageous bargain (Section 8).
Further, it is prohibited to apply business methods restricting unjustifyably the consumer's freedom of choice. The following shall in particular qualify as such a method: where such circumstances are created which make it substantially more difficult to assess objectively the actual worth of the goods or the offer, and to compare the goods or the offer with other goods or another offer (Section 10).
The Act LVIII of 1997 on Business Advertising Activity (“Advertisement Act”) also prohibits the publication of misleading advertisement and sets forth the requirements for comparative advertisements. Misleading advertising is defined as any advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, for reason of its deceptive nature, is likely to affect their economic behaviour or which, for those reasons, injures or is likely to injure a competitor who is engaged in the same or similar activities.
b)In the case law, in addition to the above cases, no list of further unfair market practices has been evolved. However, the courts have broad capacity in the course of applying the general clause (Section 2). Please note that such general clause is not applicable to unfair influencing of the consumers. On the other hand, the broad scope of the provisions on the prohibition of misleading consumer allows the Competition Office to take appropriate measure against evolving new market practices misleading the consumer.
2. Does the law in your country contain a “black list” of commercial practices that are considered to be unfair per se ?
(Please devote also attention to new markets like telecommunications and energy (gas and electricity).
The Advertising Act sets forth specific advertising prohibitions and restrictions.
Covered or disguised advertising may not be published. Advertising is prohibited for goods whose production or marketing is illegal. Further, advertising may not be published if it contains a promise of tax exemption, tax allowance or the use of other tax advantage in place of or disproportionate to an actual service, or is otherwise misleading in respect of the tax advantage actually available.
Advertising which does not contain all costs incurred in relation to the disbursement of consumer loans may not be published.
Advertising may not be published if it aims to promote a gambling organized in another country.
An advertisement containing a special offer, including special price offers, can be published if it clearly and plainly states the product to which it pertains, as well as the period or duration for which it is offered, or that it is offered for a product from a specific date as long as such product is available.
It is forbidden to publish any advertisement that contains a comparison
a) with a fictitious product or company,
b) with a product that is not available in commerce,
c) with a product or company that cannot be clearly identified,
d) with a product or company not of similar nature, whereby to purport or pretend a true option.
Further, special rules apply for advertising pharmaceuticals, tobacco products or alcoholic beverages.
Please see answer to Question III. relating to restrictions based on non-economic aspects as well.
II. Material Rules
- Are there a priori different rules regarding unfair commercial practices against consumers and against enterprises? Are there, in particular, different general clauses for consumers and enterprises forbidding unfair commercial practices ?
The preamble of the Competition Act sets forth that the public interest relating to the maintenance of the market competition serving economic efficiency and social progress, the interests of the undertakings observing the requirements of fair business activity and the interests of consumers, require that the State should ensure the fairness and freedom of economic competition through legal regulation. This requires the admission of rules of competition law which prohibit market practices violating the requirements of fair competition and restricting economic competition, and prevent the interlocking of undertakings in a manner detrimental to competition.
The Competition Act does not make any distinction with respect to B2B and B2C relations.
The Competition Act generally sets forth in Section 2: It is prohibited to conduct economic activities in an unfair manner, in particular, in a manner violating or jeopardizing the lawful interests of competitors and consumers, or in a way which is in conflict with the requirements of business fairness. However, such general clause is applicable exclusively to the unfair competition acts violating the competitors’ interests, and it is not applicable to cases of misleading the consumer.
As presented in I.a., the Competition Act regulates in separate chapters (i) the prohibition on unfair market practices; and (ii) the prohibition on misleading of consumers.
This method of regulation is significant because in the event of violating the prohibition on unfair market practices, the injured party may initiate litigation before the courts, whereas, in the case of misleading consumers, the procedure falls under the jurisdiction of the Competition Office. The procedure of the Competition Office is initiated by a notification or ex officio, however, the entity that has filed the notification cannot participate as a party in the procedure.
The reason for the legal policy behind the separation of the competences was that unfair market practices violate primarily the competitors’ interests, and these competitors may initiate litigation before the Courts. In the case of influencing the consumers in an unfair manner, such act violates the public interest; therefore, it is reasonable for the Competition Office, as an administrative entity to commence a procedure to cease the infringing market behaviour.
- Are there different benchmarks for the assessment of unfair commercial acts depending on whether they are seen from the consumers or the competitor’s perspective? Or is the focus on the commercial practice as such that, of course, must be seen in connection with all “special circumstances”, which may also include the target group (general public, youth, professional, etc.) ?
In principle, there are no different benchmarks for the assessment of unfair commercial acts depending on whether they are seen from the consumers or the competitor’s perspective.
According to the Section 9 of the Competition Act, in establishing whether the information provided is capable of misleading the consumers, the general meaning of the terms used, as accepted in everyday life and/or in the trade shall apply.
In the course of assessment it shall be taken into consideration to whom the market practice was addressed to. For instance, different standards apply if the advertisement was addressed to professionals (e.g., physicians) or to the general public.
The Competition Office declared that the Competition Act protects all market participants. Special attention shall be made to the so-called sensitive consumer groups. In this respect, potential buyers of products relating to health form a sensitive or volatile consumer groups (ill or elderly people)[1]. As the inexperienced lay buyers are defenceless in assessing the advantages and disadvantages of the product, it is of high importance that they should be properly informed, without any exaggerations. Further, the Competition Office considers the members of a so-called organized group of consumers[2] as volatile consumers by whom mutual trust has significant importance.[3]
- Are there relevant definitions of consumers as opposite to non-consumers in the law of unfair competition and if so, how are they qualified ?
