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 Interview with Ildiko Fazekas, head of the self regulatory organization (SRO) , chairman of the panel on “Comparative advertisement”

 

 How can the ÖRT (Önszabályozó Reklám Testület) as an SRO contribute to the compliance efforts of its members?

The ÖRT as an SRO , in line with the goals of the Unfair Commercial Practices Directive (UCPD) is there to ensure that all advertisements published are ethical and honest with all claims properly substantiated and not misleading or aggressive. Our members (advertisers or agencies) implement strategies and procedures to ensure that all advertisements are in line with the regulations and ethical standards.

Our members request copy advice before the publication of their advertisement. The SRO reviews and checks the draft ad to make sure it complies with  ethical norms and all regulations. The SRO’s copy advice is not compulsory but it is an important input for advertisers to make sure the final version of the advertisement will fully comply with relevant norms and regulations.

The SRO keeps its copy advice service up-to-date with changing regulations and follows the case law of the authorities in order to give the best possible help to its members and to ensure that  consumers would not loose their trust in the ads.

Authorities are fully aware and support our SRO’s activity. We share the same goals: protecting the consumer from rouge traders and misleading, unethical or aggressive advertising practices. The Gazdasági Versenyhivatal (GVH, Hungarian Competition Authority) stated in its guidance that the decisions of ÖRT can be taken into account as aggravating or  mitigating circumstances. This means that in the procedure before the GVH the advertiser can present the ÖRT copy advice and can expect the GVH to take it into account as an attenuating circumstance. As the decision of the ÖRT can be the base for reduction of a fine, it encourages advertisers to use our copy advice service more and more often.

How can ÖRT check the substantiation of the claims of any given advertisement?

The copy advise is full clearance, so ÖRT undertakes the task to check the advertisement based on any applicable regulation, including sectorial legislation (like the special regulations on food advertising, on pharmaceuticals, or cosmetic products), and ethical code of conduct. In 2016, approximately 800 copy advice had been given.

When an advertisement is submitted to ÖRT for copy advice, first of all, ÖRT identifies the message of the ad as consumers would understand it. This is done considering the exact wording, pictures, sound and other creative content of the advertisement. If ÖRT finds that the message of the ad contains a claim, the copy advice identifies what needs to be substantiated in order to avoid misleading advertising. In this advice ÖRT specifies the acceptable substantiation, especially if an independent expert opinion is needed for substantiation of the given claim. In its weekly routine, ÖRT accepts the declaration of the advertiser about the substantiation. If there are doubts or upon the request of the advertiser the ÖRT also checks the substantiation – this means reviewing the the expert opinion whether it truly supports the consumer message of the advertisement, and whether the methodology of the testing is in line with scientific requirements. 

The ÖRT also handles consumer and competitor’s complaints, and monitors advertisements. Our decision making process is fast, and we take extra care not to share sensitive data and information, to avoid potential competition law infringements.

ÖRT is not like an enforcement authority, it also invests into education. We are committed to raise the consumers’ awareness about legal and ethical regulation, and spread information on how to make a complaint. That is why we have created the “SzulokSzava” website and an ad campaign http://jatek.szulokszava.hu/jatek too. Knowledge about regulation makes the consumers stronger; and self-conscious consumers help to keep the ad standards high. The result is a well-functioning competitive market, which is an important success factor of the economy. With all these activities we hope that ÖRT can contribute to achieving the goals of the UCPD.

Interview with Ildiko Fazekas, head of the self regulatory organization (SRO) , chairman of the panel on “Comparative advertisement”

How can the ÖRT (Önszabályozó Reklám Testület) as an SRO contribute to the compliance efforts of its members?

The ÖRT as an SRO , in line with the goals of the Unfair Commercial Practices Directive (UCPD) is there to ensure that all advertisements published are ethical and honest with all claims properly substantiated and not misleading or aggressive. Our members (advertisers or agencies) implement strategies and procedures to ensure that all advertisements are in line with the regulations and ethical standards.

