The amended Besluit prijsaanduiding producten (Price indication Decree – “Decree”) entered into force on 1 January 2023. These amendments tighten the rules for online and offline price discounts, to prevent consumers from being misled by fake offers or discounts. We previously addressed the main changes and exceptions resulting from the new regulations: see here and here. Now that the amended Decree has entered into force, this blog lists the practical points of attention regarding the new rules.
ACM describes in its latest press release the basic principle that the discount must be based on the lowest price charged in the 30 days before the discount, subject to three exceptions. But the Commission’s guidance on the interpretation and application of Article 6a (“Guidance”) presents a more balanced picture.
New Deal for Consumers
In early 2018, the European Commission (“Commission”) presented an extensive package of new legislation to strengthen and modernise consumer rights: the New Deal for Consumers. This legislative package sets out regulations to strengthen the supervision and enforcement of consumer law, to modernise consumer legislation and to allow collective redress.
The Enforcement and Modernisation Directive (EU) 2019/2161 (“Omnibus Directive”) forms part of this legislative package. The Omnibus Directive entered into force on 28 May 2022 and amends four existing European consumer protection directives: (i) the Unfair Contract Terms Directive; (ii) the Price Indication Directive; (iii) the Unfair Commercial Practices Directive; and (iv) the Consumer Rights Directive. See this blog for more information on the amendment of these directives.
The rules on discounts and price reductions are set out in Price Indication Directive 98/6/EC (“Price Indication Directive”). The rules curbing fake discounts are set out in Article 6a, newly added to the Price Indication Directive. This new article provides that the original price of a discounted product (the ‘prior’-price: the reference price against which the ‘reduced’-price is compared) must be the lowest price charged by the seller of that product in the past 30-day period (“30-days-rule”).
This should prevent companies from. Among other things, increasing the selling price of the product in question (the ‘prior’ price) immediately before a envisaged discount, so that the discount presented is artificially overstated (fake discount), because that makes it difficult for consumers to check whether the price reduction offered is genuine. See also this blog for a detailed explanation of the new regulations and some practical examples.
Points of attention in practice: what should companies bear in mind?
Since the Decree entered into force and the aforesaid Guidance was published, the scope of the 30-days-rule has been clarified. The main points of attention for companies are set out below.
i. Exceptions that apply specifically in the Netherlands
The Price Indication Directive concerns minimum harmonisation. Member States are therefore free to impose stricter conditions in national legislation. The specific conditions for giving discounts therefore differ from one Member State to another. However, Member States may not set a shorter period than 30 days; a longer period is permitted under certain conditions.
The European legislature has also given Member States the possibility to introduce exceptions to the standard rule (Article 6a(3), (4) and (5) of the Price Indication Directive). The Dutch government has made use of this possibility and has included the following three exceptions to the main rule in the Decree:
- the 30-days-rule does not apply to perishable products or products with a limited shelf life that have a ‘use by’ date. A ministerial regulation dated 16 December 2022 lists products that fall under this exception, such as fresh fruit and vegetables, bread, dairy products, meat, fish and fresh flowers;
- the 30-days-rule does not apply to products that have been on the market for less than 30 days (introductory discounts). In that case the seller may base its ‘prior’ price on a period at its discretion; and
- the 30-days-rule does not apply to progressive or stacked discounts (e.g. a discount increasing from 10% in the first week to 20% in the second week to finally 50% in the fifth week). If this discount increases continuously during a given discount period, the seller may refer for a maximum of three months to the ‘prior’ price that applied at the beginning of the discount period.
ii. Scope of the fake discount rules
The new rules on fake discounts (the 30-days-rule) do not apply to all products. The main restrictions are the following:
- In the Netherlands, the 30-days-rule applies nly to products and not to services. This is in line with the Guidance, which expressly refers t ‘goods’. Please note that some Member States have pted to include services under the ban on fake discounts.
- The 30-days-rule applies t sales via all conceivable distribution channels, such as brick-and-mortar shops and online sales.
- The 30-days-rule applies t all forms of discounts or price reductions, not only to ‘from/for’ discounts. They may, for instance, take the form of percentages or promotions, such as a clearance sale, Black Friday, etc. Importantly, a price reduction needs not to be measurable. Communications that give the impression of a price reduction also fall under the 30-days-rule.
- The 30-days-rule applies t discounts on specific products as well as to general announcements of price reductions (e.g. “10% ff all coats today”). Pleas nte that in the case of a general price reduction the ‘prior’ price does not need to be stated in the general announcement, but must be stated at the point of sale or on the price tag in question.
- The 30-days-rule des nt apply t loyalty programmes and personalised discounts, such as discount cards or vouchers that entitle a specific consumer to a discount on all the seller’s products for a longer continuous period.
