Tipping is sexy or maybe not? A ‘tip-slider’ with default settings was found to be unlawful by the Hungarian Competition Authority

After almost two years of investigation the Hungarian Competition Authority established that a terminal operator, HelloPay Zrt. had been conducting unfair commercial practice from April 2016 by automatically applying 10% tip/donation rate at its terminals. As a consequence of the infringement, a fine of HUF 20,000,000 (approximately EUR 62,500) is to be paid in twenty instalments and the company was prohibited to continue the commercial practice.

 

The terminals in question, operated by HelloPay Zrt., have been available to consumers since 2016 at major clubs, restaurants and at venues with high rate of attendance, especially at festivals and fairs. The terminals, allowing card payments, added a tip of 10% automatically to the amount payable for a particular service, unless the consumer actively modified or deleted the pre-suggested rate by using the ‘tip-slider’ that appears before the end of the payment process.

The Hungarian Competition Authority initiated an investigation, weather the automatically displayed “expected” tip of 10% significantly limits the decision-making process of the consumers, especially under payment circumstances at festivals and bars and thereby encourages the additional tip payment. According to the assumption of the authority the use of such terminals reduces the ability of consumers to independently determine whether to pay a tip, and if so, how much.

Moreover, this commercial conduct may convey the message to the consumers that the amount of the tip set by default on the screen is deemed to be conventional and equals to the expected amount, thereby limits the decision-making freedom of the consumer, which is to be protected by the provisions of the act on the prohibition of unfair commercial practices against consumers.[1]

In the course of the investigation the Hungarian Competition Authority found that the relevant market was the market of systems allowing innovative, cash-free payment solutions and the focal point of the case was the operation of the so-called ‘tip-slider’ of the terminal, with which the consumer is able to set the desired amount of tip.

Hellopay Zrt. tried to defend its practice by arguing that the default 10% tip setting is solely an option for the consumer; the customer is free to decide upon the tip. In addition, the company emphasized that their innovative solution encourages the consumers to freely decide upon the tip contrary to the service charge, which is a compulsory type of payment to be paid in exchange of the service under current Hungarian legislation.[2] With regard to the psychical pressure Hellopay Zrt. noted that primarily the employees of the venue, thereby the host companies are able to exert psychical pressure on the customer rather than the terminal operator.

The Hungarian Competition Authority highlighted that the consumer was able to make the payment without any affirmative conduct because no PIN code is required for card payments under a certain limit (HUF 5.000,-, which is approximately EUR 15,-). It is also noteworthy that the general effect was affirmed by the layout on the terminal screen, namely the size of the additional amounts was visually increasing along with the rising suggested amounts. Additionally, the final sum appearing on the screen also contained the sum of the default 10% tip. On the basis of these the Hungarian Competition Authority held that the amount of the tip displayed appeared as a “generally” expected one.

From the evidence collected in the course of the investigation and on the basis of the principals of behavioural economics it can also be clearly established that without the 10% default settings solely a negligible ratio of the consumers would have paid the 10% tip referred by the company as “conventional”, however by the default 10% settings appearing on the terminal screen the ratio of the consumers keen to pay a tip for the service became remarkable, which information was not contested by the company.

Hellopay Zrt. offered to undertake certain commitments (such as preparation of information materials, modification of the relevant message of the terminal, educating its partners, organizing an educational campaign etc.) in order to handle the possible distortion caused by the commercial practice. Additionally, the company also referred to the notification as a possible sanction allowed by the provisions of the Hungarian Competition Act[3], but both suggestions were rejected. Instead, the Hungarian Competition Authority established that Hellopay Zrt. conducted unfair commercial practice from 15 April 2016 by highlighting the 10% tip at Hellopay terminals as a default setting and prohibited the company from continuing the unlawful behaviour. The procedure and the decision of the authority resulted the modification of the configuration of the ‘tip-slider’ displayed at the terminals in question, after the modification a default tip of 10% can no longer be set again.

When imposing the fine the Hungarian Competition Authority took into account, as an aggravating factor, the fact that the service was newly introduced to the market and the practice may have affected a wide range of consumers. However, the amount of the fine was reduced after considering that Hellopay Zrt. has already taken measures to comprehensively modify the practice in question, and that at certain events the company has published auxiliary information on the operation of the terminals.

Taking into account the reasoning of Hellopay Zrt., especially its low liquidity rate due to recent asset procurements and the expenditure related to the commitments, which were underpinned by several financial statements, the Hungarian Competition Authority allowed the fine payment in twenty instalments.

The decision is available in Hungarian here:

https://www.gvh.hu/dontesek/versenyhivatali_dontesek/dontesek_2017/vj-642017121

 

[1]Act XLVII of 2008 on the prohibition of unfair commercial practices against consumers

[2]Decree No. 71/2005 (IX. 27) of the Ministry for Economy and Transport about the establishment of the extent of the service charge and about the regulation of the applicability and utilization of the service charge

[3]Subsection 8 of section 78 of the Act LVII of 1996 on the Prohibition of Unfair and Restrictive Market Practices

Rólunk / About Us

Források / Resources

  • Publikációk / Publications
  • Blog

Hírlevél / newsletter


© 2019 Versenyjogi Kutatóközpont / PPKE All Rights Reserved