Annual Report on Consumer Policy Developments

I. Institutional developments

1. The public institutions of consumer protection

The General Inspectorate of Consumer Protection (GICP), under the direction of the Minister for Economic Affairs, performs a wide range of administrative functions relating to consumer protection, together with the 19 county-based agencies and the Budapest inspectorate.

The activities of the GICP are funded by the state. Taking over the acquis communautaire has involved new functions for the GICP, the implementation of which requires development. The operations of the GICP are mainly covered by the budget of the Ministry of Economic Affairs. In addition, the state budget supplements the budgets of the GICP and county inspectorates with proceeds from fines imposed for offences and fines relating to infringements of consumer protection.

An internal re-organisation of the GICP was carried out last year, leading to the creation of an effective market surveillance system, the operation of which has now been established. The technical-testing laboratories (Technical Testing Directorate) and the authority type (enforcement) functions (Authority and Legal Department, Market Surveillance and Inspection Directorate) have been separated.

The GICP, together with the regional inspectorates, complies with and implements the annual National Inspection Programme. On request, the GICP provides technical assistance to the individual regional inspectorates in carrying out their local inspections. In addition, samples taken from traders during the consumer protection and market surveillance inspections are analysed/tested in the General Inspectorate's laboratory free of charge, while the competent section of the Market Surveillance and Inspection Directorate prepares the expert opinion.

The GICP recognises the importance of training of its staff. In 1999, six training courses and seminars were organised with enhanced participation by the civil servants from the GICP and the regional inspectorates. In addition, the employees participated in 21 study trips and conferences organised abroad. GICP officials followed training sessions organised by the Training Centre of the Hungarian Standards Institution on European and Hungarian technical/ legal standardisation.

The GICP also initiated the development of the Central Market Supervisory and Information System (CMSIS), which will come into operation on 1 January 2000. The procurement of testing, measuring and sample conveying instruments, establishment of the related infrastructure and harmonisation of the internal IT system of the GICP are currently in progress. The share of work with the partner authorities and power-related problems caused certian difficulties in our work. The lack of hardware and software support caused additional problems. Temporary solutions were elaborated and will be applied until such time as the PHARE tenders have been evaluated.

In May 1999, Hungary launched the Trapex (Transitional Rapid Information Exchange System on Dangerous Products) international information system. Nine central and eastern European countries participate in the system. The system is managed by the Co-ordination Secretariat situated within the GICP. During its first half-year of operation, the system achieved a number of objectives.

2. Representative organisations (NGOs)

A number of measures were established by Agenda 2000:  Hungary was the first among the Eastern European countries to create a consumer protection association. The National Association for Consumer Protection acts in a dual capacity: i) as the association of Hungarian consumer protection organisations; and ii) as the national representative organisation.

The Hungarian Government engaged the support of civil organisations in consumer protection since 1998. Under the Consumer Protection Act, the activities of civil representative consumer protection organisations are supported by the state budget. The Act provides annual support through the central budget. For the first time, in 1998, the Ministry of Economic Affairs issued a tender for voluntary organisations in consumer protection and supported their operations with state funds of nearly HUF 30 million.

The 1999 central budget provides HUF 33 million of support for voluntary organisations from the "Targeted estimate for the support of civil organisations in consumer protection" section of the Ministry of Economic Affairs' budget. These funds are distributed through competitions. As the largest and most organised of the civil organisations, the National Association for Consumer Protection submits its application for financing to cover the cost of its operations. It requires development in order to perform its tasks of information related to the protection of interests and informing consumers, which include both new and enhanced functions.

3. Arbitration Boards

Arbitration Boards are to be set up pursuant to the Act on Consumer Protection. They will serve to settle legal disputes related to consumers based on compromise. Short of a compromise, the task of these independent bodies will be to take a binding decision and to ensure that consumer rights are respected in a rapid, efficient and simple manner.

