Hungarian Competition Authority imposes a fine of EUR 3.6 million for unfair commercial practices

Following similar decisions in other EU member states, the Hungarian Competition Authority (which is also competent in the field of consumer protection) sanctioned with a fine of 3.6 million EUR the behaviour of a social media services provider presenting its services to consumers as “free”.

The Hungarian authority imposed the sanction arguing that although consumers did not have to pay a fee for using the service, the personal data provided benefits the business and generates substantial income for the social media service provider.

In accordance with the provisions of Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market (“Unfair Commercial Practices Directive”), a commercial practice shall be unfair if:

(a)      It is contrary to the requirements of professional diligence, and

(b)      It materially distorts or is likely to materially distort the economic behaviour with regard to the product of the average consumer whom it reaches or to whom it is addressed.

In assessing the misleading claim of the data-business driven structure, transparency towards the consumers is a key element. The scope of the Unfair Commercial Practices Directive is to prevent the traders from hiding the commercial intent behind the commercial practice and, from this perspective, the information about the processing of personal data may be considered as material. The Hungarian authority also highlights that most consumers are not aware of the importance or value of the personal information they provide online and the promotion of services as “free” in such cases is likely to contribute to this confusion.

In this context, failure to inform the consumers with respect to the use of their personal data and presenting the services as “free” while in reality, the business model attracts and further sells targeted advertising based on collecting detailed information about the consumers is an important feature of the commercial practice.

Although lack of transparency towards consumers may be sanctioned separately under data protection rules (i.e. GDPR), the case reminds about the interplay between consumer and data protection and the assessment made on a case-by-case basis when determining whether a commercial practice may qualify as being a misleading omission of material information.

Furthermore, it must be noted that this interplay between consumer and data protection rules, as well as the relate concept of “data as a price”, represents an ongoing concern for the European legislator. In this context, both the Digital Content Directive no. 2019/770 and the New Deal for Consumers imitative meant to update the entire consumer protection legal farmworker at the level of the EU, expressly state that a digital service provided in exchange for the consumer’s personal data is not considered “free”.

In this context, even though until this point the Romanian Consumer Protection Authority did not turn its attention to digital services provided to consumers in exchange for personal data, we do not exclude similar sanctions on the Romanian market, following the trend evident in the other EU member states.