Friday, November 29, 2024, is approaching quickly, and that means Black Friday. Offers and advertisements will be popping up everywhere, both online and in physical stores. Many businesses use “was-now” offers to emphasize the size of the discount consumers are getting on this shopping day. The lower sale price is often compared to a prior “recommended price,” “manufacturer’s price”, or “original” price. This higher price is frequently crossed out or displayed with an attractive discount percentage.
However, not all businesses display accurate discounts, catching the attention of the Dutch Authority for Consumers and Markets (ACM). Recently, the regulator imposed fines on several companies for this. For example, online stores were penalized for artificially inflating the “was” price or listing a price that was never actually used as a sales price. Such misleading discount practices can lead to hefty fines and reputational damage for companies. Businesses such as Leen Bakker, G-Star, JYSK, and Tommy Hilfiger received fines ranging from €105,500 to €163,000. In mid-October 2024, the ACM again reminded business owners of the rules around discounts to prevent consumers from facing fake discounts around Black Friday and the holiday season.
The rules around fake discounts
Since January 1, 2023, new rules have been in place to protect consumers from misleading price promotions. The revised Dutch Product Pricing Decree, originating from the European Modernization Directive, outlines the rules on how discounts may be presented.
What Do These Rules Entail?
- Displaying the lowest price: When a seller shows a discount, they must display the lowest sales price they offered in the 30 days preceding the discount.
Example: An online store has a TV that was priced lowest at €800 over the past 30 days. If they want to offer a discount now, they may only use this €800 as the reference price and can advertise, for example, “Was €800, now €750.” - Exception for perishable goods: For products that perish quickly or have a limited shelf life, the seller may show the price that applied directly before the price reduction.
Example: An online grocery store sells fresh strawberries that spoil quickly. When the price is reduced from €3 to €2 for a quick sale, the online store may show the previous price of €3 as a reference, regardless of any lower prices in the last 30 days. - Cumulative discounts: With cumulative discounts, where the discount is increased in steps, the seller may display the lowest price that was valid in the 30 days before the first discount for up to three months after the first discount. Example: A store starts on December 1 with a 20% discount on a coat originally priced at €200. In the following weeks, the discount is increased to 30% and then to 50%; during this period, the seller may continue to list €200 as the reference price, as this was the lowest price in the 30 days before the first discount.
- New products on the market: For products that have been on the market for less than 30 days, the seller may indicate the period over which the lowest price applied.
Example: A new phone is launched on November 1, and the seller offers a discount on November 20. Since the product has been on the market for less than 30 days, the seller may indicate that the lowest price during that period was €799 and offer the device for €749, specifying the 20 days.
Which practices have been fined?
As previously mentioned, the ACM recently fined sellers for using fake discounts. The ACM has acted against the following practices, among others:
- Incorrect “Was” Price: A company advertised a product with a price reduction of “was €699, now €629.” However, in the 30 days before this offer, the product was available during an earlier promotion for €539.
- Artificial Inflation of the “Was” Price: Another company increased the “was” price of a product to make the offered discount appear larger. The product was initially offered with “was €149.99, now €99.99.” A day later, the same product was advertised as “was €199.99, now €99.99.” The increased “was” price of €199.99 was never actually used as a sales price during the investigated period.
Conclusion
With Black Friday approaching, it is crucial for businesses to review how they present their discounts. There are significant risks associated with using incorrect discounts, especially now that the ACM is strictly enforcing regulations. SOLV would be happy to discuss with you how to offer your product or service in compliance with current laws and regulations. Feel free to contact us for advice.