As is the case in EU Member States, the Arbitration Boards will form a set of county-based institutions, providing rapid access to legal redress for Hungarian consumers. The development of the Boards is closely related to taking over the Community acquis, although their activities will not be restricted to disputes related to the consumer protection acquis.

The rules stipulated in the Consumer Protection Act concerning Arbitration Boards have been in force since 1 January 1999, and Boards have been set up in 19 counties and in Budapest.

II. Product safety

1. General Inspectorate of Consumer Protection

In the course of 1999, the main activities of the GICP were to supervise the fulfilment and enforcement of the obligations stipulated in Government Decree No. 79/1998. (IV. 29.) on the safety of goods and services.

The market surveillance inspections carried out on the basis of the product safety regulations implementing the harmonised EU Directives were designed to protect the life and health of consumers (low-voltage equipment, toys, general product safety). In 1999, the number of the products taken off the market on the basis of laboratory tests/analysis carried out either following individual notices/complaints or within the framework of  national or local investigations, increased considerably.

From the safety perspective, the event of the year was the total eclipse of the sun. In this context, and in the framework of a project financed by the Ministry of Economic Affairs, an extensive information and awareness campaign was launched (e.g. displays, posters placed in public areas) and the safety compliance of protective glasses was monitored. Of the 25 products tested, only one was deemed to be dangerous.

A number of measures were taken by the GICP, such as prohibiting the goods, imposing a consumer protection fine, and national-scale prohibition.

2. Designation

In the second half of 1999, the Designation Committee and the Designation Secretariat in the Ministry of Economic Affairs(MEA) was established by Ministerial Decree 4/1999. (II.24.) to implement the detailed rules relating to the designation of testing, inspection and certification bodies in the field of conformity assessment.

In 1999, 25 designation certificates were issued for nine bodies, through 12 laws.

In the field of designation, MEA received significant assistance from the Phare project:

Designation is a very important activity for the mutual recognition of test results and certificates with the EU (PECA – Protocol on European Conformity Agreement) and for the future notification of these bodies.

 III. Protection of the economic interests of consumers

Act CLV of 1997 on Consumer Protection laid down the basics for harmonising the EC acquis on consumer protection as well as for institutional development. The provisions of the Act on Consumer Protection are compatible with Council Directive 92/59/EEC on general product safety, Directive 87/102/EEC on consumer credit, Council Directive 87/357/EEC on products which endanger the health or safety of consumers, and Council Resolution of June 9, 1986 on the teaching of consumer protection in secondary schools, and finally Council Resolution of 25 June 1987 on legal redress concerning consumers.

The Commission appreciated the enactment of the independent Act on Consumer Protection, which regulates a number of areas of consumer protection. Furthermore, the Commission acknowledged that Hungarian legislation is compatible with the directives regulating distance contracts, package tours and unfair terms in consumer contracts.

The Hungarian Government adopted a decree on the remuneration of the members of the Arbitration Boards. In accordance with the decree, the setting up of these bodies was completed as of 1 January 1999. Their primary function is to settle disputes between consumers and business organisations relating to the quality and safety of goods and services, and to ensure the application of the rules on product liability and the conclusion and performance of contracts in a rapid, efficient and simple manner based on compromise.

1. Legal activities

Act CLV of 1997 on Consumer Protection came into force on 1 March 1998. Government Decree 44/1998 (III.1.) Korm. on door-to-door sales, and Government Decree 79/1998 (IV.29.) Korm. on the safety of products and services and the related market surveillance procedures entered into effect on 1 May 1998.

Pursuant to the provisions of the Act on consumer protection, Government Decree 89/1998 (V.8.) Korm. came into force. This decree stipulates the organisation, functions and powers of the GICP and the use of fines to ensure consumer protection.

Council Directive 93/13/EEC on unfair terms in consumer contracts has been fully transposed by Act CXLIX of 1997 on the amendment to Act IV. of 1959 on the Civil Code and by Government Decree No. 18/1999. (II.5.) Korm. on unfair terms in consumer contracts. It entered into effect on 1 March 1999.

Council Directive 94/47/EC on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a time-share basis has been fully transposed into Hungarian legislation by Government Decree No. 20/1999. (II.5.) Korm. on contracts relating to the acquisition of the right to use immovable properties on a timeshare basis. The decree came into force on 1 May 1999.

Council Directive 97/7/EC on the protection of consumers in respect of distance contracts has been almost fully transposed into Hungarian legislation by Government Decree No. 17/1999. (II.5.) Korm. on distance contracts, and entered into effect on 1 March 1999. Article 8 of the Directive relating to the credit card payments has not yet been harmonised. Full harmonisation will be achieved before accession.

Joint Decree No. 31/1999. (VI.11.) GM-KHVM on the electromagnetic compatibility (harmonisation of 89/336/EEC Directive).

Goverment Decree No. 208/1999. (XII.26.) on use of conformity marking (harmonisation of 93/465/EEC Decision).

On 6 April 1999, the Hungarian Government adopted Resolution (No. 1036/1999. (IV.21.)) on consumer protection policy, as a general political concept which specifies the direction of the government’s legislation, the responsibilities and functions of the government and of other organisations. The achievements of the European Community in this area are taken into account.

2. General Inspectorate of Consumer Protection

Arising from the Act on Consumer Protection the GICP considered in 1999 that one of its most important tasks was the protection of the economic interests of consumers. During its inspections, attention was focused on whether:

In 1999, the GICP conducted 27 inspections aimed at protecting the economic interests of consumers: four cases involved continuous or periodically repeated inspections (fuel quality, taxi service, operation of fairs and markets, etc.).

A considerable number of the inspections related to the distribution of food products (e.g. sales conditions for milk products, vermicelli, fresh meat and meat products, and baby foods). Service-related aspects are also considered important (e.g. optician’s service, supply of public drinking water, services to be rendered during the tourist season, cable TV service, parcel trade, etc.).

IV. Consumer education and information

During the course of the market surveillance inspection, it was highlighted that the most serious deficiencies in the information provided to consumers included the following:

The general experience shows that retail traders and entrepreneurs are not aware of the requirements in terms of licences, what kind of information, what certificates they may have to obtain from manufacturers and distributors. In many cases, they are unaware that they are responsible for the insufficient or inadequate labelling of products.

In 1999, attention was focused primarily on the nation-wide inspection programme, press conferences as well as the shopping periods prior to and after the traditional holidays.

Co-operation with the editors of national and county daily newspapers, national weekly newspapers, professional journals and news-agencies as well as with editors of the public service and commercial radio and TV channels – close to 100 newspapers and electronic media – has become more effective. Contacts with the media were strengthened by the press conferences. Altogether 250 journalists, radio and TV reporters participated in these press conferences.

From February 1999, Piactükör (Market Mirror) was replaced by a new journal A fogyasztóvédelem (Consumer Protection). Content, layout, editing and distribution, frequency of publication were all completely revised. The professional journal of the GICP is distributed to regional inspectorates, regional offices of the OFE, all local authorities, national and regional organisations of chambers and other interest groups, partner authorities, testing houses, public administration organisations, parliamentary parties and numerous high-level educational and training institutions every two months (a print run of 10 500 copies).

To promote the better consumer awareness, the GICP created an independent Web site. The site is currently in the experimental phase and will be continuously updated and improved.

Information targetting all sectors of the population was promoted by a range of publications edited by the GICP. These included: the Vevok vagyunk (We are Customers) series for young people, on the black economy, on the rights of the consumers (30 000 copies); the Jó tudni (It’s Good to Know) series on foodstuffs, chemical and construction materials, light industry and technical products, and public utility services (25 000 copies); and the Fogyasztóvédelmi levelezolap (Consumer Protection Postcard), issued in 130 000 copies, on which consumers can notify their complaints.

