Sales promotions, incentives, and cost-saving deals - Strategies for merchants to attract customers
Shopping Shenanigans: Navigating Price Advertisements
In today's shopping landscape, prices play a significant role in consumers' decisions. With retailers using discounts, bonuses, and best price guarantees to attract customers, there are rules to keep in mind. Let's dive into the laws governing price advertisements, focusing on Germany and the European Union (EU).
Price Display and Transparency
The German Price Indication Ordinance (Preisangabenverordnung) dictates how companies should present product prices to customers. It states that the total price, including VAT and other charges, should be clearly displayed. Moreover, for certain products, such as food, the basic price per unit (kilogram, liter, square meter, etc.) should be specified.
Regulations for Price Reductions
It's crucial not to mislead consumers using price reduction advertisements, according to lawyer Martin Jaschinski from JBB Rechtsanwälte in Berlin. False original prices comparing prices that were never as high as claimed, or the price swing strategy (setting high prices for a short time before discounting), must be avoided. The competition law also sets tight boundaries for these practices.
Comparing Prices
The European Union (EU) implemented a Price Indication Directive to combat problems related to price reductions. In every advertisement with a price reduction, the lowest price demanded for the product during the last 30 days must be indicated (reference price). This European directive is implemented in Germany's Price Indication Ordinance.
Indicating the Reference Price
Initial legal disputes existed about where and how the 30-day reference price should be indicated. In September, the European Court of Justice (ECJ) clarified that percentage discounts or advertising statements, such as "price highlight," must always relate to the reference price, and it cannot be merely mentioned in a footnote.
The Karlsruhe Case
The Federal Supreme Court is currently hearing a case involving the Association for Competition's complaint against the food retailer Netto Marken-Discount in Bavaria. The retailer advertised a coffee product with the previous week's price (6.99 euros), the current price (4.44 euros), and a percentage discount (-36%). Although the reference price was in a footnote, it was the same price as the supposedly discounted current price (4.44 euros). The Association for Competition considered this advertising misleading and a violation of the Price Indication Ordinance.
Alternatives to Conventional Price Reductions
Since the ECJ ruling, there has been a decrease in price reductions and an increase in the use of non-binding recommended prices (RRP). Instead of using the previous price for comparison, the price recommended by the manufacturer has become more common. This is because the Price Indication Ordinance does not apply to the RRP. However, the clarity and purpose of these price indicators remain questionable.
In summary, to ensure transparency and honesty in price advertisements in Germany:
- Use accurate and comparatively lower original prices.
- Indicate the original price clearly for a specified period before the reduction.
- Transparently present the discounted price, including all taxes and fees.
- Apply these rules consistently across all advertising media.
- Comply with the harmonizing standards set by the European Union Directive on price indication.
These principles protect consumers from deceptive pricing practices and ensure fair competition among retailers by promoting transparent and honest advertising.
- In the context of personal-finance and business, adhering to the German Price Indication Ordinance is essential when presenting product prices to customers, as it requires total prices, including VAT and other charges, to be clearly displayed.
- In accordance with the European Union's Price Indication Directive and German regulations, it's crucial to indicate the lowest price demanded for a product during the past 30 days in price reduction advertisements to avoid misleading consumers.
