Club Dobogómajor (time sharing) - deception of consumers - Vj - 142/2001
The Competition Council found that 5 undertakings, Proinvest 2001 Kft., Kereknap Kft., Sol Oriens Hungaria Kft., Holiday Club Kft. and Pláninvest Bróker Rt. deceived the consumers by the companies` practice concerning discounts, influencing the exercise of the consumers` right to withdraw from the contract and by the information concerning the annual modification of the time sharing fees. The Competition Council imposed a fine of HUF 5.000.000 on Proinvest, HUF 2.000.000 on Kereknap, and HUF 1.000.000 on each of Sol Oriens, Holiday Club and Pláninvest.
Sales conditions of time sharing rights
Time sharing is a form of transfer of the real estate lease whereby the owner of the real estate alienates only the right to use, and the parties are entitled to exercise their rights in turns, within an international organization (RCI). Thus, the parties entitled have the opportunity to spend a few days at home or abroad without any change in their right to use.
The substantial and formal characteristics of the sales conditions of time sharing rights were developed internationally and adapted to Hungarian conditions. Because time sharing is inherently likely to mislead consumers, the Competition Council has already conducted several proceedings concerning the sale of these rights. In the course of these, the now defending undertakings were also prosecuted and fined by the Competition Council.
Sale of time sharing rights of Club Dobogómajor
Club Dobogómajor is a holiday resort owned Rentinvest Kft. and Helikoninvest Kft., and leased by Proinvest (previously acting under the name "Abbázia Kft.") possessing a considerable share in the Hungarian time sharing market. Proinvest markets the time sharing rights directly and also through its agents (Kereknap, Sol Oriens and Holiday Club) who are obliged to act according to the business terms and guidelines set by Proinvest. However, they have considerable discretion in setting the discounts, as the guidelines only indicate their maximum and minimum values. The share purchase linked to the time sharing is done through Pláninvest, according to contracts prepared by the undertaking.
The sale of time sharing can take place off-site (with a video presentation) or on site (in the holiday resort). If the consumers are willing to purchase time sharing rights they must sign the several contracts, including a time sharing contract (providing for the right of use) and a share purchase agreement (between the consumer and Pláninvest, as the purchase of rights is done through share acquisition).
Prohibition of unfair manipulation of consumers
According to Section 8 of the Competition Act it shall be prohibited to deceive consumers in economic competition. Deception of consumers shall be presumed, in particular, if (a) false declarations are made or facts are declared in a manner which is likely to deceive with respect to prices or essential features of the goods; (b) information that is deceptive or may possibly be deceptive is given about the factors related to the sale and distribution of goods, in particular, about the method of distribution, terms of payment, or discounts; (d) a false impression of especially advantageous purchase is created.
Deception of consumers concerning the discounts
The agents are free to determine the discounts and time sharing purchase price, taking into account the maximum and minimum values set by Proinvest. The maximum discount can be 45% of the purchase price.
The terms of the price list made known to the consumers during the presentation differ from the list according to which the settlement is made between Proinvest and its agents, and provide that some price differences should not be considered as discounts. The consumers are entitled to several types of discount, however, they are not informed about the amount and conditions of the discount, and about the fact that all "high season" prices that are not part of "peak season" are 0,72-0,77 times the "peak season" price, thus leading to the deception of consumers as a hidden element of price calculation.
The rules according to which the presentations are made have the aim to lead the consumer to make an immediate decision, therefore, the defending undertakings should be very prudent in providing accurate information. This obligation was not met by the undertakings, as the consumers were not aware of the amount and the conditions of the discount, and the price calculation factors, therefore point (d) of Article 8 (2) of the Competition Act was infringed.
Deception of consumers concerning the exercise of the right of withdrawal
The right of withdrawal is an essential element of the time sharing contract, therefore it constitutes a deception if the exercise of this right is restricted due to the ambiguous wording of the provisions on forfeit, penalty and deposit which would imply that the consumer will lose the money under these titles when withdrawing from the contract. By using such a wording in their time sharing contracts, the defending undertakings infringed point Article (8) 1 and point (c) of Article 8 (2) of the Competition Act.
Deception of consumer`s choice concerning the information on the annual modification of the time sharing fees
The information brochures provided for the contracting consumers (buyers) stated that the decision on the modification of the fees will be made by the general assembly of the company, where the buyers can take part as shareholders, and thus, have an influence on the outcome of the decision. However, the Competition Council found that according to the articles of association of all three of the companies concerned, all decisions concerning fee modification are taken by the board of directors. Therefore the defending undertakings infringed point (a) of Article 8 (2) of the Competition Act.
In line with Article 78 of the Competition Act, when setting the amount of the fine, the Competition Council took into account the following facts:
Proinvest has special responsibility as this undertaking defines the business terms and conditions of the sale of time sharing rights, and the scope of the information given to the consumers;
Kereknap, Sol Oriens and Holiday Club acted as agents of Proinvest, but they should be considered as independent market players, as they had a large discretion in determining the actual discounts;
the duration and negative impact of the behaviour under examination on the time sharing market;
the fact that the undertakings were prosecuted and fined for similar conduct in the past, therefore they should have known the importance of the obligation to provide correct information to consumers.
The Competition Council also took into account the fact that the defending undertakings, together with the Ministry of Economy, have taken steps in order to correct the information brochures and the text of the contract to be concluded by their future buyers.