Consumer awareness benefitted from the fact the GICP had an independent stand at the 103rd Budapest International Trade Fair where consumers could acquire the above-mentioned publications and obtain professional guidance from GICP experts. The annual conference on consumer protection, held together with the Hungarian Society for Quality, also contributed to the awareness of both experts and consumers.

The GICP continues to pay a special attention to consumer education. In September 1999, consumer education was introduced in the Department of Ergonomics of Budapest Technical University as a one-semester facultative subject. GICP experts lecture to a group of 30 students; the KERMI Ltd. and the GICP jointly provide laboratory practice.

From mid-October 1999, seven classes on consumer awareness will be taught at the Qualitas Gymnasium and Specialised Secondary School by experts of GICP.

Consumer education will be introduced at the Trade and Catering College from February 2000 as a facultative subject, which will be included in the basic curriculum from September 2000.

Discussions with the Training Institute of the State Administration College are proceeding in view of the launching of a postgraduate training course – organiser of the specialised administration on consumer protection – starting from 1 September 2000.

A specific area is the education of consumers focused primarily on school education. It should be noted that under the Act, voluntary consumer protection organisations also have tasks in education outside schools and in providing information to consumers.

V. Complaints and redress handling

1. General Inspectorate of Consumer Protection

a. Consumers' complaints

GICP operated a separate office for the investigation of complaints. Consumers contact the consumer protection agencies to present their claims/complaints and/or to ask for information and advice. Complaints can be made in person or in writing or – at the request of the consumer – the trader will send the product for testing. Such complaints mainly refer to quality and their number is significantly higher than the number of the personally presented complaints.

b. Legal redress

The most frequent offences included: hindering price control, violation of the obligations relating to food hygiene and provision of quality certificates, failure to fulfil documentation requirements, incorrect handling of quality-related complaints and inflicting losses on consumers.

2. Arbitration Boards

The establishment of the Arbitration Board was completed in the counties, and the presidents of these bodies appointed. The Hungarian Government provides HUF 20 million to cover the establishment and operation of these bodies.

Act CLV. 1997 on Consumer Protection sets forth the establishment of Arbitration Boards, and control of their operations. These bodies function independently of the chambers of commerce and aim: to reach compromises in legal disputes between consumers and economic organisations; to take decisions when no amicable agreement can be obtained; and to provide simple, efficient and time-saving enforcement of consumer rights. Furthermore, Article 21 (6) and Article 55 g) of the Consumer Protection Act regulate the fees of Arbitration Board members by government decree.

The comments and recommendations of the chambers of commerce were taken into consideration in drafting the government decree. The initial text was intended to fulfil two requirements: i) it was to contain principles guaranteeing the comparability of costs of arbitration proceedings to their efficiency; and ii) it was to include the differentiated remuneration of body members regulated by decree, in order to acknowledge their social prestige while keeping in view the voluntary nature of their work. Considering that the volume of cases and the number of members may vary largely among the Boards, the decree wished to enable members to sign contracts to receive monthly fees.

The Government Decree includes a special clause on remuneration of the presidents and vice-presidents. In accordance with the special duties and competencies defined in the Act, the officers will receive augmented remuneration on a contractual basis and, in light of the amount of work involved, will take part in the concrete procedures only in extreme cases. The Decree stipulates the reimbursement of expenses of Arbitration Board members. In order to facilitate and simplify payment of expenses, global charges are allowed. Article 37 allows an acceptable range of expenses to be defined item-by-item in the framework of the arbitration proceeding rules set by the national chambers. The item ‘personal expenses’ covers the presidential and vice presidential fees and the total amount granted to members per case. Additional functional costs come under the heading of ‘miscellaneous operational expenses’. Chambers have sent us copies of invoices and pay-out receipts on payments from subsidies and from extra resources.