According to the Competition Act, protection against misleading consumers extends not only the private persons, but definition of the consumers includes "customers, buyers and users". Thus, this definition covers the professional market participants as well.
Please note that under Hungarian civil law, the definition of consumer - contrary to the respective EU legislation - is not restricted to natural persons: 'consumer' means any person who is a party to a contract concluded for reasons other than economic or professional activities.
III. Non-economic aspects
1.To what extent do other than economic aspects (e.g. the social responsibility of marketing, the protection of child, against discrimination, religious feelings, the right of privacy, etc.) play a role in unfair competition law and can these aspects lead to the prohibition of a commercial behaviour that does not harm the economic interests of enterprises or consumers ?
The preamble of the Advertising Act defines its goal to ensure the protection of consumer interests and sustain market competition which serves economic efficiency and social welfare, to regulate business advertising activity for the purposes of achieving fair communication with consumers, to protect the interests of enterprises, observing the requirements of fair business practices, and to facilitate the sale of goods and services.
The Advertising Act sets forth certain prohibitions on advertising for the public interest. Thus, an advertising may not be published if:
a) it infringes on personal rights, respect for the deceased or rights related to the protection of personal data,
b) it encourages violence or any behavior that jeopardizes personal or public safety, the environment or nature,
c) it generates a sense of fear.
Further, advertising targeted at children or juveniles may not be published if (a) it may harm their physical, intellectual or moral development, or (b) taking advantage of their credulousness or lack of experience, it directly encourages them to motivate adults to purchase goods. Advertising may not be published if it may harm the physical, intellectual or moral development of children or juveniles, including in particular advertising which shows children or juveniles in dangerous or violent situations or in situations with sexual emphasis.
Special rules apply for advertising sexual goods.
In case of violation of such rules, the Consumer Protection Agency shall commence proceedings and if it establishes that the advertising violates the law, it may
a) order that such violation be terminated;
b) prohibit continuation of the violation; and
c) impose a penalty. The amount of the penalty shall be established with respect to all circumstances of the case, including, in particular, the scope and severity of the violation of law against consumer interests, the duration of the violation of law, and any repeated violating conduct.
Finally, it shall be noted that violation of such rules per se does not constitute an act of unfair competition, however, such act may fall under the prohibition in the general clause, and a competitor may initiate a lawsuit for unfair market practice permitting a competitive advantages.
IV. Procedural
1.Are there different sanctions provided in the rules to combat unfair competition depending on whether the unfair practice affects primarily consumers or enterprises?
In case of unfair market practices, the injured party may request the following according to Section 86 of the Competition Act:
(a)the violation of the law be established;
(b)the termination of the violation of the law and the prohibition of the party violating the law from any further violation of the law;
(c)the party violating the law give satisfaction (make an apology) by making a statement or in another appropriate manner, and, if necessary, that sufficient publicity be given to the satisfaction (apology) on the part or at the expense of the party violating the law;
(d)the termination of the unlawful situation, the re-establishment of the state of affairs prior to the violation of the law, and the deprivation of the goods manufactured or placed on the market through the violation of the law of their offending character, or, if this is not possible, the destruction thereof, and the destruction of any special devices and facilities used for the manufacture thereof;
(e)compensation for damages in accordance with the rules under civil law, and
(f)proceedings conducted by the court shall also extend to the imposition of a fine.[4]
In a proceeding commenced before the Competition Office for the misleading of consumers, the competition board in its resolution shall:
(i)declare an act as illegal, shall order the termination of any illegal conduct, and shall prohibit the continuation of any illegal conduct,
(ii)order the publication of a statement of correction in connection with any misleading information,
(iii)impose a fine on that entity who infringes the provisions of the Competition Act.
The recent practice of the Competition Office shows a significant increase of the amount of the fine imposed.
2.Are there, in particular, different proceedings or authorities for the application of rules against unfair commercial practices affecting consumers ?
Regarding alleged unfair market activities, the injured party may initiate a lawsuit before the courts.
In the case of misleading of consumers, the Competition Office may start proceedings ex officio, or anybody may notify such market practice to the Competition Office. If the Competition Office finds that the initiation of any investigation is unjustified and refuses to start proceedings, the notifying person may appeal to the court against such decision. (Section 43/G.)
Further, in case of violating the provisions of the Competition Act, and such unlawful action that affects a wide range of consumers, the organization protecting consumer interests, the Competition Office (if it falls within its jurisdiction and it has established the violation of law by its resolution), or the chamber of commerce, on behalf of its members, may file a lawsuit, even if the identity of the aggrieved consumers cannot be established (Section 92.).
3.Is it possible for enterprises to file an action against a competitor based on the violation of specific rules for the protection of consumers; for instance rules that require information to consumers ?
Competitors may file a notification to the Competition Office to start proceedings as set forth above.
The violation of statutory rules – e.g., law on health protection, environment, etc. – per se does not constitute an act of unfair competition permitting a competitive advantages, however, depending on the circumstances of the case, a competitor may start an action on the basis of the general clause on prohibiting unfair market practice if the violation of law violates his market interest as well.
V. Opinions
- Should there a priori be different legal rules for fairness in market behaviour based on the fact that a commercial practice primarily influences the consumer’s decision making (and only indirectly the economic interest of enterprises) ? Or should there be a uniform standard for (un)fairness, focussing on the behaviour as such (but taking into account all circumstances, e.g. the target group of the act) ?
The competition law protects simultaneously the following interests: