Index – Economy – How did Booking.com get a $ 2.5 billion fine?

Booking.com received a record HUF 2.5 billion consumer protection fine. We have already presented the reasons for the punishment, and if you are interested in the logic of the GVH, you can follow in great detail what the GVH has examined and how it has thought.

The measure surprised everyone

The three findings were briefly as follows.

1. Accommodation “free cancellation” was indeed limited and could not be called free, as anyone who chose the later cancellation option booked more expensive.
2. Annoying so-called “urgent” messages from Booking.com, such as “there is only one room available now,” “six in the last hour,” are suitable for psychological pressure and disrupt the calm consumer decision-making process.
3. Finally, according to the GVH, when displaying the offers from Hungarian accommodation providers, the possibility of Széchenyi Pihenőkártya was not correctly (not uniformly) indicated on the site, which could distort reservations.

The first two exercises persisted at the time of the study, the last one no longer. The 112-page GVH material illustrates the relationship between Booking.com and consumers with a wealth of website images, trial purchases, analyzed messages from sources, and pricing examples, while covering several previous studies of international practices .

Speaking of the large fine, we spoke with nationally competent attorneys in part about the specific case and in part about the background

Our interlocutors were familiar with the case, even if they were not involved, they knew that Booking.com was (again) under investigation, nor were they surprised by the finding of the case, but even more by the amount of the fine.

Bilateral market

Booking.com’s business is special, to understand it, think for a moment about the so-called bilateral markets, or in better known terms, integrators, concentrated markets.

These platforms connect consumers and companies.

• Stock exchanges are companies and private investors that buy stocks,

• accommodation agents for those who wish to travel and hotels,

• insurance intermediaries cover clients and insurers,

• Uber passengers and drivers,

• But there is also a well-known home business that pairs voyeurs and those willing to get naked for them.

The principle of such bilateral markets is that liquidity generates liquidity. If there are many companies on a stock exchange, investors will go there. And if there are many investors, the companies that issue the shares will also go there. Good markets become very strong, less popular ones become insignificant.

If there are many hotels on a platform, everyone looks there, if everyone looks there, then the next hotel will also be contracted with the market leader, the network available there will be increasingly valuable to customers on both sides of the market. Similarly, everyone on the best real estate site or the best used car portal is trying to sell, but also to buy.

Booking.com has always been in focus

So Booking.com was, and still is, the strongest player in a two-way market, accommodation brokers. The company was not unknown to the Hungarian and European competition authorities. He has had a serious history with various authorities.

His first big series of cases was investigated in two dozen European countries, it was a classic antitrust case, about the company that advertised it and that also demanded that the accommodation offer you the best price guaranteed. Interestingly, in Hungary, this investigation ended without conviction, but

This was severely restrictive in some situations, ruling out the logic of the market where, for example, a hotel could offer highly personalized discounts or last-minute promotions. The reservation has stipulated with everyone that a discount can only be given if its price is so moderate. The matter has ended in a compromise, and we no longer come across this term “best price guaranteed”.

Words to avoid

Every profession has what terms should not be used. For example, the words “everyone” and “nobody” should be avoided in the press to avoid demands for redress. If we write that no one liked the concert in the auditorium and the concert organizer is suing us, no matter how ugly the show was, it cannot be proven that no one liked it, we cannot summon everyone as witnesses. There are such words to avoid in competition law, “better”, but “free” is also the case.

There are many such cases, sensible companies are simply afraid to use the word “free”. The case of Booking.com is special because in the event of cancellation of the cancellable accommodation, it did not really cost the reservationer a cent of the reservation, that is, it was free. But if you didn’t cancel your reservation in the end, you paid a higher price, meaning the cancellation option was not free.

It is a recurring practice for GVH and other authorities to examine the term “free” from companies.