As one of their initial duties, the chambers and the bodies worked hard to publicise their activity which entails providing consumers with a new access to legal redress which is on a par with consumer protection in Europe. For this purpose, a number of brochures were issued, addressing the scope of arbitration activities as well as informative broadcasts for the electronic media. Certain chambers have included related costs and enclosed invoices.

In co-operation with HCCI, several chambers organised conferences and training sessions for Arbitration Board members, sometimes even on a regional basis. Experts from the Ministry of Economic Affairs, the Ministry of Justice, the GICP and other consumer protection bodies were invited to give lectures. Chambers have provided invoices to verify related costs. Above all, appropriate infrastructure was needed; in most cases this meant installing computers and establishing suitable working conditions (rooms, equipment, etc.). Other functional expenses included a proportionally accountable share of public utility costs, postal costs, etc.

Under the authorisation of the Consumer Protection Act, the Ministry of Economic Affairs and the Hungarian Chamber of Commerce and Industry (HCCI) concluded an agreement on subsidising the maintenance of Arbitration Boards in the counties as well as in the capital. Use of conciliatory services was not homogenous; there were two main areas:

Complaints were frequently transfered to the GICP or other authorities due to a lack of competence. In addition, clients often failed to satisfy suppletory claims, or did not pay the HUF 1 000 fee, thus hindering legal action. In Budapest, every second procedure was dropped for related reasons. Some 6-7% of cases were settled by mutual out-of-court agreement. Decisions with recommendation, with consent of agreement, and obligation were made in 78 cases.

The most general types of cases were the following:

Fifty per cent of cases were handled by the Budapest Arbitration Board. The most frequent cases handled in the capital differed from those in the countres: disputes about travel contracts, and on repair and maintenance services were the most numerous. It is noteworthy that large businesses in Budapest are keen to reach a compromise, while individual entrepreneurs showed the opposite attitude, and they tended to disobey recommendatory decisions.

VI. Consumer issues related to other policy areas

1. Market surveillance

Act CLV of 1997 on Consumer Protection accorded wide powers to the GICP with respect to market surveillance control. In cases where a consumer is injured, GICP is entitled to initiate actions with the competent market surveillance authority in cases occurring in areas supervised by other authorities. In some specific areas, a division of labour or co-operation may arise with other authorities involved in market surveillance activities. An example of this is monitoring compliance with the provisions concerning the eco-label.

The creation of Hungarian regulations compatible with EU consumer protection legislation and legal approximation to the internal market have brought far-reaching changes in the market for consumer goods with respect to the extent and technical depth of market supervision. As a result of narrowing the scope of testing obligations which were previously required by law before putting products on the market, the probability of the appearance of "sub-standard" products on the market (which are, consequently, potentially harmful to the consumer) has increased. Easier access to the market, together with the requirement to protect the consumer, necessitate the revamping of the philosophy and system of market supervision and led, for instance, to an increase in the number of checks at commercial outlets or an increase in the quantity and depth of testing of samples collected for testing, and an increase in the volume of document collection to develop the technical training of supervisors, etc.

To prevent access of "sub-standard" products to the Hungarian and Community market, a draft project of the Council Regulation 339/93/EEC on monitoring conformity with product safety rules of products originating from third countries has been prepared.

The Act on Consumer Protection sets out the tasks of the state institutions for consumer protection and, in particular, the GICP. The market surveillance activities of the GICP are regulated by two decrees: Government Decree 79/1998 (IV.29.) Korm. on the safety of products and services and related market surveillance procedures, and Government Decree 89/1998 (V.8.) Korm. on the organisation, functions and powers of the GICP.

Government Resolution 2422/1997 Korm. provides for the development programme required for the implementation of market supervision in conformity with EU rules which has become necessary as a result of harmonisation with Community legislation and in particular the adoption of four technical directives (73/23/EEC, 89/392/EEC, 88/378/EEC, 89/336/EEC). In its resolution, the government provided for the establishment of the Central Market Surveillance Information System (CMSIS) with effect from 1 January 2000. The CMSIS will maintain mutual exchange of information on "sub-standard" products with other market surveillance authorities and with customs officials.

