6 Oct 2023
The following blog post was written in collaboration with Dr. Nico Brunotte, LL.M. (Cambridge), a specialist in e-commerce and digital business law at global law firm DLA Piper. With over 8 years experience advising clients on the implementation of digital regulations, his help has been invaluable to us when looking to understand when and how the Price Indication Directive needs to be applied.
The EU Price Indication Directive is a law which aims to increase transparency of price reductions for consumers, and Member States must apply the rules of the Directive from May 2022. In this blog post, we'll cover the Directive's key provisions, where it applies, exceptions to the regulation and more.
One of the ultimate goals of the Directive is to prevent businesses from artificially inflating an item’s original price and misleading consumers on how much a product is discounted by. As a result:
Any announcement of a price reduction must indicate the prior price.
The prior price is the lowest price applied by a business for at least 30 days before the current price reduction.
Let’s take an example: A pair of shoes current and “normal” selling price is €100, but they were sold at a discounted price of €80 last week (ie within the last 30 days). If that product is put back on sale the following weekend at €70, the “prior price” that will need to be displayed is €80.
The new Directive applies across all distribution channels, including both online and in brick-and-mortar shops, and to all sorts of promotional statements, including:
A price reduction by percentage, (e.g. “20% off”), or a specific amount, (e.g. “€10 off”)
By indicating a new, lower price together with the indication of the previously applied higher price (e.g. “now €50, was €100”) or in crossed-out form (“€50/
By another promotional technique such as “buy today without paying the VAT” that tells the consumer that the price reduction is equal to the value of the VAT (meaning that the VAT is not collected).
By presenting the current price as the “starting” price (which then is the lowest 30 days price), if a higher price is shown as an upcoming price (for example “€50 for the next week, before price increases to €100”).
However, the Directive does not apply to tied or conditional offers, for example:
Long-term arrangements that allow the consumers to benefit systematically from discounts received, such as loyalty programs
Specific individual price reductions - i.e., personalized price reductions based on consumer shopping behavior or data. Examples of this could include win-back promotions, where brands offer a discount to encourage a certain segment of customers to start shopping with them again, or birthday coupons.
Buy one get one free deals
General marketing claims that promote the seller’s offer by comparing it with other sellers’ offers without invoking or creating the impression of a price reduction, such as “best/lowest prices”
Product bundles (for example, offering a 20% discount when buying three items from a certain range)
There is an exception: if a price reduction is presented as personalized, but in reality is offered to all consumers, the Directive applies for this price reduction. The official Commision Notice on the interpretation of the Directive offers the following examples:
Such a situation could occur where the trader makes available vouchers or discount codes to potentially all consumers visiting the online shop during specific periods. Examples could be campaigns such as “Today 20% off when using the code XYZ”; or “This weekend 20% off everything for loyalty members only”.
This will prevent misuse if a discount, offered as “personalized”, is in fact granted to all customers and thus a reference price (as “lowest price”) can be displayed which applies uniformly to all customers.
In these cases, as the code or loyalty program is accessible or could be used by all customers, and are therefore not specific individual price reductions as described above, retailers must comply with the Directive by showing the lowest publicly available price in the last 30 days. We recommend consulting with your legal council or an external expert to better understand when to display lowest prior prices as part of your loyalty program offers.
There is another important exception: if a business is forced to gradually reduce the price of a product, for example when selling products to clear stock, the EU gives countries some flexibility in how to implement this. This means that businesses are not forced to indicate the previously applicable sales price (total price) again for each individual price reduction because of the administrative burden that would arise. However, this is up to individual Member States to decide if they want to implement this exception.
The Directive distinguishes between different sales channels, for example online or in brick-and-mortar stores. The lowest prior price is specific to the channel: retailers discounting online, for example, only need to consider the lowest prior price displayed on their website, not in-store.
In terms of where to display the lowest prior price, there is no need to indicate the prior price on display banners or advertising with blanket statements such as “This week only: 20% off all items”. Instead, the guidelines state that prior prices need to be indicated at the point of sale - for example on the individual product page.
Below are two examples of pricing displays that are deemed compliant. In the first example, a retailer has included a simple strikethrough to indicate the lowest prior price – as long as this is truly the lowest price from the last 30 days, this example counts as compliant. some retailers are choosing to show three prices: the original price, the lowest prior price, and the current product price, as in the second example.
The Directive applies to businesses that are the seller of the goods, even if they use intermediaries such as online marketplaces for their sales. For retailers, this means keeping a record of pricing history is of paramount importance, so you can both correctly display lowest prior prices and retain on hand in case of any dispute. This requires considerable documentation and even potentially re-configuration of your data warehouse to retain historical SKU-level pricing data.
Certain items are exempt from the directive, including:
B2B: The law is only applicable in relation to consumers.
Digital content or services: The Directive only applies to what the EU describes as “movable goods”, for example FMCG products, clothing, accessories and beauty products. Digital content or services are therefore not included.
Perishable goods, in particular food that may deteriorate rapidly or expire, or goods which have been on the market for less than 30 days: in these cases, Member States can provide for different rules.
Retailers that ignore the EU Pricing Indication Directive risk a similar system of penalties to those introduced by the GDPR. Fines for breaches of the Directive are capped at either 4% of a business’ annual turnover in these countries (if available) or, if this is not possible to calculate, €2 million. Beyond the monetary fines, retailers also risk considerable reputational damage with consumers, who may feel duped into shopping with a brand based on the artificial price reduction.
Because the Directive focuses on protecting the rights of EU consumers, that means all businesses - regardless of where they are headquartered - need to follow and apply the Directive if they are targeting EU consumers for their sales.
Stay compliant and avoid heavy fines by communicating lowest price from the last 30 days - all at the switch of a toggle within Talon.One. You’ll be able to automatically generate the lowest prior price for a defined period of time to ensure EU compliance. Please reach out to your Account Manager to discuss your business case and product requirements for this specific feature, or speak to our Sales team here.
The contents of the following blog should be taken as guidance only. To ensure full compliance with the law, we highly recommend working with your internal or external legal counsel - particularly when dealing with complex use cases or multi-market entities.
DLA Piper is a global law firm operating through various separate and distinct legal entities. Further details of these entities can be found at www.dlapiper.com. This publication is intended as a general overview and discussion of the subjects dealt with, and does not create a lawyer-client relationship. It is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation. DLA Piper will accept no responsibility for any actions taken or not taken on the basis of this publication. This may qualify as “Lawyer Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome. Copyright © 2023 DLA Piper. All rights reserved.
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