EU law change on Promotions

Chris Kervinen
Promotion Effectiveness

1. What is Article 6a?
 

The Article 6a brings specific rules on price reduction announcements. Its goal is to address issues of transparency of price reductions by introducing specific rules to ensure that they are genuine. Article 6a aims at preventing traders from artificially inflating the reference price and/or misleading consumers about the amount of the discount. It increases transparency and ensures that consumers actually pay less for the goods when a price reduction is announced.

 

2. Is this change immediately applicable?
 

The directive becomes applicable in the EU and EAA from 28.05.2022. Member States will enact local legislation based on the directive. The directive gives them some freedom over certain parts of the legislation.
 
 

3. What are the main changes?
 

Any announcement of a price reduction shall indicate the prior price applied by the trader for a determined period of time prior to the application of the price reduction.
 

The prior price means the lowest price applied by the trader during a period of time not shorter than 30 days prior to the application of the price reduction. However, the lowest price reference period can be longer than 30 days as well. Paragraph 2 of Article 6a does not prevent traders from indicating as ‘prior’ price the lowest price applied during an even longer period than 30 days (for example, as part of the marketing strategy).

 

Member States may provide for different rules for goods which are liable to deteriorate or expire rapidly.

 

Where the product has been on the market for less than 30 days, Member States may also provide for a shorter period of time than the period specified in paragraph 2.

 

Member States may provide that, when the price reduction is progressively increased, the prior price is the price without the price reduction before the first application of the price reduction.

 

4. What are its limitations?
 

  • Only affects goods, not services or digital content.
  • Does not affect price fluctuations that do not involve a price reduction announcement.
  • Applies even if no exact discount is given together with the price reduction announcement. E.g. “Black Friday offer!”, “Special Offer!”.
  • Does not apply to general marketing claims, e.g. comparing prices to those of competitors, if no price reduction is announced. Also, it does not apply to combined or conditional offers (e.g. “buy one, get two” or “30 % off when buying three”).
  • Does not apply to intermediaries, such as online marketplaces and price comparison platforms. The rules, however, apply if the intermediary is the actual seller of goods or when it sells on behalf of others.
  • Also applies to traders outside the EU who direct their sales to EU customers.
  • Does not apply to customer loyalty programmes, such as discount cards or vouchers, which entitle the consumer to a price discount on all seller’s products or on identified product ranges during extended continuous periods (e.g. 6 months, 1 year) or which allow accumulation of credits (points) for future purchases.
  • Does not apply to real personalised price reductions that do not have the nature of ‘announcing’ the price reduction, for example, vouchers received after a purchase. The article applies to general discount codes and vouchers though.
     
     

5. How will these changes affect your retail business?

 

  • No benefit in artificially raising prices just before a discount campaign. The regular price raise must happen at least 30 days before to be regarded as the new prior price.
  • Successive discount campaigns are harder to carry out (e.g. Singles’ Day, Black Friday and Christmas) because the price of the last discount campaign may become the prior price in the new campaign.
  • One way to go around this is to use different products in different campaigns or to do progressive campaigns.
  • Conditional offers (e.g. 3-for-2), personalised offers, and general marketing claims (e.g. “we are cheaper than competitors”) may become more popular.
  • More manual work in offline retail if price tags need to be manually adjusted
  • Penalties for non-compliance: max 4% of last year’s revenue.
     
     

6. What role will the countries play?
 

Local legislation can determine the impact of Clauses 3 and 4. For example, in Finland, perishable goods have been previously proposed to be excluded from the rules meaning that grocery retail will be pretty much excluded from the rules. Moreover, the same time 30-day window is proposed for new products. However, final legislation has not been approved yet.

 

Sellforte can work with you regardless of the country you are located in. We can study the legislation and help you use our product accordingly!

 

Let’s look at some practical examples!
 

  • If a promotional product costs between 100 and 120 euros in the 30 days before the promotion and 115 euros one day before the promotion, then we have to state 100 euros as the prior price (cheapest price during the past 30 days) and 80 euros as the sales price during the 20% promotion period. We may indicate the cheapest previous price as a crossed-out price.
  • If we have a promotion "20% on many products", then we have to state the cheapest price of the last 30 days before the start of the campaign for all products covered by the campaign. This cheapest price is the reference point for the 20% discount and not our last sale price!

 

7. Can you continue running your short campaigns such as 10% on Weekends or 20% at the beginning of every week?
 

  • Yes! you can, but these campaign will trigger the new prior price. If one of the participating items is used in a monthly campaign during the next 30 days, you cannot promote it with the discount% information.
     

What are your possibilities to continue running these types of campaigns?
 

  • Make the campaigns personalized or available for a certain small customer segment only
  • CRM campaigns for individuals or small customer segments are OK, as personalized campaigns fall outside this regulation
  • Special price reductions granted on special occasions for that consumers are OK. “10% for a new customer”, “15% for subscribing to the newsletter” are OK.
  • Make the campaigns for one product group / brand only, and not use that product group / brand in other campaigns during the next 30 days. Of course these type of campaigns for a very limited range are much less impactful than “20% off all” campaigns.

 

8. Can we still present the manufacturer’s recommended price?
 

Yes, the manufacturer’s recommended retail price is out of the scope of the new legislation: ”In that regard, it has to be noted that, apart from price reductions, a seller may use other types of practices promoting price advantages, such as: comparisons with other prices, e.g. prices of other traders (21) or the manufacturer’s recommended retail price ; combined or tied conditional offers (e.g. ‘buy one, get two’ or ‘30 % off when buying three’. Such promotional practices are outside the scope  of Article 6a of the PID but remain fully subject to the UCPD. Source: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.C_.2021.526.01.0130.01.ENG&toc=OJ%3AC%3A2021%3A526%3AFUL
 

  • However, you cannot continue to calculate the discount% from the manufacturer’s recommended retail price. “As stated in section 2.8.2 of the UCPD guidance, a seller presenting a price comparison must pay utmost attention to ensure that the average consumer does not perceive the comparison with, e.g. the recommended retail price, as a price reduction. Where, due to its misleading presentation, the price comparison is actually perceived by an average consumer as a price reduction, such practice can amount to the breach of both the UCPD and Article 6a of the PID due to the incorrect presentation of the ‘prior’ price.”
     

9. Can we still have long term discounts?

 

  • Yes, you can continue them. Long-term discounts are not in scope of this new regulation. These can be continued if the national legislation and UCPD allow
  • However, you need to establish the ‘prior price’ before starting the long-term discount. It is not OK to have a 20% long-term discount communication if the item has never been sold at the original price
     

10. Can we move to “X% off all normal-priced items” communication in our campaigns to be able to not give discounts on the already reduced items
 

  • Yes, you can do “X% off all normal-priced items” to exclude already discounted items from the campaign
  • You can also include the already discounted items in the campaign. However, please notice that after you raise the price back up, then the ‘prior price rules apply


Share blog post