The GICP modernised its premises, and now accommodates the computer centre for the reinforcement of CMSIS. It also modernised its premises and established the necessary infrastructure. As planned, the staff was increased, and the process of creating offices and installing computer hardware are underway. Work to ensure compatibility and upgrading of hardware has begun.

The development of the market surveillance system to be implemented out of the state budget and PHARE funds means an expansion and upgrading of the existing testing capacities and the establishment of CMSIS. This CMSIS will thus be implemented by upgrading the existing institution. Technical modernisation includes acquiring new testing instruments, vehicles for transporting samples taken in commercial outlets to the regional surveillance agencies or to the authorities for tests, the hardware and software required for the development of the IT system, etc. Technical training envisaged under the project means the organisation of study trips to counterpart organisations in some EU member countries, as well as language courses and advanced training for experts. Project implementation will be assisted by twinning, aimed primarily at incorporating the experiences of the EU into the new system.

The Ministry of Economic Affairs began preparations for the institution building of the market surveillance programme in 1997. The project was accepted in the Phare COP’98 country programme to support this issue. The twinning project’s covenant was provisionally accepted by the EU Commission on 28 October 1999. The required amendments and final confirmation by the EU Delegation in Budapest was made at end January 2000. The PAA started work in Hungary in early February. The project will run for 14 months, with the following objectives:

The following Directives will be fully implemented into the Hungarian practice after the project:

The second part of this project is to develop the equipment and laboratory system of the Hungarian market surveillance organisation. In this respect, tenders have been launched according to Phare regulations, and, after evaluation of the applications, contracts have been signed for the delivery of needed equipment to the GICP. To show that the government takes this matter seriously, already in 1997, during the planning period a Government decision (2242/97) was made for the co-financing of this programme.

The market surveillance system will be implemented with financial assistance from the COP’97 and COP’98 programmes.

It is expected that the development projects will be completed by the date of accession.

Another project concerns the development of infrastructure for eight testing and certification bodies and market surveillance authorities with PHARE support (COP’96, COP’97, COP’98 projects). Within this PHARE project, there is a twinning programme which started in 1999 in the Ministry of Economic Affairs under the topic: conformity assessment and market surveillance with a Swedish long-term expert (COP’98 project).

The economic implications are two-fold. On the one hand, manufacturers enhance their competitiveness as the increasing intensity and depth of market surveillance exercises a positive impact on production. On the other hand, as a consequence of the work of the supervisory authority and the inspections carried out on a commission basis, the standard and the volume of the work of the inspection organisations evolve according to the Community’s expectations.

With Hungary’s full membership of EU, products which are harmful to human health and safety could possibly be marketed not only on the domestic market but also in the markets of the EU Member States. It is in the common interest that harmful or substandard products be withdrawn from the market at the earliest possible date and that Member States are promptly informed of the situation. The increase in market surveillance inspections is likely to bring about an increase in consumer confidence in the products on sale and in services.

2. Other

In 1999, under the professional guidance of the Advertisement Surveillance Department of the GICP, the regional inspectorates monitored displays placed in public areas on the basis of the authorisation stipulated in the Act LVIII of 1997 on Economic Advertising. At the national level, some 190 procedures were initiated in this field.

The co-operation agreement signed with the National Radio and Television Board helps to a great extent  – in addition to the GICP’s own advertisement monitoring system – in processing the economic advertisements published in the electronic media and in verifying advertisements.

In an effort to enhance civil consumer protection, members of the National Association for Consumer Protection participated in a number of GICP inspections. The relationship between the Association and GICP is ongoing and successful, and is based on the mutual exchange of information.

Latest update 25 January 2001

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