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05 July 2018
Society is undergoing a new industrial revolution – with the global development of the Internet, life has changed radically in just a few decades, and legislation can barely keep up with adapting to a situation that was previously unimaginable. The Hungarian Competition Authority (HCA) has also been monitoring developments and it has not been afraid to intervene in the interests of fair competition and the protection of consumer rights.
Influencers have recently been targeted by the HCA, especially regarding their promotional activity. Thus far, the HCA has taken a supportive approach; it has not imposed any fines but released guidelines to help influencers with compliance.(1) This update will examine the most important elements of the HCA's guidelines and the relevant issues to help ensure that individuals are compliant.
Before the popularity of social media, brand owners often used celebrities to promote their products and serve as role models for their fans. However, with the development of social media, roles have changed and now anyone can be famous; even a cat can have millions of followers and a bigger fanbase than respected singers or movie stars. This has presented a real goldmine for marketing specialists, who have not hesitated to jump on the opportunity to reach new customers. A recent study found that 39% of marketers are going to increase their influencer marketing budgets in 2018.(2)
Influencer marketing has also rapidly increased in Hungary. After issuing its guidelines at the end of 2017, the HCA aims to increase consumer awareness and also influence and shape future market conduct.
According to the guidelines – which are aligned with international practice – an 'influencer' can be anyone who is capable of exercising influence and forming consumer opinion in a digital environment by sharing online content on their website, social media or other online platform. This definition includes traditional celebrities, as well as youtubers, bloggers, vloggers or publishers of other online content (eg, on Facebook, Twitter, Instagram, YouTube and Snapchat) who have a dedicated follower base. Age does not matter – even a minor can be an influencer.
Being an influencer and sharing contents is not illegal. However, if the content is an advertisement which is not part of the influencer's own opinion, taste, style or spontaneous reaction, but is due to some sort of reward from the advertiser company, consumers have a right to know this information. The reward is not limited to money, but also includes discounts, free tickets, products, car use and anything for which one would otherwise have to pay, including dividends or commissions.
In line with the Consumer Protection Act(3) – which transposes the UCP Directive(4) – it is deemed unfair(5) if influencers share content in printed or electronic media to promote the sale or other form of use of a product and a business entity which has paid for this promotion, without making the paid promotion clearly identifiable to the consumer.
According to the guidelines:
In case of non-compliance, not only the influencer can be fined, but also the company ordering the paid content and even the intermediary company (eg, marketing agency).
Thus far, the HCA has conducted three competition supervision proceedings against influencers in Hungary, which all ended with commitments (ie, no fines were imposed). The concerned parties were ordered to share educational posts and information material on their pages to raise awareness of the issue. Although the HCA could have initiated further proceedings in this respect, it has considered that commitments with an educational value would better serve the public interest – at least in the short term.
The HCA has recently dealt with another legal issue relating to influencers: the practice of buying fake followers to appear more popular than in reality. The number of followers is something that many people look at when deciding who to follow and it is a metric which brands frequently use to measure the possible audience their advertisement might reach.
This question emerged when a Hungarian violin artist suddenly gained more than half a million new followers from South Asia and became the second most-liked Hungarian celebrity page on Facebook. While there is no official press release from the HCA regarding this issue, it has provided information to an online newspaper on the ongoing competition supervision proceeding. The HCA has outlined that acquiring likes and followers for financial consideration and displaying it on a page may deceive both consumers and business partners regarding the positive assessment of the artist's reputation and popularity.
While the proceeding is still pending, it will be interesting to see whether the HCA closes the case with commitments or whether it considers it necessary to impose a fine.
Although the HCA has applied a supporting, non-punitive approach towards these practices, after a certain grace period any non-compliance will induce the possibility of a significant fine (the statutory maximum is 10% of the undertaking's turnover of the previous business year) being imposed. Affected market players should develop a practice based on the above guidelines and seek professional advice to prevent possible legal consequences.
For further information on this topic please contact Anna Turi or Márk Kovács at Schoenherr Attorneys at Law by telephone (+36 1 8700 700) or email (firstname.lastname@example.org or email@example.com). The Schoenherr Attorneys at Law website can be accessed at www.schoenherr.eu.
(1) HCA guidelines available here.
(2) Linquia – the State of Influencer Marketing 2018.
(4) The EU Unfair Commercial Practices Directive (2005/29/EC) of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market amending the EU Comparative Advertising Directive (84/450/EEC), the EU Distance Selling Directive (97/7/EC), the EU Protection of Consumer Interests Directive (98/27/EC), the EU Directive on Distance Marketing of Consumer Financial Services (2002/65/EC) and the Regulation on Consumer Protection (2006/2004/EC).
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