GymBeam, a nutritional supplements company, has recently faced serious legal consequences after the Hungarian Competition Authority (GVH) found several infringements in relation to its commercial practices. The company admitted the infringements and cooperated with the authorities, which was a mitigating factor in the imposition of the fine. This resulted in a fine of €240 964.
The background to the infringements
The GVH opened proceedings against GymBeam s.r.o. and its Hungarian subsidiary GymBeam Hungary Kft. at the end of 2022, after the authority suspected the company of unfair commercial practices against domestic consumers in several respects.
The competition authority found the following infringements:
- False health claims: GymBeam claimed health benefits and medicinal effects in its product descriptions that were not in line with the legal requirements or were outright prohibited. For food advertising, there are strict rules on what claims can and cannot be made.
- Price and promotional communication: between 1 May and 7 November 2023, the company used crossed-out prices and „best prices” slogans to suggest to consumers that they could buy certain products at a discount. However, this conveyed false information as the prices did not always reflect the real market situation.
- Handling of consumer reviews: the company did not provide information on the handling and filtering of consumer reviews in accordance with the law. This is explicitly required by the regulations to ensure fair treatment of customer reviews.
- Failure to notify: GymBeam has marketed several products without prior notification to the competent authorities, which is also against the law.
On the basis of the false health claims, which regulation has been breached?
The false health claims made by GymBeam were in breach of Regulation (EC) No 2064/2003 and Regulation (EC) No 1924/2006, which regulate health and nutrition claims made in relation to food advertising in the European Union.
Regulation (EC) No 2064/2003: health and nutrition claims made on foods may only be used if they are included in the EU permitted list and are supported by scientific evidence. Health claims in GymBeam’s product specifications that did not comply with these requirements or were not included in the list of authorised claims constituted an infringement.
Regulation (EC) No 1924/2006: This Regulation sets out in detail the conditions under which health and nutrition claims may be made for foods. Health claims that do not comply with the Regulation, such as claims that claim a beneficial effect on health without a scientific basis, should not be included in food advertising.
So in the case of GymBeam, the company made claims that were either not on the EU’s approved list or were not supported by adequate science-based evidence, in breach of the provisions of the above regulations.
What can your business learn from this?
Sales and marketers need to communicate in a conscious and legal way. They need to be aware of the legal and ethical standards associated with their products. They must always ensure that their company’s communications comply with the law to avoid legal problems and maintain customer confidence.
Misleading communication and prices
This infringement is contrary to Article 6 of Directive 2005/29/EC, which prohibits unfair commercial practices. The Directive prohibits the communication of misleading or untrue information which misleads consumers and influences their purchasing decisions.
In the case of GymBeam, the company used „best prices” slogans and crossed-out prices to suggest to consumers that products were available at a discounted price, when the prices did not reflect the real market situation. This constituted misleading communication, as consumers were led to believe that the price was a real discount price, while the actual prices did not reflect the market norms. This practice violates fair competition and the right of consumers to make informed choices, which is explicitly protected by the Directive.
Lessons for your business
The following are important lessons your business can learn from the GymBeam case to avoid similar infringements and maintain fair business practices:
Transparent price communication
Never use price or promotional communications that could mislead customers. Strikethrough prices or „best price” slogans can be unlawful if they do not reflect the true market situation or if you do not ensure that consumers understand exactly whether the discounted price is a discount. It is important that pricing and promotions are always transparent and truthful.
Fair commercial practices
Ensure that all communications, including promotional offers and prices, are fully compliant with the law, in particular the guidelines on misleading commercial practices. The rules are clear on how and when you can use promotional prices.
Regular marketing
When communicating prices and promotions, always make sure that advertising, slogans and marketing materials do not convey false information. Consumers have a right to expect that advertised promotions and offers are real, and if any of the details are not true, this can not only lead to a loss of customer confidence, but can also have legal consequences.
Compliance with legislation
Monitoring ongoing compliance with legislation is particularly important. Violations of these types of regulations can result in fines and long-term reputational damage. The lesson from this case is that it is worth seeking legal advice before developing marketing campaigns, product descriptions and promotions, or carefully studying (and complying with) EU directives.
Transparent communication
For the sales team, it is essential to always provide customers with the most up-to-date information and to be completely transparent about prices, discounts and promotions. Misleading information can cause more damage in the long term than you can gain in the short term from miscommunication.
Manipulation of customer reviews
GymBeam has breached Article 6 of Directive 2005/29/EC (the Unfair Commercial Practices Directive), which requires fair and transparent treatment of consumer reviews, in its handling of consumer reviews.
Article 6 ‘unfair commercial practices’ also includes the need for businesses not to manipulate consumer reviews and to ensure that they are genuine, credible feedback. The legislation obliges businesses to inform consumers how reviews are managed and filtered to ensure they are reliable and fair.
If GymBeam did not provide the required information on the handling of reviews and did not follow procedures to ensure fair handling of consumer reviews, it violated Article 6, as manipulating or filtering customer reviews in an unfair manner is an unlawful commercial practice.
