Ecommerce in Hungary

Pandemic-induced changes in shopping behaviour have transformed markets permanently, and this is true for Hungary as well. According to Reacty Digital’s forecast, Hungary’s domestic online retail turnover will be worth around EUR 2.7bn at the end of 2020, compared to EUR 2.2bn in 2019. By 2024, it may increase 2.2 times and exceed EUR 4.9bn. A further expectation is that the market will experience about 25% growth in 2020, compared to a 16% increase in 2019, as GKI Digital forecasts.

Currently, nine out of ten Hungarians aged between 18 and 79 have already bought something online. According to Growww Digital’s data, segments such as Groceries, Sport, Entertainment and Health are booming, seeing a 200–300% increase in Hungary at the beginning of 2020. 

According to trade.gov, harmonised EU rules on data privacy and security could catalyse the development of the local cloud computing market and create the potential for Hungary to develop into a regional e-commerce hub. Companies in Hungary will have to invest in key IT services and products to compete with EU rivals, with cloud-delivered services expected to perform well. Spending on IT security products is expected to grow rapidly in the next three years.

The pandemic offers a great opportunity to Hungary’s e-commerce industry: until now, the market was growing by approximately 20% and attracted a lot of non-Hungarian companies as the number one or two expansion destination in CEE. Expansion in Hungary is very attractive to foreign online shops because operational and online marketing expenses are relatively low in Hungary. 

Based on an interpretation of the relevant laws accepted by the competent authorities, a Hungarian affiliate, branch office or commercial representative office is required to carry out any retail activity in Hungary. This is because one of the mandatory elements of the required notification for such activities is the company’s registration number, and the Hungarian authorities can only deal with Hungarian company registration numbers for administrative reasons. Please note that this approach by the Hungarian authorities is debatable under EU law; however, a costly judicial or European procedure would be required to prove this approach wrong

There are no special licence or permit requirements for e-commerce businesses, and e-commerce activity is not subject to prior authorisation or any requirement having an equivalent effect.  

However, requirements relating to qualifications, training, authorisations and notification prescribed in other specific legislation for information society services not provided by electronic means apply, which, among others, are the following:

• any commercial activity (including e-commerce businesses) must be announced to the competent notary based on the e-commerce company’s seat;
• there are specific products which can only be sold in physical shops and not online: dangerous materials and mixtures under the act on chemical safety;  paints, lacquers, car glazers/polishers; veterinary medicines and their active agents; weapons, munitions, explosives, exploders, gas-spray; pyrotechnical products; insecticides and their active agents; non-hazardous waste and any highly flammable or explosive materials;
• pets specified in the decree on the keeping and sale of pets, which cannot be sold via mail order houses.

Furthermore, the authorisation and notification requirement prescribed in Act on Electronic Communications and in other legislation adopted under the authorisation of this act also apply.

E-commerce services qualifying as online marketplaces, search engines and cloud-based IT services (services subject to notification) must report to the Government Incident Response Team (the “Incident Response Team”) designated by the Government in a decree any security incident provided for in other government decrees

Providers of information society services, including but not limited to electronic commercial services* must make available to the recipient of the service the contract terms and general conditions concerning the information society service they provide in a way that allows him/her to store and reproduce them.

The service provider must give the following information clearly and unambiguously and before the recipient of the service places the order:

1. the different technical steps to follow to conclude the contract by electronic means;
2. whether or not the concluded contract is considered made in writing, whether or not it will be filed by the service provider and whether it will be accessible;
3. the technical means for identifying and correcting input errors before placing the order;
4. the languages offered in the conclusion of the contract;
5. the relevant codes of conduct relating to the service activities in question, to which he/she subscribes concerning the services in question and information on how those codes can be consulted by electronic means.
   1. Information society services: services provided electronically, normally for financial consideration, at a distance and at the individual request of the service recipient.
   2. Electronic commercial services: any information society service provided in the form of business operations where the purpose is to encourage the sale, purchase or exchange of and access by other means to any goods of a fungible nature that are capable of being delivered, including money and securities and natural resources that can be utilised as capital goods, also including services, immovable property and rights.

No. However, if the e-commerce website addresses consumers, the general terms and conditions must contain the mandatory elements listed in Government Decree No. 45/2014 (II. 26.) on the detailed provisions of contracts to be concluded between a consumer and a business entity.

General terms and conditions with the mandatory elements listed under point I/3 which must be made available in a way that allows the audience to store and reproduce them.

