Webshops beware: ACM may impose high fines for use of fake discounts
‘Was/now’ prices and other discounts are a powerful tool to signal to consumers that an attractive (temporary) price advantage applies. At the same time, the legislature wants to prevent consumers from being misled online by fake offers, for instance by a webshop first briefly raising the price of a product and then advertising an artificially high discount.
Since last year, stricter rules for (online) discounts have applied to prevent consumers from being misled, but according to the Netherlands Authority for Consumers and Markets (ACM), many online shops still often transgress. The ACM has recently been structurally monitoring prices of online shops and has announced that it will be taking enforcement action. This is no empty threat: in practice, we see that the first webshops are actually facing fines.
‘Was/now’ prices: what restrictions apply?
Fake discounts are misleading for consumers and distort competition between companies, because a webshop that does follow the rules may lose customers to one that misleads customers using fake discounts.
The rules on discounts (real and fake) are set out in the EU Price Indication Directive and have been implemented in the Dutch Price Indication Decree. Fake discounts may also violate the EU Unfair Commercial Practices Directive.
Webshops are of course allowed to present discounts. This is referred to in the law as ‘announcements of price reductions’. In doing so, however, the webshop must always state the reference price (the old price or ‘was price’). That must be the lowest price at which the product was offered in the 30 days before the discount. This is known as the 30-day rule and this rule applies to all types of discounts, such as crossed-out prices and discount percentages.
A number of exceptions apply to this rule. The 30-day rule does not apply, for instance, to products that spoil quickly or have a limited shelf life. It also does not apply to so-called stackable discounts, whereby the discount percentage increases continuously (e.g. 10%, 20% and eventually 50% compared with the original price).
The price reduction may also not be otherwise misleading. For instance, showing a price reduction comparing the ‘was’ price of a larger pack with a ‘now’ price of a smaller pack of the same product is prohibited. Made-up recommended retail prices may not be used either.
Beware when comparing with the recommended retail price
Webshops regularly make comparisons between their own price and the manufacturer’s recommended retail price. According to the European Commission, in principle, the 30-day rule does not apply to this, because only a comparison with another person (the manufacturer) is involved, not a price reduction by the webshop. That is therefore permitted.
But beware: the ACM insists that a comparison with the recommended retail price may not be construed by consumers as a discount. To avoid high fines, webshops that make a comparison with the recommended retail price must always state this clearly and may not imply that a discount applies, because a discount means that the consumer could actually have bought the product at a higher price at that webshop in the past.
The ACM strictly enforces this rule and prohibits the use of the recommended retail price as the (crossed-out) original price. The European Commission appears to be more lenient on this point and states in the Guidelines to the Unfair Commercial Practices Directive that webshops are allowed to show crossed-out recommended prices, provided that they clearly communicate to consumers that the indicated reference price is a comparison, not the reduction of the price previously charged by that webshop. This explanation must immediately be provided together with the reference price.
But the Dutch government wants to get rid of such comparisons altogether. In November 2023, it called for a European ban on discount promotions in which manufacturers’ suggested recommended prices are stated if sellers have not actually used those recommended prices.
Dynamic pricing remains possible
Dynamic pricing means that the price of a product changes (very) frequently, sometimes even several times a day, depending on market conditions. By means of this strategy, sellers look for the optimal price, based on what consumers are willing to pay at a specific time. Factors such as competitive prices, the time of day, demand, and available stock are taken into account in determining this price. The 30-day rule applies only to discount offers where it is stated that the price has been reduced. As long as dynamic pricing is not accompanied by an announcement of a price reduction (i.e. a silent price change), the 30‑day rule does not apply.
Webshops risk high fines when using fake discounts
In November 2023, the ACM found that the use of fake discounts on websites is still a major problem. It monitored websites in the clothing and consumer electronics sectors, among others, and established that a large proportion of these companies structurally violated the rules on fake discounts.
Webshops that fail to comply with the rules risk a high fine of up to €900,000 or even 4% of the annual turnover of the company concerned. The ACM may also impose a separate fine of up to €900,000 on the individuals involved who de facto commit the violation.
We see that, when taking action against fake discounts, the ACM tries to settle cases with webshops (known as ‘simplified settlement’). It then offers the webshop a 10% reduction of the fine, provided that it is willing to acknowledge the violation and accept a fine.
In addition to a fine, the ACM may also impose an order subject to a penalty, carry out a dawn raid, and publicly warn consumers about companies violating consumer law.
Other points of attention for online shops
The ACM strictly monitors compliance with consumer rules. Protection of consumers, for instance against online deception, plays a major role at the ACM. Some 70-80% of all investigations launched by the ACM in recent years relate to consumer protection. The ACM’s enforcement practice shows that it takes strict enforcement action against unfair commercial practices in e‑commerce.
In its Focus Areas in 2024, the ACM announced this year that it would again pay extra attention to protecting online consumers and preventing (online) deception. In addition to fake discounts, this includes the use of so-called ‘dark patterns’ and misleading sustainability claims.
More blogs and practical tips on consumer rules can be found at consumentenrecht.info.
Information on dawn raids by the ACM and the European Commission can be found at invalacm.nl.
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