The European Union Committee has declared a directive for consumers' protection in the indication of the prices of products offered. It's aimed at consumer protection in the first place and also will be crucial to reducing the risks of unfair competition in the market.
The EU has made specific rules for price reduction announcements and they must be applied from 28 May 2022 by merchants. So, when there is a price reduction it needs to be operated by specific rules.
In this blog post, we will go over the rules that you will be faced with and how you can apply them, things you have to consider and we will end with some practical tips.
Let's dive in!
What Omnibus Directive Changes for Online Retailers?
Now businesses have more restrictions to follow with the EU Omnibus Directive. Businesses need to review and recharge their prices and adopt transparency practices with respect to the price of the products that are offered to the consumers.
There are some requirements you must apply while making price reductions in your store.
Let's explain them one by one.
- The Selling Price Must Be Easily Identifiable, Clearly Legible and Unambiguous
The Directive aims at the customers' rights to evaluate and compare prices of the products homogeneously and transparently. So, when there is a price reduction offered by retailers, they have to be more transparent to the consumers.
Therefore, the Directive will reinforce consumer rights via enforcement measures and increased transparency requirements.
Implementing it will prevent merchants from artificially inflating prices and misleading customers about the discount.
- Traders Outside of the EU that Direct Their Sales to EU Consumers Have The Ton-contractual Obligation
Whether your country is an EU member or not, if you sell your products to EU customers you have a non-contractual obligation to the Directive. So, the Directive will apply to non-contractual obligations in civil and commercial matters. National authorities will be in charge to enforce this law. And when it's needed they will be able to investigate and use enforcement power under regulation on consumer protection cooperation.
So, if you are an international merchant, reaching different countries globally you should be careful about this directive.
- Merchants Must Indicate The Prior Price as a Reference in Each Price Reduction
Before each price reduction, the merchant must indicate the prior price. The prior price, as definition, is the lowest price applied by the same merchant in the last 30 days. And merchants cannot provide for a shorter period than 30 days while establishing the prior price.
For example, when the price reduction is like ''50% off'' and the lowest price in the previous 30 days was 100 dollars, the merchant has to provide 100 dollars as a prior price even though the last selling price was 180 dollars.
And one other important aspect of the price reduction is to present the old price in cross out. So, when the price reduction is done, the previous price can be presented in cross out such as the existing price: 50 dollars and the old price: 100 dollars.
Merchants don't have to indicate how long they have applied the prior price. Also, it will not affect the duration of the price reductions but it requires merchants to indicate the prior price.
- Products That Have Been on the Market For Less than 30 days, Merchants can Indicate the Prior Price by Themselves
If your products are in the market for less than 30 days, let's say new arrivals, you can provide a shorter period. So, you can state different rules including the exemption of your products from the scope.
The Directive allowed merchants to determine the period by themselves and merchants can indicate this period along with the corresponding prior price.
What about seasonal products?
Let's say that you offer a range of products but you resume the offer of the same products after periodic interruptions. This might be seasonal goods such as winter/summer clothes or after products are out of stock this expectation of indicating prior price on your own will not be applicable.
In that case, merchants can announce a price reduction indicating the prior price as the lowest price applied in the reference period before the interruption.
- For The Bulk Products Price Reduction Only The Unit Price Must be Identified
For the products sold in bulk where the selling price cannot be determined but only the unit price must be indicated. The unit price must show the prior price of that product.
- Merchants can indicate the Prior Price as The Last Price for The Price Reduction of Perishable Goods
The legislation allows the merchants to indicate a prior price as the last price immediately before the price reduction for perishable goods. These goods are liable to deteriorate or expire rapidly so they may need to be discounted more often, and need to sell faster due to approaching the expiration date.
These goods are fresh foods or drinks that have short export time limits.
- Prior Price doesn't have to be Identified for General Discounts
Campaigns such as; ''50% off on everything today'' don't require the identification of prior price.
When the price reduction is announced as a general statement, merchants don't have to indicate the prior price on the same medium. Rather, the prior price for individual products covered by the price reduction announcement must be indicated at a point of sale.
- Clearly Identify Categories of Goods for Price Reduction
If you provide different discounts on different categories, you must clearly identify the categories on sale. It cannot create confusion for consumers.
- Prior Price doesn't have to be Identified in Loyalty Programs or Personal Price Reductions
The rules don't apply to merchants' customer loyalty programs such as discount cards which will be entitled to the identified product range in a specific amount of time or allow credits for future purchases.
The rule doesn't apply either to personal price discounts that don't have the nature of a price reduction announcement.
For example, price reductions that are resulting from customers' old purchases so, customers receiving ''20% off'' voucher coupons valid for the next purchase until the next month. Other examples of personal discounts might be special occasions such as birthday price reductions that haven't been announced beforehand to the customer individually.
- Identify Prior Price when Loyalty Programs Price Reductions are Announced Generally
In special price reductions such as: ''20% off on everything for loyal customers only.'' or ''50% off on everything for premium customers only''.
Where the loyalty or premium program is accessible by many of your customers, you must identify the prior price as the lowest price in the last 30 days. You must ensure that you offer the lowest publicly available price to your customers.
- Indicate Prior Price for the Goods Concerned by Price Reduction Announcements in Sales Seasons
Sales and offers can create the impression of a price reduction and the prior price must be indicated for the goods concerned by the announcement.
When merchants offer general discount codes, potentially all customers are visiting the shop during a specific period. In this case, the merchant must comply with the requirements which are showing the prior price. You must comply with the requirements of showing the prior price as the lowest price in the last 30 days.
Well, applying is easier after learning the requirements. They are pretty straightforward and applying those asks for a little effort.
To learn more about it in detail, you can read here!
Things to Consider for Online Merchants
Both brick-and-mortar and online stores have to inform consumers about the previous price of the product in the last 30 days with respect to the requirements of the Directive.
While preparing for that businesses will have to look for other ways to optimize their prices. In that step working with the price automation tool might be a wise thing to do. You can see your price points in the last 30 days and then you can adopt the directive into your pricing operations in an easy way.
Practical Tips
Start preparing for a new consumer deal. Commercial selectors state that the best advice for EU businesses is to start preparation for the new consumer deal earlier to avoid last-minute changes or penalties. And it makes sense for all merchants and businesses to have an understanding of the Omnibus Directive. Then, creating a new customer deal if they are already making a business with them or planning to expand into the EU market.
Conduct a risk assessment so that you will know which areas you need to work on first. To manage the risk you may need to organize a team or work with consultancy services to ensure that you have the resources to make the required changes.
Think about whether your business needs to work with third parties. Reviewing and recharging your prices may require some effort from other businesses. It might be highly beneficial since it will make your job less complicated.
Final Thoughts
Keeping accurate records of your prices in the last 30 days is crucial with this Directive. The intelligent step is to grasp the 30-day rule as soon as possible and to ensure your team properly understands the impact of the Directive.
Did you find the topic interesting? If so; you can also check our e-book for the EU Consumer Protection Indication of Prices Checklist from here.
This way, stay updated on how regulations have changed when pricing reductions are in accordance with the European Union Committee Directive.
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