Our members request copy advice before the publication of their advertisement. The SRO reviews and checks the draft ad to make sure it complies with  ethical norms and all regulations. The SRO’s copy advice is not compulsory but it is an important input for advertisers to make sure the final version of the advertisement will fully comply with relevant norms and regulations.

The SRO keeps its copy advice service up-to-date with changing regulations and follows the case law of the authorities in order to give the best possible help to its members and to ensure that  consumers would not loose their trust in the ads.

Authorities are fully aware and support our SRO’s activity. We share the same goals: protecting the consumer from rouge traders and misleading, unethical or aggressive advertising practices. The Gazdasági Versenyhivatal (GVH, Hungarian Competition Authority) stated in its guidance that the decisions of ÖRT can be taken into account as aggravating or  mitigating circumstances. This means that in the procedure before the GVH the advertiser can present the ÖRT copy advice and can expect the GVH to take it into account as an attenuating circumstance. As the decision of the ÖRT can be the base for reduction of a fine, it encourages advertisers to use our copy advice service more and more often.

How can ÖRT check the substantiation of the claims of any given advertisement?

The copy advise is full clearance, so ÖRT undertakes the task to check the advertisement based on any applicable regulation, including sectorial legislation (like the special regulations on food advertising, on pharmaceuticals, or cosmetic products), and ethical code of conduct. In 2016, approximately 800 copy advice had been given.

When an advertisement is submitted to ÖRT for copy advice, first of all, ÖRT identifies the message of the ad as consumers would understand it. This is done considering the exact wording, pictures, sound and other creative content of the advertisement. If ÖRT finds that the message of the ad contains a claim, the copy advice identifies what needs to be substantiated in order to avoid misleading advertising. In this advice ÖRT specifies the acceptable substantiation, especially if an independent expert opinion is needed for substantiation of the given claim. In its weekly routine, ÖRT accepts the declaration of the advertiser about the substantiation. If there are doubts or upon the request of the advertiser the ÖRT also checks the substantiation – this means reviewing the the expert opinion whether it truly supports the consumer message of the advertisement, and whether the methodology of the testing is in line with scientific requirements. 

The ÖRT also handles consumer and competitor’s complaints, and monitors advertisements. Our decision making process is fast, and we take extra care not to share sensitive data and information, to avoid potential competition law infringements.

ÖRT is not like an enforcement authority, it also invests into education. We are committed to raise the consumers’ awareness about legal and ethical regulation, and spread information on how to make a complaint. That is why we have created the “SzulokSzava” website and an ad campaign http://jatek.szulokszava.hu/jatek too. Knowledge about regulation makes the consumers stronger; and self-conscious consumers help to keep the ad standards high. The result is a well-functioning competitive market, which is an important success factor of the economy. With all these activities we hope that ÖRT can contribute to achieving the goals of the UCPD.

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Dear Colleagues, in order to prepare for our upcoming 5th Pázmány UCP Conference, we would like to share with you a couple of quick interviews with some of our conference speakers.

We have invited Veronica Manfredi, head of unit at the EU Commission to talk about recent developments in EU consumer and marketing law, the REFIT evaluation and how the enforcement of the UCPD could be strengthened.

  • What are in your view the most important developments from the last year in EU consumer and marketing law?

2016 and 2017 have been very important years for EU consumer and marketing law!