Service providers must render easily, directly and permanently accessible at least the following data and information by electronic means:

1. the name of the service provider;
2. the registered office or permanent establishment, or failing this, the home address of the service provider;
3. the details of the service provider, including its electronic mail address, which allows it to be contacted by recipients of the service rapidly and communicated with in a direct and effective manner;
4. where the service provider is required to register in a public register as a precondition for coming into existence and/or for engaging in activities, the name of the court of registry or other authority entering the service provider into the register and the registration number;
5. where the service provider’s activity is subject to authorisation by law, an indication of this fact and the name and the particulars of the relevant supervisory authority, and the number of the authorisation;
6. if the service provider is liable to pay VAT, the relevant tax number;
7. regarding the exercise of regulated professions:
   1. the name of any professional body or similar institution (chamber) with which the service provider is registered, whether under legal requirement or voluntarily,
   2. if the service provider is a natural person, an indication of the vocational skills or professional and scientific title, and the Member State where it was granted,
   3. a reference to the applicable professional rules for exercising the regulated profession in question in the Member State of establishment and the means to access them;
   the registered office, place of business of the service provider who provides data hosting services to the service provider, including its electronic mail address, which allows it to be contacted rapidly and communicated with in a direct and effective manner, unless such details are already accessible given the nature of the data hosting service provided to the service provider.

Any information published by a service provider, which is not recognised as media content, whose content might seriously impair the physical, mental, spiritual and moral development of minors, in particular those that are dominated by graphic scenes of violence and/or sexual content and that depicts nudity, may be published only with warning labels displaying, in advance, on the sub-page that contains the information about the potential harm it may cause to children, and with identifiers incorporated into the source code indicating the content category, and which can be identified by a content-filtering software.

The service provider must insert an electronic hyperlink into the website which redirects the consumer to the online dispute resolution platform (Alternatív/online vitarendezés peren kívül - Your Europe (europa.eu) 

The service provider must also publish the data privacy notice on the website/webshop according to the GDPR.

No. However, the service provider must inform the recipient of the service clearly and unambiguously and before the recipient places the order of the service about the languages offered in the conclusion of the contract.

Product selection is an important aspect of e-commerce business that needs to consider specific local and EU restrictions.

These may be product-specific restrictions that apply in all sales channels, e.g. in the case of foodstuffs and medicinal products, or that certain products may only be sold in brick and mortar stores, e.g. hazardous materials, gasoil, pesticides and explosives. In Hungary, however, there are also certain restrictions that apply to online channel only, such as a prohibition on the online sales of prescription medicines and the restriction that over-the-counter medicines can only be sold online by authorised pharmacies.

Thus, it is crucial to properly check all the requirements in place concerning the online sales of the relevant products

The main difference compared to traditional sales is that, as a rule, consumers are entitled to withdraw from a contract made on-line within 14 days of the date of its conclusion, without giving a reason. Business entities must inform consumers of their right to do this, e.g. by providing them with the appropriate form of such statement. If the business entity does not inform the consumer of this right, the withdrawal deadline is extended by 12 months.

If the consumer decides to withdraw from the contract, she/he is entitled to the reimbursement of the delivery cost but not exceeding the least expensive type of standard delivery offered by the seller. 

Regarding standard ‘warranty’, i.e. the seller’s liability for physical and legal defects, and the producer’s ‘guarantee’, in Hungary the same rules apply to traditional and online sales

In Hungary sending marketing communications via electronic means, e.g. emails and SMS, requires the opt-in of customers as recipients. Contrary to the opt-out model, the opt-in model means that the sender can only send marketing via the mentioned communication channels if it obtained a prior consent from a designated recipient for the given channel of communication.

Marketing opt-in should meet the GDPR-consent standard. This means that such consent should be a freely given, specific, informed and unambiguous statement or clear affirmative action.  

A clear affirmative action means that a deliberate and specific action must be taken to opt in or to agree to the processing. This can be done, e.g. by ticking a box when visiting a website, choosing technical settings for information society services or signing a consent statement.

Non-automated phone calls and sending postal letters is subject opt-out. 

Hungarian competition and consumer protection law is completely harmonised with EU regulations similarly applicable to online and brick-and-mortar sales. Given this, the practice and the activity of the relevant Hungarian Competition Authority (Gazdasági Versenyhivatal; the “HCA”) signals the main competition law trends in Hungary concerning online selling. As the HCA is competent not only in competition but also in certain consumer protection cases (unfair commercial practices, misleading and unlawful comparative advertising), the following summary covers both issues.

