EU requirements for advertising with price reductions

customer loyalty

Marketing

Nov 4, 2022

Sean McTiernan Editorial Content Writer Talon.One

Sean McTiernan

Editorial Content Writer

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9 minutes to read

The EU's Omnibus Directive is a set of regulations that, among other things, aims to ensure consumers are given fair and clear pricing information when they shop. The directive is designed to protect the interests of consumers, by making it easier to compare different offers — especially discounted versus non-discounted prices — and ensure you're getting value for money when shopping. In this article, we'll look at how these rules affect businesses advertising with price reductions, such as discounts, savings or deals.

Pricing claims and indications must be clear and unambiguous.

The Directive aims to give consumers better information about prices. When retailers want to offer a discount, they have to be transparent in explaining this fact—they can no longer hide behind opaque pricing strategies.

Therefore, the Directive seeks to reinforce consumer rights through a combination of enforcement measures and increased transparency requirements.

What does this mean for retailers? It is important that price claims and indications are clear and unambiguous. You should not make any misleading claims or indications about the value of your product or service.

The price must be clearly stated and should not be misleading. The actual amount paid by the customer should be shown in a prominent place on all material: PDPs, content and banners ads.

Claims to discounts, savings or deals should not be misleading.

A merchant must indicate the prior price of an item when reducing it. In the Directive, a prior price is defined as the lowest price applied by the merchant in the last 30 days. And merchants cannot establish the prior price for a shorter period than 30 days.

To give an example, if a retailer is advertising a pair of shoes at 70% off, and the lowest price that those sneakers were sold at in the previous days was $100, then the prior price must be listed as $100 — even if the shoes were $200 the day before the sale started, the lowest price in the previous period is the one that matters.

This stops retailers jacking up a price just before a sale, to offer an illusion of a bargain.

Another important aspect of the price reduction is that, after it has been implemented, the old price should be presented in crossed-out format— this is called strikethrough pricing or 'cross-out' pricing..

What about seasonal products?

Let's imagine your business sells a variety of products but temporarily stops offering some items (for seasonal or timely reasons). This might be used for seasonal goods such as winter/summer clothes or after products are no longer in stock.

In this case, the expectation to indicate the prior price using the rule above will not be applicable—since it has been more than 30 days since you have sold that product on that market. When this happens, you should indicate the prior price as the lowest price applied in the period immediately before the interruption.

How should I handle general discounts?

There is no need to identify prior pricing in marketing campaigns such as ‘’50% off on everything today.’’

If a price reduction is announced generally, and not in relation to the prior price on a specific item — for example, by saying "any item" instead of specifying an amount—merchants do not have to indicate their previous pricing.

However, the prior price must be displayed at the point of sale.

What is the impact of ignoring the Omnibus directive?

The Omnibus Directive imposes obligations on companies that are backed by substantial fines. The Omnibus Directive sets out a similar system of penalties to that introduced by GDPR. Fines for breaches of the Directive are capped at either 4% of a company's annual turnover in these countries (if available) or, if this is not possible to calculate, €2 million. Member States can introduce their own higher penalties when they implement the Directive.

There are certain criteria that will be considered when calculating the penalty:

  • the nature, seriousness, extent and duration of the infringement;

  • whether any action has been taken to reduce the impact of damage;

  • any previous violations, including fines in other European Union countries.;

  • any financial benefits or losses to the seller that may have arisen from infringements of consumer law;

  • whether there have ever been any previous allegations made against the trader.

How Talon.One can help

Talon.One allows for clear, rule-based promotions, which can be set up to have guaranteed and automatic promotion validation. Marketers can quickly set budgets for campaigns, time-limits for redemption and clear rules for eligibility. This can also be communicated on the front-end using the Talon.One API.

Talon.One also helps online sellers stay in compliance with the Omnibus Directive by offering strikethrough pricing support in our Rule Engine. This is a specific type of rule for labeling and strikethrough pricing campaigns. By importing a Cart Item Catalog, the system can intelligently discount the item, and provide the information for your frontend to display both the discounted and the 'strikethrough' price.

If you're working for a major retailer and you're looking for ways to boost your conversion rates, why not check out our Guide To Group Loyalty. This ebook gives facts and insights on how multi-brand companies can use synergies to drive higher conversion and retention across their entire portfolio.

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