Indeed, on May 25th 2016, just a few days after I had been at the 4th edition Pázmány UCP conference, the European Commission adopted the updated version of the 2009 Commission Guidance on the Unfair Commercial Practices Directive (UCPD) as part of a wider e-Commerce Package. The revised Guidance has clarified in which way the UCPD applies also to new business models specifically in the online sector, which include platforms, app stores, search engines, comparison tools, social media etc. Online market players are often considered to be merely "intermediaries" but it was important to clarify that they are nevertheless subject to EU consumer law rules whenever they act as "traders" for the purposes of the UCPD, meaning they must act with due professional diligence and respect the transparency requirements. The Guidance also reflects major enforcement actions undertaken by the consumer protection authorities, whether nationally or within the coordinated Consumer Protection Cooperation network: indeed, such actions, including the EU-wide ones on in-app purchases and car rentals, provided important clarifications on the practical functioning of the UCPD. In addition, the Guidance incorporated the key voluntary principles agreed within the Multi-stakeholder groups on Comparison Tools and Environmental Claims. All this should now make it easier for enforcement authorities to stay vigilant and use the right legal basis to tackle any unfair commercial behaviour they spot in the market!

The other crucial outcome is the fact that, no later than last May 29th, Commissioner Věra Jourová presented at the COMPET Council the results of a major Fitness Check of EU consumer and marketing law (REFIT), carried out throughout 2016 on 6 key Directives, including the UCPD. The Fitness Check shows that, substance-wise, EU consumer and marketing law remains largely fit for purpose, provided that it is effectively applied and enforced. The purpose of the Fitness Check was to identify excessive regulatory burdens, overlaps, gaps, inconsistencies and/or obsolete measures which may have appeared over time. It included broad consultation activities, such as external studies, an online public consultation, a high-level European Consumer Summit, meetings with a dedicated Expert group that brings together the representatives of the main consumer and business organisations. In parallel, we have also finalised and transmitted to Council and Parliament a thorough Evaluation of the Consumer Rights Directive, of major importance for e-commerce transactions.

But, throughout the II half of 2016 and 2017, the Commission has also considerably advanced in negotiating the review of Consumer Protection Cooperation Regulation, ensured strict monitoring on the implementation of the ADR/ODR legislation and started assessing the impact of the 2013 Recommendation on Collective Redress.

  • What are the possible follow-up actions to the REFIT?

The Fitness Check identified three key priorities for follow-up:

(1) Ensuring better knowledge, not only among consumers, traders and their associations, but also among judges and other legal practitioners, of all the rights and duties stemming from EU consumer and marketing law, as robustly interpreted also by the CJEU;  

(2) Ensuring stepped up enforcement and easier redress in case of breaches of the substantive law provisions at stake;

(3) Considering a number of targeted amendments to the substantive rules, with a view to enhance their overall enforceability and quality of consumer protection, reduce, where appropriate, divergences in implementation and contribute to a simplification of the regulatory landscape there where fully justified.

Additionally, we have recently kicked off a self-regulatory initiative within the REFIT Stakeholder Group, to drive the industry to work on modalities ensuring a better presentation to consumers of pre-contractual information requirements and standard T&C.

We are also assessing the need for a possible legislative reform of the Injunctions Directive, which needs however to take full account of the findings of the ongoing analysis of the 2013 Recommendation on Collective Redress, because there are important ties between the two issues.

  • What possible follow-up actions could be considered for the UCPD?

The Fitness Check has shown that there is still considerable consumer detriment due to UCPD breaches - 33% of consumers responded to the REFIT online public consultation that they had experienced misleading or aggressive practices within the last 12 months.

Currently, consumers do not have an individual right to remedies under the UCPD: it is left entirely up to the Member States to determine under their national laws whether, under which conditions and which type of remedies would be available in case consumers have been subjected to an unfair commercial practice.

Therefore, we are considering the introduction of direct remedies in the UCPD (e.g. termination of contract, price reduction, damages), to enable victims to enforce their rights more effectively across all Member States. A good example of a problematic situation in practice is the Dieselgate emissions scandal. In many Member States consumers today cannot bring a compensation claim against Volkswagen, although the company breached consumer law, notably the UCPD, by presenting misleading "green claims".

