INVENTIO – INVESTITIO – INNOVATIO
New rules on price reduction
Omnibus Directive: Part 1.
Omnibus Directive: The new EU consumer protection regime
As of 28 May, 2022 certain provisions of the European Union’s new consumer protection package (New Deal for Consumers) in particular Directive (EU) 2019/2161 will be applicable, which is also known as the Omnibus Directive due to its collective and comprehensive nature – and not the vehicle sung about in the popular cabaret hit song-.
The changes are indeed widespread, affecting among other things:
- the rights of consumers in the online space,
- the display of customer reviews,
- ranking based on search engines,
- and various rights of withdrawal.
Due to its complexity, it is appropriate to present the novelties of the Omnibus Directive in multi-part newsletters, where this present first part focuses on a priority area like the new rules on price reductions, which constitutes a substantial new obligation for traders.
Displaying the prior price shall be deemed as vital
The core element of the new regulation is that for every promotion announcing price reduction, the prior price must be marked, compared to which the new price is considered to be a discount or reduction. This prior price shall mean the lowest price applied by the business during a period which cannot be less than 30 days before the price reduction is applied.
In practice this means that if the business communicates price reduction, the price reduction will be based on the lowest price that the business has charged not shorter than 30 days prior to the price reduction. However, the business may decide to set a longer period than 30 days for the establishment of prior prices.
Therefore, if a business wishes to sell a product at a lower price compared to a higher price and otherwise announces this to consumers, it is not necessary to review the prior price every 30 day, but may sell the product at a lower price on a permanent basis.
This rule applies to every promotion that communicates a price reduction, regardless of how it is worded: “now much cheaper”, “now with huge discounts”, “up to 50% off”, “now plus a free product as a gift”, “pay one, get two” – to all such communications the new rules must be applied.
What are the exceptions to the regulation?
However, there is no need to apply the new rules to promotions that provide a permanent and general discount on all or a specific group of products of a trader, for example to various loyalty programs.
The new rules also do not apply to personalised discounts.
The new rules also do not apply to price comparisons, when a business does not announce an explicit price reduction but compares its permanent prices to the prices of its competitors.
The regulation is only applicable to communication
It is also very important to emphasise that the new rules do not apply to the price reduction itself, but to its communication, i.e. the various periodic price fluctuations and reductions that are not separately announced to consumers are not subject to the above mentioned obligations.
The new regulation is, of course, only partly new – in Hungary, the Hungarian Competition Authority has already set out a number of requirements in practice regarding how thoroughly customers should be informed about the reference prices used by businesses in their pricing promotions, at the same time, now concrete, specific and accountable requirements have been set out in the legislation towards the businesses.
Preliminary legal opinion: You can count on us
It is obvious that the new environment will place a serious burden on businesses in planning how to communicate their pricing promotions, particularly in the case of promotions that involve several levels of the distribution chain, such as those communicated by the manufacturer but implemented by retail chains.
This of course also enhances the role of the lawyers involved in the planning process – the preliminary legal opinion on price promotion practices will become indispensable – and Germus & Partners Attorneys-At-Law is of course ready to assist its current and future Clients.
The content of the newsletter is only for your information and it cannot be regarded as legal advice of any lawyers or trainee lawyers of Germus & Partners Attorneys-At-Law.
You may contact us anytime via firstname.lastname@example.org, Germus & Partners Attorneys-At-Law is at your kind disposal.
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