For the implementation of UCP Directive, new Hungarian legislation splits the regulative area between B2C and B2B relations and sets new enforcement mechanism, dividing the tasks between several authorities depending on the nature and gravity of the violation of law.

1. BRIEF OVERVIEW
A substantially amended advertising regulation is in force from 1 September 2008. Besides several laws governing specific sectors, the following four acts contain the most important general rules:

1.1 Act CLV of 1997 on Consumer Protection (Consumer Protection Act)

1.2 Act XLVII of 2008 on the Prohibition of Unfair Commercial Practices against Customers (UCP Act)

1.3 Act XLVIII of 2008 on the Basic Conditions and Certain Barriers of Economic Advertisement Activity (Advertisement Act)

1.4 Act LVII of 1996 on the Prohibition of Unfair Trading Practices and Unfair Competition (Competition Act)

The amendments display a new trend towards strengthening rigor, and aim to implement the provisions of Directive 2005/29/EC on unfair commercial practices (UPC Directive) into Hungarian law. The UCP Directive requires maximum harmonization, so its provisions are to be applied in all 27 EU member states. While the general laws in this field are the same across the EU, they still allow a certain leeway among the case law of different member state authorities.

2. WORTH PAYING ATTENTION TO...

2.1 Is a commercial practice unfair?
The UCP Act defines unfair commercial practice as follows:

• The general definition of a commercial practice as unfair is when it is contrary to the requirements of professional diligence or it materially distorts or is likely to materially distort the economic behavior of the consumers.
• A misleading commercial practice is unfair. A commercial practice shall be regarded as misleading if it (i) contains false information and is therefore untruthful or in any way deceives or is likely to deceive the average consumer, or (ii) omits material information that the average consumer needs to take an informed transactional decision. To qualify as misleading the practice must cause or be likely to cause an average consumer to make a transactional decision that he/she would not have otherwise made.
• A commercial practice shall be regarded as aggressive if it impairs or is likely to impair the average consumer's freedom of choice or conduct with regard to the product and thereby causes him or is likely to cause him to make a transactional decision that he would not otherwise make.
• The Annex to the UCP Act contains a blacklist with 31 specific cases of unfair commercial practices, such as:
  - falsely claiming to be a signatory to a code of conduct or falsely claiming that a code of conduct has an endorsement from a public body,
  - unauthorized displaying of a trust mark, quality mark or equivalent,
  - making an invitation to purchase products at a specified price and then refusing to show the advertised item to consumers with the intention of promoting a different product (bait and switch)
  - falsely stating that a product will only be available for a very limited time in order to elicit an immediate decision of the  consumer,
  - presenting rights given to consumers in law as a distinctive feature of the trader's offer,
  - advertisement masked as editorial content (advertorial),
  - falsely claiming that a product is able to cure illnesses, dysfunction or malformations,
  - including in marketing material an invoice or similar document seeking payment which gives the consumer the impression that he has already ordered the marketed product when he has not,
  - including in an advertisement a direct exhortation to minors to buy advertised products or persuade their parents or other adults to buy advertised products for them.

In deciding whether the advertisement is misleading, a new rule applies: if limitations in time or space are imposed by the medium communicating the advertisement (e.g. short duration of television or radio advertisements), and there is a possibility that the advertisement retains or hides material information or provides it in an ambiguous manner, it must be taken into account and examined whether the advertiser [trader] has taken every measure to make the information available to the consumer by other means. It is not clear  how this rule will change the authorities' proceeding practice. On these grounds it seems to be reasonable if the advertiser publishes information on its homepage that is not mentioned in the advertisement or is perceivable for the consumer only with difficulty, and refers to such information on the website properly in the advertisement. The issue of whether the publication on the homepage is suitable to exclude the misleading omission can be examined by taking all the circumstances into account (the nature of the product, the group of consumers addressed, the nature and relevance of information with respect to the consumer's decision). As an additional requirement, it must be a characteristic habit of the consumers to visit the homepage due to the nature of the product.

Strict rules in fining

The Consumer Protection Act sets forth the imposable sanctions and method of calculating the sum of consumer protection fines. Previously, the amount of the fine had to be determined by taking into account all circumstances of the case; however the amendments now provide a framework for the fining possibilities (previously unlimited) by fixing the upper limit of the fine (a maximum of HUF 2,000,000,000 (appr. EUR 8 million), depending on the net annual turnover). Otherwise, the minimum fine is HUF 15,000 (appr. EUR 60).

The Act makes it compulsory to impose a fine in three cases:

• the same violation repeated in a certain period
• serious violations, e.g. those violating or endangering the life, physical integrity or health of consumers, or affecting a wide range of consumers
• violations against an especially protected group of consumers, e.g. violating a provision protecting persons under 18 [minors]

2.2 Which authority can proceed?

By virtue of the changes, the following authorities have competence:

• Hungarian Authority for Consumer Protection (NFH)
• Hungarian Competition Authority (GVH)
• Hungarian Financial Supervisory Authority(PSZÁF)

Which of these authorities shall proceed in a given case depend on the following factors:

• The GVH proceeds in almost all cases that are capable of substantively influencing competition, while in other cases the NFH and PSZÁF proceed.
• General and special competence: the NFH has general competence, while the PSZÁF shall proceed in the cases relating to financial services.
• The NFH has competence for almost all acts that are committed exclusively on labels, in operating and user manuals or by violating certain requirements to inform, specified by other laws.

The following aspects must be examined when assessing whether competition is affected:

• the range of the commercial practice adopted, particularly with regard to the nature of the medium of communication, the size of the geographic area or the number of shops affected by the violation of law, the duration of the violation or the amount of wares affected by the violation, or
• the size of the undertaking responsible for the violation, according to the net turnover

Competition is affected without regard to any other circumstances, therefore the GVH has the competence to decide on the commercial practice if

• the commercial practice takes place by means of nationwide broadcasting,
• the commercial practice takes place by means of a newspaper or periodical distributed nationwide, or a daily newspaper distributed at least in three counties,
• the commercial practice employed by/consisting of directly contacting the consumers is directed to consumers of at least three counties , or
• the commercial practice of sales promotion at the place of selling is organized in at least three counties.

DR. GUSZTÁV BACHER