In addition, we consider that the effectiveness of the UCPD and of several other EU consumer and marketing law instruments could be improved if we could increase the deterrent effect of penalties for breaches of consumer law. We believe that, at the current stage of development of the Digital Single Market, it makes a lot of sense to consider a better alignment of the penalties for breaches to Consumer Law to those already in place for breaches to Competition and Data Protection Law. 

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 Dear Participants, in order to prepare for our upcoming 5th Pázmány UCP Conference, we would like to share with you a couple of quick interviews with some of our conference speakers.

 First, we have asked András Tóth, the chairman of the Competition Council of the Hungarian Competition Authority about his views concerning the importance of their fight against misleading advertising practices. It’s title could be: ‘the human face of a competition authority’.

  •  Some would say that antitrust authorities have no role to play in the field of misleading advertising. Do you agree with this/How would you persuade them?

Well, from my experience I would say that the opposite is true. This can also be seen in the approaches adopted by a number of other competition authorities, for example the German competition authority, the Bundeskartellamt, has recently expressed its desire to be entrusted with specific powers in relation to misleading advertising and therefore a draft law dealing with this very matter has been submitted. Furthermore, it should be noted that the Dutch competition authority has also been entrusted with consumer protection competences, while the Polish, Italian and British competition authorities have a long history and experience in this regard. In my opinion, competition authorities definitely have a role to play in the field of misleading advertising, as the entire process of competition needs to be protected from unfair practices. It is not sufficient to protect the healthy competition structure, as merely protecting competition in this way is pointless if at the final point, when competition is crucial and when competition is over, competitors can exert unfair influence over the decision the consumer decides to make. If the latter is allowed and competitors were able to exert unfair influence, then the competition authority has ultimately acted in vain and competitors cannot compete on their merits. An authority’s role in preventing this from occurring reflects best the human face of a competition authority. For average citizens the abstract and indirect consumer protection activities and benefits of competition authorities are not well understood and appreciated, as such activities do not raise competition awareness, or increase the reputation of the authorities, while consumer protection activities can bring competition authorities closer to the ordinary people they work for. I do not agree with the idea that competition authorities should not concern themselves with other public policies, on the contrary, I believe that it makes plain common sense that authorities should also take into account other public policies.

  • Which cases would you highlight as the most important ones in the last year?

I would like to mention the Magyar Telekom case. The Hungarian Competition Authority (GVH) pays particular attention to competition in the Hungarian mobile telephony market. Broadband network coverage is a significant indicator, not only for competition in the mobile markets, but also for the whole digital market. It is not the determining infrastructure of the future, but that of the present. It is no accident that the actors of the mobile market also highlight the characteristics of their broadband networks in their commercial communications. This case, however, pointed out that an advertising communication shall be interpreted in the economic environment in which it takes place. In the given case, taking into account this important factor, a decision made by a consumer in the mobile market results in a long lasting, possibly even 2-year long loyalty commitment. A market player, making statements on this crucial element of competition concerning its own products, must take into account the fact that a consumer decision based on its statements is long term in nature. When market players are continuously investing large amounts of money in developing broadband networks, a service provider must not make a statement that it has the largest coverage or fastest speed network in the market  based on a current given market condition, as it does not take into account the dynamics of competition, or the long term commitment of consumers. This is the message of the Magyar Telekom decision, which is currently under judicial review.

  • Are there specific markets or forms of advertising that will be in the GVH’s focus?

The digital economy is currently in the focus of the GVH. We may say that from a consumer protection point of view we focus on the attention-based markets where competitors compete for the attention of consumers, as in such markets competitors are able to make profit from advertising revenues, thereby enabling them to further increase their capabilities to provide more services absorbing consumers’ attention. Consequently, the market players of digital markets must refrain from calling or absorbing unfairly the attention of the consumers since it distorts competition. The digital or attention-based markets create new forms of advertising. One only needs to think of social media where it is expected that consumers will be informed if a post does not reflect a personal opinion, but is instead a form of paid or sponsored advertising.