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For consumers, with compensation!

or how to “settle” with the HCA for the benefit of consumers.

The lawyers of the Competition Law Group of CERHA HEMPEL Dezső & Partners represented Kft. and a.s. (“Alza”) in a consumer protection proceeding that was concluded on the 16th of February 2022 by the Hungarian Competition Authority (“HCA”). In its resolution, the Authority has ordered Alza to comply with the compensation package that the company voluntarily offered. Alza has agreed to compensate natural person consumers who made a purchase with Alza in 2019, with a coupon of HUF 3,000, if they spend more than HUF 10,000 HUF in the webshop or the Alza app within a year after the coupon is sent to them. The guaranteed minimum amount of this compensation commitment is HUF 450 million, which means that if the value of the coupons redeemed by consumers does not reach this minimum amount within the one-year period, Alza will have to give the remaining amount to its customers through a supplementary procedure.

In its proceeding, the HCA investigated whether Alza’s sales method of displaying next to certain products on the website the message that stocks were running out or the number of customers interested in the products was misleading or designed to put pressure on consumers.

In addition to accepting the compensation offered, the HCA imposed a fine of HUF 40,000,000 on Alza. The fine finally imposed by the HCA is significantly lower than the “astronomical” amounts that are now regularly doled out by the HCA and than what was originally “projected” in the statement of objections issued in the case (which could be described, in a somewhat misplaced analogy, as the “indictment”). Besides the compensation package offered by Alza, it also played a major role in the significant fine reduction that the companies admitted the infringements and waived their right to legal remedies, and that they stopped the conduct under investigation almost immediately after the commencement of the HCA’s proceeding. Alza's full cooperation with the HCA throughout the procedure also helped to achieve a more favourable outcome for Alza.

In our view, the HCA’s new direction, which allows for direct reparations offered to consumers to be rewarded with a reduction in fines, is cer-tainly progressive, consumer-friendly and socially beneficial. The social benefits of compensation in this particular case are appreciable as it directly benefits consumers by reducing the cost of the products they buy from the online store. While complying with the compensation package creates a tangible financial burden for Alza, the amount returned directly to its own customers represents a smaller loss of reputation than a final decision with only a competition supervision fine would.

We believe that it is also preferable for the HCA to conclude its investigations with the cooperation of businesses because, if their proposed commitment schemes are accepted by the HCA (and in most cases they are) together with a waiver of remedies, the HCA does not have to engage in costly and time-consuming court proceedings with often uncertain outcomes. If there is a suspicion of a breach of commitments, the GVH can carry out a follow-up inspection and impose sanctions if a company does not comply with its commitments.

The lesson of the proceeding against Alza is that it is always advisable to choose a strategy at the very beginning of the proceedings, after consulting a professional who has experience in consumer protection law and with the HCA’s procedures, and to create all submissions and communications with the authority on this strategy in mind throughout the proceeding,” said Márton Kocsis, the head of CERHA HEMPEL's Competition Group. “If the chosen strategy is cooperation (admission, compensation, etc.), the emphasis should be on the very detailed elaboration of the voluntary commitments, rather than on defending against and disproving the authority’s legal arguments."

However, the most important message and advice of our firm remains that it is always a good idea to consult a professional before launching a new marketing solution or advertising campaign in order to identify any possible legal compliance gaps as soon as possible and to avoid lengthy and costly regulatory proceedings.

"I am proud of another great success of our competition and consumer law team" added Tamás Polauf, a Partner at CERHA HEMPEL. "The conclusion of the Alza case is a great example of what can be achieved through complex legal and business thinking by a diverse team where experts with a strong regulatory and judicial background work alongside lawyers with decades’ worth of experience. The CERHA HEMPEL competition group is a team just like that. At the same time, we could not have achieved our goal without the honest commitment of our client, Alza, and their sincere intention to cooperate fully with the authority, and for this, Alza’s legal team deserves the highest praise," concluded Tamás Polauf.

On behalf of CERHA HEMPEL, Márton Kocsis, Boglárka Priskin, Márton Osztheimer and Anna Pintér participated in the work.