How your business can avoid similar situations
Here are some important lessons for your business from the GymBeam case:
Treat consumer reviews fairly and transparently – If you collect consumer reviews, make sure that you treat them in a way that complies with the law. If you are collecting customer reviews, make sure that you are complying with the law. Ensure that reviews are genuine and not manipulated to give a false impression of products.
Compliance – The rules and guidelines for handling consumer reviews are strict and it is important to always comply with legal requirements. To avoid violations, regularly review and update internal policies that work for your business.
Proper communication and transparency – Transparency on how ratings are handled is not only important from a legal point of view, but also essential to maintain consumer confidence. Customers’ reviews must be properly managed and published, ensuring that the process is fair and credible.
Ongoing legal compliance – Legislation and regulations on food, supplements and other products are subject to change. It is important to stay up to date with industry regulations and ensure that your business is compliant with all legal requirements.
Don't forget your responsibilities
GymBeam’s failure to comply with the notification requirements under Reglamento (EU) N° 2015/2283 (Regulation (EU) N° 2015/2283 of the European Parliament and of the Council on the marketing of novel foods and food supplements) and Directive 2002/46/EC (the Food Supplements Directive).
Article 4 (prior notification of food supplements) of the Regulation and the Directive requires manufacturers and distributors to notify the competent authorities before placing new food supplements on the market. The purpose of the notification prior to the placing on the market of food supplements is to enable the authorities to ensure the safety and compliance of the products. Failure to comply with the notification obligation constitutes an infringement and may lead to penalties. Therefore, in the case of GymBeam, the infringement relates to the failure to comply with the obligation to notify, which is provided for in the legislation on the marketing of food supplements.
Your business will never be penalised if:
You comply with your reporting obligations
The key lesson is that all new products, especially food supplements, must be notified in advance to the competent authorities. This is not only a legal obligation, but also for consumer safety. Failure to notify properly can have serious legal consequences, which can result not only in fines but also in damage to the reputation of the business.
Decision of the GVH
The Competition and Consumer Protection Authority (GVH) strictly regulates the functioning of the market for nutritional supplements, in particular with regard to health claims. European Community law strictly regulates the authorised, science-based health claims that can be made for a product. Such claims can only be made if they are included in the list of claims authorised by the EU.
GymBeam admitted the violations, waived its right to appeal and agreed to implement a compliance program. This includes developing internal policies, holding training sessions and joining the Self-Regulatory Advertising Standards Board (SAB). Through these measures, the company is trying to prevent future infringements and ensure that its commercial practices comply with current legislation.
The GVH took the company’s cooperation into account as a mitigating circumstance and as a result imposed a fine of „only” 240 964 euros.
Lessons for B2B
This case is a reminder of the serious consequences that can result from breaching the law, particularly in the food and supplements sector. Businesses need to pay attention not only to the quality of their products, but also to ensure that their communications comply with the law and do not give consumers the wrong impression. Infringements can not only lead to fines, but also to serious reputational risks.
In the case of GymBeam, it has also become clear that cooperation with the authorities can be much more beneficial than pursuing legal action. The company has admitted its mistakes and has taken steps to reduce the fine. The GVH has also repeatedly stressed that its primary objective is not to penalise but to promote compliance with the rules, and that active cooperation can help businesses reduce the amount of the fine imposed.
Did GymBeam consciously "play" this way?
It is not clear whether GymBeam knowingly committed these violations or whether negligence or lack of knowledge of the rules led to the problems. We have prepared a professional balance sheet, which we leave to your imagination to tip in your direction:
They can be signs of awareness:
– Market pressure and competition – Often, a company will adopt aggressive pricing and marketing strategies because it is trying to increase sales and gain a competitive advantage. For example, crossed-out prices and „best prices” slogans may be a conscious tactic to persuade consumers.
– Profit maximisation – Non-notification of products may have occurred because the notification process is time-consuming and costly. If this was ignored, it may have been a conscious decision to enter the market faster.
– Exploited grey areas – In the area of health claims, it is sometimes the case that companies deliberately try to navigate the grey areas of the law and use legally questionable claims until someone holds them to account.
There may be signs of neglect:
– Lack of knowledge of the law – Dietary supplements and their marketing are a highly regulated area. In a small or fast-growing company, the team may lack expertise or pay insufficient attention to regulatory compliance.
– Handling consumer reviews – The legal requirements for filtering online reviews may be relatively new for some companies. Failure to have an adequate policy or control mechanism in place could be considered negligence.
– Rapid growth issues – A rapidly expanding company like GymBeam may be tempted to sacrifice compliance issues on the altar of growth. This is not necessarily a conscious violation of the law, but a result of a lack of capacity and a shift in priorities.
Real motivation is difficult to prove
The authorities usually look at the consequences of an act, not the underlying intent. If the infringements were systematic or recurrent, it may be likely that there was consciousness. However, if the errors are one-off or isolated incidents, negligence is more likely. Whether conscious or not, the example of GymBeam highlights that neglecting compliance is always detrimental to the business in the long run.