• Phone companies did not give the device away for free if they required a two-year loyalty statement, during which they charged fees.
• As a result, if someone hasn’t spent a single penny on Facebook, Facebook still can’t be considered free because social media participants pay by looking at the massive ads on them.
• By this logic, even shopping malls are not free for consumers. Although nobody takes a ticket, they don’t send it if we just look around us, but the mall operator also turns on and heats up for us, because their tenants will pay if many of us go there.

records

In terms of consumer fines, Booking.com is a record, but within half a year

• Telenor was also fined HUF 1.8 billion (free device),

• Facebook Ireland was fined HUF 1.2 billion (free service, but customer data was used for commercial purposes),

• and Vodafone was fined 1,176 million HUF (loud and exaggerated statements).

According to lawyers, it is a matter of competition philosophy to what extent these “individual” consumer protection cases are subject to competition law. According to national practice, when the GVH protects individual consumers, it also protects competition to the extent that those who defraud their consumers gain an unwarranted competitive advantage over those who do not defeat the consumer.

However, in many European countries, consumer protection is separate from competition authorities, but in Hungary it is not only part of the GVH, but also seems to be an increasingly important part.

Income restriction

What explains this? The GVH generates income, the income from its fines is “planned”, it contributes a substantially greater amount than its operating costs. From a state point of view, therefore, its balance is positive not only for the social benefits of its activities, but also for its specific financial benefits.

At the same time, its core business, posters, is more difficult to process,

Cracking down on a secret conspiracy is harder to analyze public announcements.

Furthermore, GVH’s activities are often criticized for quickly giving the green light on matters close to politics, but for taking firm action against companies without sponsors.

Less politicized

Classic competition authorities tend to consider mergers, trusts, dominance, but in Hungary, independent or quasi-independent authorities also question how far they go to politically “protected” companies, and most of these cases are full of such companies.

And in consumer protection, everyone can get caught, even Western companies that don’t create many jobs at home, but earn a lot of income.

You do as much consumer protection as you want

To have many cases, companies also help because they constantly pressure each other, pharmaceutical companies, telecommunications companies, dietary supplement manufacturers keep people separate to see the ads from the competition. The GVH investigates these and can relatively easily impose many fines.

However, in cartel cases it is more difficult to prove or the relevant market is incorrectly established, most recently in the large bank case the fine imposed decreased from HUF 9.5 billion to HUF 4.9 billion in seven years.

Furthermore, the circumstances were accompanied by a strong loss of reputation, such as when a newly appointed young member of the Competition Council, for a few days, salivated 1,400 documents and formed an opinion), the case finally fell apart before the Mansion. For those who are interested in the details, this case is described in detail in this Hungarian Orange article.

The fine is high

According to our sources, punishing big, well-known online companies is a particularly rewarding task, although in reality the public barely understands why Facebook or Booking.com has been fined, but they all have an often negative opinion about companies, they collect our photos, big brother, come in our daily lives, they did not refund the cancellation, the hotel room was bad, and so on.

According to the national interpretation, said company can be penalized up to 10 percent of its turnover. Of course, the benchmark may be different in each case (for example, on Booking.com it does not matter if the expenses of Hungarian customers, the payment of the Hungarian accommodation commission or the total sales revenue of the company are the reference point).

The question is not so simple, because when a Hungarian man reserves a Spanish hotel room on Booking, it can be interpreted that Booking.com receives a commission from the Spanish hotel rate, but in the end the Hungarian client paid for it. The aforementioned GVH detailed statement describes at each point how it interpreted the relevant market.

We love it and we don’t love it

The decision of the competition authority cannot be directly related to the attitude of national economic policy leaders, but in the past it has been shown in the case of Uber, for example, that companies in California or other remote places that charge A local service are not very popular in Hungary. Just think about it:

• a family from the capital went on vacation to Hévíz and booked accommodation on Booking-com

• a young hungarian entered the party district as long as he could with an Uber

• a Hungarian company announced to Hungarian customers on Facebook

National hotel reservations, national passenger transport, national advertising, and yet a very distant company proved it. One who barely employs a Hungarian person. It is really annoying, but unfortunately these services are very good.

But that’s another question, of course, it doesn’t help judging whether $ 2.5 billion was the way Booking.com depressed us or said something for free that has no opinion, but basically consumers probably didn’t understand how it works. .