The Hungarian Competition Authority (“GVH”) initiated competition supervision proceedings against TESCO in December 2017. According to the GVH, TESCO delivered or prepared substitute products instead of the ordered products on several occasions during the home delivery and in-store collection of products within the scope of its online shopping service, without informing the consumer in advance, thereby misleading consumers. At the end of the GVH proceedings, however, the GVH – somewhat softening its recent strictness – did not establish a violation of the law and did not impose another billion-euro fine on TESCO, but accepted the company’s commitments, in which the retailer undertook to bring its behavior in line with the GVH’s expectations.
In the case of an online shopping service, it is possible that the ordered product is not delivered or a substitute product is sent instead, but in the case of an online store, this practice is not permitted. TESCO did not draw attention to the fact on its website that it has the right to send a substitute product or not to deliver the ordered product at all, so the customer often only found out upon receipt that he received something different from what he ordered.
In light of this, let’s take a closer look at what exactly the GVH found to be concerning:
Although the GVH did not establish a violation of the law (nor the absence of one) during its proceedings, it did identify as a problem that the online shopping interface and the use of words (e.g. “basket, order”) gave consumers the impression that the nature of the order did not differ from the usual practices of online stores.
The GVH also found that online shopping facilitates more considered, more careful decisions, thanks to the special settings of the website, as it makes it easier to review and analyze the price/value ratio of the products offered, as well as special offers. Based on this, it can be assumed that the consumer chooses the most favorable products for him from the given offer when making a purchase, so in comparison, any substitute product can only be a more disadvantageous solution for the consumer.
It may also happen that the consumer used the service only with a view to a certain product, so when that one product does not arrive or is replaced with another product, it is also disadvantageous for the consumer.
The so-called “enticement effect” (i.e. when the consumer is persuaded to buy a product that was not originally desired) may also apply, since if the consumer purchased the other products with a view to the replaced product, buying the main product would be unnecessary, so he would rather accept the replacement product.
As presented in point ii., while online shopping is a longer thought process, where there is an opportunity to make a considered decision, the consumer only has a few minutes during delivery/collection. In this case, the consumer has the right not to accept the replacement product, but the consumer does not have the time or the opportunity to thoroughly examine the products and evaluate the price-value ratio, since the invoice only shows the price and quantity of the products, summarized, so he does not see whether the given product is, for example, on sale.
When accepting the product, the consumer is under double pressure, despite the fact that he is not obliged to accept the replacement product. On the one hand, he presumably needs the product, and on the other hand, not accepting it would entail a modification of the invoice and additional administrative burdens, which he would like to avoid.
At the end of the competition supervision procedure, having considered the above issues and objections, the GVH concluded in its decision that any potential consumer grievances arising from TESCO’s conduct can be effectively addressed with TESCO’s commitment package.
With what commitments will TESCO ensure nationwide home delivery of groceries?
TESCO has committed to spending a total of 407 million forints to fulfill the following commitments. If TESCO can fulfill its commitment with a lower amount, it will recommend the remaining amount in a ratio of 50-50% to the Hungarian Food Bank Association and the Ecumenical Relief Organization for public interest purposes. Let’s take a look at what these commitments are.
Regarding the operation of the web store, TESCO has committed to
- create a web store that is clearly distinguishable from this service in parallel with online shopping, for customers for whom online shopping is not available according to their place of residence. In this regard, it has also committed to extending the availability of the web store to customers for whom online shopping is available (i.e. ultimately to all customers in Hungary);
- operate the webshop for 12 months from the expiry of the available delivery deadline, within which customers can purchase from a limited range of products (approximately 2,900 products);
- promote the launch of the webshop through a campaign highlighting the differences between the webshop and the current service.
In order to improve the online shopping service, TESCO has undertaken to - introduce a solution that allows customers to receive information about the offered substitute products by e-mail before delivery. The unit prices of the offered substitute products will also be displayed in the advance notification in order to compare the ordered and substitute products and to help in the decision-making process;
- introduce a solution that allows customers to opt out of substitute products for all or individual products placed in the basket;
- change the current Online Shopping name on its website to a more unambiguous name;
- immediately, in a pop-up window on the home page of its website, it publishes the following information [until the commitment regarding additional information in the following subsection is fulfilled]: “TESCO Online Shopping is not a webshop, so you only purchase the selected products upon delivery. It may happen that on the day of delivery, the product you have selected is not available in our store and therefore we cannot deliver the given product, or we will offer you a substitute product.”
- it publishes prominent information about substitute products on its website during the purchase process, on the “Help” sub-page, or in the form of a demonstration video on the main page, and it also provides its current customers with direct information via e-mail about the modifications made within the framework of the commitment.
TESCO will also have to submit a certificate of fulfillment of its commitments to the GVH within a specified deadline. TESCO has already implemented or started implementing certain measures to enhance the consumer experience and address the above anomalies during the competition supervision procedure.
What are the lessons of the case? With this commitment procedure, the GVH has achieved that a nationwide food delivery service will be created, also available in small settlements that have not been served so far, which is particularly important during the current epidemic period and before Christmas and other holidays, greatly facilitating the supply of consumers. This procedure has created a true win-win situation, which means significant advantages for both the consumer and the trader.
However, the question arises as to whether the circumstances complained of by the GVH would have stood the test of a judicial review, i.e. it is not clear whether TESCO’s online shopping service has truly deceived the average consumer. An interesting theoretical question – which we would not undertake to dissect here – is to what extent a law enforcement body, which is supposed to guard over the purity of competition and consumer decision-making, has the task of actively shaping market conditions, and if such a social need arises, it should not be satisfied by businesses, but by their own decisions in market competition.