Hungarian court confirms a fine on Apple due to its commercial practice concerning the ‘Wi-Fi Assist’ feature

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Zoltán Marosi
Oppenheim, Budapest
zoltan.marosi@oppenheimlegal.com

Rebeka Bakos
Oppenheim, Budapest

The decision of the Hungarian Competition Authority

In 2016, the Hungarian Competition Authority (GVH) initiated a procedure against Apple Inc (‘Apple’) to review whether its commercial communication concerning the launch of the ‘Wi-Fi Assist’ feature (as incorporated into Apple’s operating system ‘iOS 9’) was in line with Hungarian legislation implementing the European Union’s Directive 2005/29/EC on unfair commercial practices (‘UCP-HU’).

The Wi-Fi Assist was a new feature in Apple’s iOS 9 which, in case of a weak WiFi signal automatically – that is, without posing any question or making any request to the user – switches from WiFi internet usage to mobile data usage.

The GVH established that a wide range of information was available on Apple’s website in relation to the characteristics of the Wi-Fi Assist. These included, in particular, that its activation is automatic and that it raises the amount of mobile data usage, which may lead to additional costs for consumers. Nonetheless, the specific information provided to consumers when installing iOS 9 was found to be insufficient for a reasonably circumspect consumer: there was only a general warning in the 50-page licence contract that the usage of some applications may cause additional costs. Consumers had to take additional steps (eg, clicking on the ‘further information’ box) to gain information (on the 12th page) concerning the automatic setting and the specific additional charges.

The GVH therefore found that essential information was withheld from consumers, which thus entailed an unfair commercial practice by Apple. As a result, the GVH also imposed an HUF 100m (approximately EUR 300,000) fine and obliged Apple to change its relevant communication vis-a-vis consumers.

The Metropolitan Court’s judgment

Apple requested judicial review of the GVH’s decision before the Metropolitan Court. Apple first alleged that the information provided to consumers in the framework of the installation procedure of iOS 9 did not entail a ‘commercial communication’ as set out by the UCP-HU. In this respect, however, the Metropolitan Court ruled against Apple’s contention, finding that the aim of the information was to increase the usage of the Apple devices, ultimately to promote brand loyalty.

Apple also alleged that, even if the relevant communication fell under the scope of the UCP-HU, it could not possibly have affected the transactional decision of consumers. In this respect, the Metropolitan Court pointed out that Apple had misunderstood the meaning of the notion of a ‘transactional decision’ in the present case. The Metropolitan Court stated that such ‘transactional decision’ is not a question of whether a consumer decides to turn on mobile data traffic on a device. Rather, the ‘transactional decision’ can be better identified with the consumer’s decision: if he or she wishes to conclude a contract; through the conditions under which such contract is concluded; and if the consumer wishes to exercise his or her rights relating to the product.

In light of this, the Metropolitan Court established that the Apple practice in question effectively deprived the consumer of his or her ability to make a well-founded transactional decision: clearly, consumers believed themselves to be in full control of their data usage, which was not in fact the case, due to the lack of information provided to them.

On the substance of the case, the Metropolitan Court agreed with the GVH that the manner of sharing information and the amount of the information were insufficient. The consumers – before the installation of iOS 9 (and thus of the Wi-Fi Assist) – did not have any prior information on the use of such a feature, so they could not be expected to actively look for further information (since they did not know that there was a need for them to look further). In this respect, the Metropolitan Court emphasised that consumers could not possibly presume an undertaking may withhold essential information concerning a product.

At the same time, the Metropolitan Court accepted Apple’s arguments that the limitations of the communication devices need to be considered. It was also accepted that Wi-Fi Assist is not an individual service, but merely one of the functions of iOS 9. However, the Court underlined that the function must be considered not from the operating system’s perspective but from the consumer’s and also that the information on the automatic setting and the extra charges have such importance from the consumer’s view that it was essential this information be clearly and expressly provided, in order to enable the consumer to make a well-based/sufficiently informed transactional decision. In light of this, the Metropolitan Court held that the limitations of such devices did not, in fact, hinder Apple from actively providing the relevant information to consumers.

Apple’s argument that the GVH should have also taken into account the functioning of the status line (which shows the actual status of the internet connection — ie, WiFi or mobile data usage — on the display of the device) was rejected. The Metropolitan Court found that the usage of smart phones (even premium smart phones) is currently so widespread that not only informed consumers, but consumers from a range of social groups, use them. The average consumer was not expected to continuously follow any changes made to the status line.

Apple finally argued that it does not have any income from the usage of Wi-Fi Assist and it does not have any interest in the support of this function. The Metropolitan Court, however, found that Apple did have an interest in the sale of the devices offering the Wi-Fi Assist. Apple was interested, economically, in promoting the installation/usage of the newest operating systems on their devices and a huge amount of their income comes from this.

In light of the foregoing considerations, the Metropolitan Court rejected Apple’s arguments and upheld the decision of the GVH. Apple did not appeal against the judgment.