NMHH’s findings have led to a HUF 65 million fine to be imposed on Magyar Telekom

Published: 19 March 2015

Following supervision proceedings the National Media and Infocommunications Authority (NMIA) has imposed a fine of HUF 65 million on Magyar Telekom in the wake of damages caused to thousands of the company’s customers via its failure to pay the penalties due to its customers or through defective payment of its penalty-related commitments.

When should a penalty be paid?

According to telecommunications regulations currently in force, penalties are to be paid in the context of the modification of subscription agreements, the launching or transfer of services, the removal of limitations on services offered and of error handling procedures. A penalty should be paid to the subscriber if a deadline specified for the procedural timeframe of a service offered has been overrun or if the service provider has either overrun the deadline regarding its obligation to provide information in connection with the procedure in question or has failed to meet that obligation altogether. These overruns of deadlines and instances of non-compliance are considered infringements that call for some sort of legal compensation. Penalties do not need to be applied for; the payment of a penalty is an obligation that the service provider has to comply with automatically. The penalty shall be calculated by using the method prescribed in the relevant regulations in force. The sum thereof depends on the breach committed by the service provider, the days of default and the fee pertaining to a particular procedure such as the launch or re-launch of a service, the modification of a contract, the transfer of a service or the monthly subscription fee. The service provider shall pay the penalty within 30 days of the date upon which the breach ended, crediting or paying the sum to the bill or to the statement of balance and informing the subscriber thereof.

Fine, action plan, information aimed at subscribers

The NMIA (abbr. NMHH in Hungarian) has imposed a HUF 65 million fine on Magyar Telekom for non-compliance with its obligations regarding the payment of penalties and its obligations to inform the public, and has ordered the service provider in question to modify its penalty management method and also to develop an action plan required for the implementation of necessary modifications. In imposing the fine, the NMIA considered the extent to which the interest of thousands of customers has been affected as a result of the infringement caused by Telekom’s penalty policy, leading to a temporary financial advantage enjoyed by the service provider, the equivalent of several million forints due to the company’s unlawful conduct. The sum of fine imposed on the company turned even higher as a result of the company’s proven history of delayed delivery in performing its obligations as a service provider, a deficiency which the NMIA had already highlighted on several occasions, having conducted inquiries on these issues and imposed sanctions. Nevertheless, the service provider continued to commit the infringement. In order to protect subscribers, the supervisory authority has ordered the service provider to publish an official statement on its home page, thereby disseminating information to the broader public on the infringement.

Supervisory proceedings and their outcome

As part of NMIA’s overall agenda for 2014, the telecommunications authority performed its supervisory duty between February 1st, 2013 and January 31st, 2014 within the framework of its official inspection-related activities, by looking into the issue of Magyar Telecom’s compliance with penalty management regulations established for electronic broadcasting in the course of its procedures related to the introduction, transfer, limitation and termination of services subscribed to, or during the modification of subscription contracts. The supervisory procedure unveiled the suspicion of infringement in connection with the service provider’s penalty management policy. To rectify this issue, the NMIA initiated an overall supervisory inspection on September 24th, 2014.

During the ensuing procedure, the authority revealed several instances of infringement in connection with Telekom’s landline telephone and Internet access services as well as its broadcasting activity. Among these instances were 1148 cases where new subscriptions were launched, 165 cases in which limitations were removed from services offered, 221 cases in which services subscribed to were transferred and 150 instances in which subscription contracts were modified.

Most of Telekom’s infringements were committed within the framework of launching services. Regarding delays in deadlines it was revealed that penalty management was always illegitimate due either to penalty calculation errors or to the company’s failure to pay a penalty or to significant delays in both payment and information provided on penalty issues. Another problem revealed by the NMIA in connection with services launched was that Telekom, acting in a gravely unlawful manner, calculated penalties by using a method devised by the company itself, rather than using calculation guidelines specified by relevant regulations. In several cases, this affected subscribers unfavourably, putting them at a financial disadvantage. Characteristically, the method used by Telekom has resulted in sums significantly lower than those calculated via the method prescribed by the law.

Although unpaid penalties were being paid during the time the NMIA procedure was underway, the delay, in many cases, exceeded a one year period. While a total of some HUF 19 million was paid by Telekom to its subscribers as penalty unpaid prior to the commencement of the supervisory proceedings, the supervisory authority ordered the service provider to pay an additional HUF 3 million, the equivalent of hitherto unpaid penalties.

Telekom appealed against the decision, but the decision at first instance was upheld by the second instance decision, therefore the authority’s decision is now final.