- The 30-days-rule des nt apply t other price benefits, such as a price comparison with a competitor (“the lwest/best price”) r tied conditional offers (“tw for the price of one”).
iii. Dynamic pricing remains possible
A frequently asked question among market operators is whether dynamic pricing will still be possible under the new 30-days-rule. The short answer is yes. Dynamic pricing means that the price of a product changes constantly (sometimes even several times a day). Sellers use this strategy to look for the optimal price, being the price that consumers are willing to pay at a specific moment in time. This price is determined, for instance, on the basis of the price of competitors, the time of day, the demand, and the stock of the product.
Importantly, the 30-days-rule refers only to the seller’s “announcement of a price reduction” or a “promotional statement” that a price is reduced: for instance, stating a new ‘reduced’ price while referring to an old ‘prior’ price (possibly crossed out). A price reduction without a discount being stated (e.g. without reference to a ‘prior’ price) does not fall under the new rules. The above is also expressly stated in the Guidance: “Article 6a does not deal with, and does not restrict in any way, price fluctuations and price decreases that do not involve a price reduction announcement”.
Provided that dynamic pricing is not accompanied by a price reduction announcement, the 30-days-rule does not apply. If, however, a (lower) price is presented as a discount, the lowest price in the past 30 days must be stated. In a dynamic market, this could give rise to the (commercially unattractive) situation that the ‘reduced’ price is equal to or higher than the lowest ‘prior’ price of the past 30 days. In practice, companies may therefore lose a marketing tool in the case of dynamic pricing, namely the ability to alert consumers to a discount.
iv. 30-days-rule applies per distribution channel
Another important point of attention is the situation in which a product is sold through different distribution channels (such as different brick-and-mortar and/or online shops) whereby the seller applies different prices per distribution channel. In this case, if a general announcement of a price reduction is made, the 30-days-rule applies to each of these distribution channels separately. When announcing a discount for a product, a seller must therefore base the discount on the lowest price it has been charging in the relevant distribution channel in the past 30 days. If the seller applies different prices per distribution channel, it is possible that the ‘prior’ price differs per distribution channel, and therefore also the announced discount.
v. Showing a discount on the recommended retail price remains possible
It is common practice in the retail sector to make a comparison with a manufacturer’s (higher) recommended retail price. The Guidance provides that this pricing strategy falls outside the scope of the 30‑days-rule, since no price reduction by the same seller is involved in that case, but rather a comparison with the price of a third party (the manufacturer).
The Commission has warned, however, that the seller must ‘pay utmost attention’ to ensure that the average consumer does not perceive the comparison with the manufacturer's recommended retail price as a price reduction: the price comparison could then result in practice in a misrepresentation of the ‘prior’ price, amounting to breach of the 30-days-rule (and possibly otherwise also constituting a misleading commercial practice).
Supervision and enforcement: ACM proactively monitoring online prices
ACM announced at an early stage already that it would proactively enforce the new pricing rules (see our earlier blog). ACM has stated in that regard that it had monitored the online offers of 25 online shops for a longer period of time in response to signals that online shops were using fake discounts.
ACM reaffirmed in December 2022 its intention to step up its enforcement activities focused on fake discounts. Edwin van Houten, Consumer Director at ACM, said the following: ‘The standards are now clear. A discount must be a real discount from the lowest price that previously applied. This rule provides a sound basis for supervision.’
ACM’s monitoring of online offers of online shops has been successful. In July 2022, following a joint campaign with other European consumer authorities and the European Commission, ACM announced in a press release that Wish would put an end to fake discounts and price personalisation. According to ACM, Wish applied high discounts (‘reduced’ price) to prices it had most likely never charged (‘prior’ price). In doing so, Wish induced consumers to make a purchase that they might not have made if the discount has been stated correctly. In light of ACM’s concerns about Wish’s discount policy, the company announced it would put an end to the fake discounts. By giving that commitment, Wish has been able to avoid a likely high fine from ACM.
Companies are well advised to check their discount policies against the new regulations, since ACM may fine companies up to €900,000 for violations of consumer law. In certain cases, the fine could even amount to 4% of the annual turnover of the company in question. ACM may impose a fine of up to €900,000 on the de facto managers of the company that committed the violation. It may furthermore impose an order subject to a penalty, carry out an unannounced dawn raid, and publicly warn consumers about companies violating consumer law.
Conclusion
The new rules in the Decree set out clearcut frameworks and obligations for the use of discounts. That clarity is desirable not only for companies that wish to assess their discount policies, but also for ACM, which can enforce companies’ discount policies more effectively. ACM will therefore most likely take action in 2023 against companies that mislead consumers through fake discounts.
Whereas in the past ACM often focused its enforcement policy on certain sectors (see, for instance, our blog on ACM’s supervision of misleading sustainability claims), it is likely to keep a close eye on a wide range of online shops as far as fake discounts are concerned. ACM will in any event unrelentingly continue to focus on the digital economy in 2023.
Information on dawn raids by ACM and the European Commission can be found at invalacm.nl
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