Illustrating the same standards for online and brick-and-mortar selling, the HCA has sanctioned entities for online resale price maintenance. In 2019, the HCA found a garden supplier manufacturer guilty of setting its resale price for online selling. Currently, the HCA pays special attention to online selling, as in late 2020 it launched a new market study into investigating the role of large datasets in e-commerce. The HCA examines what type of data e-commerce companies collect from their consumers, how and for what purpose they use such data, and to what extent consumers are aware of this. If discrepancies are detected in the market, such market study may result in targeted competition control proceedings or proposals for policy changes.

Furthermore, the HCA tends to focus better on online ticket selling, online accommodation services and online payment services in its sector inquiries, consumer awareness publications and control proceedings. In consumer protection cases, the HCA also regularly investigates flash sales (e.g. black Friday sales), online home delivery service of groceries, influencer marketing as potentially concealed advertising, and tends to impose higher and higher fines. The highest fine for a consumer protection beach was approx. EUR 7m.

In the case of online payment processing services, strong customer authentication is mandatory according to the PSD2 directive. The merchant must ensure such type of payment service provider on the website which is able to provide and ensure strong customer authentication.

However, the merchant is not obliged to provide any electronic payment solution or other financial services on the website, and the customer can pay in several ways according to the general terms and conditions of the merchant, e.g. with an online bankcard payment, instant wire transfer, cash, etc.

If the merchant provides financial services other than payment processing services, such as payment initiation services, account information services, loan, e-money services, etc, the specific provisions for the given financial services apply, including the specific notification and licence provisions

The HCA deals with competition law and certain consumer protection cases (unfair commercial practices, misleading and unlawful comparative advertising) where competition is affected on its merits. The Hungarian National Bank (Magyar Nemzeti Bank) is competent in financial consumer protection cases. In other consumer protection cases, the general consumer protection authority (fogyasztóvédelmi hatóság) conducts proceedings, and its authority is incorporated into local government offices.

The National Authority for Data Protection and Freedom of Information (Nemzeti Adatvédelmi és Információszabadság Hatóság) is competent in data protection cases.

The most common enforcement form is alternative dispute resolution proceedings before the conciliation body (békéltető testület). The conciliation body is competent in various consumer complaints. The precondition to initiate proceedings is that consumers have first attempted to resolve their complaints directly with the service provider. Although the service provider must take part in such procedure, the decision of the conciliation body is only binding if the service provider explicitly accepted this to be so in advance. The conciliation body may confirm the settlement between the parties or issue a decision. There is an option of judicial review against the decision of the conciliation body if the conciliation body infringes procedural rules. Apart from general conciliation bodies, the financial conciliation body specialises in disputes between financial service providers and consumers.

As another dispute resolution body, the Commissioner for Media and Communications assists consumers in protecting and asserting their interests as well as facilitates user awareness. Therefore, the Commissioner contributes to the promotion of the interests of users, subscribers and readers of press products, electronic communications and media services, which deserve an appreciation related to electronic communications, media services and press products. The Commissioner, if justified, conducts settlement procedures.

Consumers can also bring an action before the civil court in certain cases, e.g. product damage, product defects, invoicing. There is also a possibility for class actions before the civil court which could be initiated by consumer protection authorities, associations representing consumer rights, or the prosecutor if the alleged infringement affects a wide range of consumers or causes significant disadvantages

Legal developments relevant to e-commerce businesses in Hungary derive mostly from changes at the EU level. There are several such EU initiatives that concern digital businesses, and are thus relevant to online traders. For example:

• Omnibus Directive: An EU Act that introduces several amendments to consumer-related EU Directives. For example, it includes new rules concerning price reductions and restricts the marketing of “dual quality” products (items marketed as being identical, where in fact their quality is different between the respective Member States). The Directive is to be implemented by Member States by November 2021 and enforceable by May 2022. The implementation is still ongoing in Hungary.
• Digital Services Act and Digital Markets Act: EU initiatives which will provide new rules concerning online platforms. Work on these Acts is still ongoing.
• Revision of VBER (regulation providing for a competition framework on vertical aspects of trade, including online trade): The EC is currently evaluating the EU framework, which will be revised to meet the requirements and challenges of the rapidly growing and changing trading landscape. The outcome will most likely be reflected in the corresponding Hungarian legislation as well.