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Are Convenience Fees Lawful?

Are Convenience Fees Lawful?

Hungary
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Convenience fee is the part of our everyday life that seems to be a usually small but inconvenient price to pay for shopping online. But is it indeed a necessity? The Prosecution Service of Hungary intends to find out exactly that.

Background

A convenience fee is generally an additional charge for online or credit card payments, sometimes charged by the service provider (or third-party payment processor). In the case at hand, a Hungarian movie distributor and cinema operator company sold (and currently sells as well) its cinema tickets not only at ticket offices and vending machines but also online. In the case of online purchases, the company charges consumers a “convenience fee” of HUF 120 (approx. EUR 0.3) per ticket in addition to the ticket price.

(In)convenience fee and action popularis

According to general principle and the case law of the Court of Justice of the European Union (ECJ), a condition requiring a consumer to pay a fee in connection with the conclusion of a contract is contrary to the requirement of good faith – and is unfair as such - if it creates a significant imbalance in the rights and obligations of the parties, because the fee is not the consideration for the service actually provided and the costs incurred in connection with it.

Under the Hungarian legislation, as regards business-to-customer contracts an action may be brought for the annulment of an unfair contract term that has been incorporated into a contract by (among others) the prosecutor (so-called public interest proceeding or similarly representative action under EU law).

The Prosecution Service of Hungary did file an action against the cinema operator company in February 2024 and argues that it follows from the applicable Hungarian legislation that the sale of a private ticket is part of the conclusion of the contract, since the consumer is entitled to watch only the movie in exchange for the ticket. The ticket is made available to the consumer by the cinema after payment of the purchase price, and therefore payment of the purchase price and receipt of the ticket is a necessary element of the purchase. The sale of tickets online does not include any additional service but is only one of the specific ways of concluding a contract. It is therefore unfair to charge an extra fee (convenience fee) for the provision of a service of its own, that is the online ticket sale.

The court proceedings are just to be started, but if the court upholds the action, in addition to the prohibition of the application of the convenience fee and reimbursement of previously paid fees in the given case, such a decision could serve as a precedent generally for such convenience fees (without value added).

By Balint Zsoldos, Head of Tax, KCG Partners Law Firm