Vodafone judgment: what is expected from the GVH when imposing fines?

Facts of the case

On 25 January 2022, the highest court in Hungary, (the “Curia”), upheld the judgment of the court of first instance, establishing that Vodafone has engaged in unfair commercial practices to the detriment of consumers when it falsely claimed in its marketing campaigns that Vodafone is a market leader in the 4G network market in Europe (“Vodafone Judgment”). The court of first instance also ordered the Hungarian Competition Authority (“GVH”) to conduct an additional analysis and a new assessment regarding the fine imposed on Vodafone (HUF 1.175 billion, approx. EUR 3.5 million) to ensure the severity of the fine was justified.

Key takeaways of the Vodafone Judgment

Depth of reasoning when imposing fines

The Curia stated that under the rules of administrative procedure when exercising its discretion over an administrative action it has a duty to examine whether the administrative body exercised its powers within the limits of its discretionary powers, and whether the criteria of discretion and their reasonableness can be ascertained from the document containing the administrative act.

In this case, the amount of the fine had to be determined considering all the circumstances of the case, in particular the gravity, duration, repetition and frequency of the infringement, the benefit obtained due to the infringement, the infringer’s market position, the consequences that arose from the conduct and the the infringers cooperation.

The Curia found that in determining the amount of the fine, the GVH had quantified some items in concrete terms, assigned a basic amount and percentages to them,and failed to do so for other items. . As a result, the GVH’s consideration of the requisite criteria and the reasonableness of the assessment could not be established. The Curia also stated that the application and reference to the GVH's Fine Notice cannot replace the fact that the GVH’s decision must reflect the criteria of assessment and the comparative weight of the evaluation of certain circumstances.

Procedural time limits

Vodafone also challenged the GVH decision on the basis that the GVH had not complied with the procedural time limits during its investigation. In its assessment of this claim the Curia had to assess whether the court of first instance had appropriately examined this circumstance and in this regard stated that:

• first, the claimant must dispute (in a manner that is sufficiently specific) the authority’s non-compliance with the time limit and provide the reasons for disputing the non-compliance;
• the mere fact that it could not be established in the present case that the GVH exceeded the procedural time limit set out in the legislation does not necessarily mean that its procedure was fair. This means that the formal compliance with a procedural time limit does not mean that the case has been concluded within a reasonable time;
• the consecutive use of several procedural actions that cannot be counted in the administrative time limit (e.g. suspension of the procedure), and/or the multiple repetition of procedural actions (e.g. requesting several data submissions) may create a situation where the authority formally complies with the administrative time limit, but the requirement of a reasonable time limit under fundamental rights is violated.

Comparative advertising and/or unfair commercial practice

According to the judgement of Curia dated 8 May 2019 regarding the advertising of Magyar Telekom, claiming that it has the biggest 4G network does not constitute an unlawful comparative advertising.

The main difference of the two cases is that, while in the Magyar Telekom case the 4G statement was only assessed as comparative advertising, in the Vodafone case the 4G statement was assessed based on comparative advertising (regulated by the Competition Act) and unfair commercial practices (regulated by the Consumer Protection Act). The conceptual difference between the two is that if the statement is investigated as an unfair commercial practice, the company making the statement may be required to prove that the statements are in fact true. If the company fails to comply with this obligation, the statements will be deemed false.

In the Vodafone case, while initially the GVH launched its investigation for the alleged violation of comparative advertising, it ultimately extended its investigation to assess the statements in question from an unfair commercial practice standpoint and thus requested Vodafone to prove the truthfulness of its statements. Following the GVH, in the court review process the Curia also found that Vodafone failed to meet its burden of proof regarding the verification of its statement and therefore Vodafone’s claim of being market leader was deemed unfair commercial practice.

Potential aftermath of the Vodafone Judgment

Following the Curia’s final and binding judgment, the GVH is obliged to reassess the HUF 1.178 billion fine imposed on Vodafone and must reason its assessment in more detail and in a transparent manner, because the GVH’s discretionary power to impose fines does not acquit the GVH from such principles of law.

What the Vodafone Judgment may also mean for upcoming GVH investigations is that

1. there is more pressure on the GVH to determine the fines in more detail and in a transparent manner to present the assessment of the circumstances and their weight in a comparable manner;
2. the principle of procedural fairness may be called upon if the length of the GVH’s procedure, the consecutive use of RFIs or the suspension of the procedure could result in an unnecessary elongation of the investigation;
3. when it comes to advertising comparing services with other competitors, the GVH may not only launch its investigation to assess comparative advertising, but it may also investigate whether an unfair commercial practice occurred.

The Vodafone Judgment in Hungarian is available here and the Magyar Telekom’s judgment in Hungarian is available here.

For more information, please contact Dániel Arányi, Gábor Kutai or Rebeka Szopkó.