Transparency of price reductions: a closer look at the legal framework in the EU and its impact on market practices

Enforcement activity in the EU

Since the national implementation of the new rules on price reduction announcements, there has already been significant enforcement activity in the EU. National enforcement authorities in various member states closely monitor compliance, issuing warnings and offering guidance on compliant pricing practices. Penalties are effectively being imposed in various EU member states, including Belgium, the Netherlands and Spain. In the Netherlands, five companies were fined a total of EUR 621,000.

Additionally, in 2024 a case has been brought before the European Court of Justice (“ECJ”). The ECJ addressed percentage price reduction announcements in a recent case concerning the Aldi group (C-330/23) regarding the supermarket group’s advertisements for different types of fruits. The EJC reinforced that price reduction announcements must be based on the ‘prior’ price as meant in the PID (i.e. the lowest price in the thirty days, unless an exception applies). 

Announcements of price reductions – recap of the main rules

The legal framework applicable to price discounts that was introduced in 2022, is formed by the rules on announcements of price reductions and the regulations concerning unfair commercial practices. In summary, when making announcements of a price reductions, sellers are required to indicate the lowest selling price applied by the seller during a period not shorter than thirty days prior to the application of the price reduction. This lowest selling price is generally referred to as the ‘prior’ price. This main rule follows from article 6a of the Price Indication Directive (Directive 98/6/EC or “PID”, as amended by the Omnibus Directive (Directive (EU) 2019/2161)). 

A price reduction can be announced in various ways, such as through a reference to a previously applied (higher) price (“from-to” offers, often presented in crossed-out form) or in terms of a percentage or amount (e.g., “20% off”). Also, general price reduction statements (e.g., “sale” or “Black Friday discounts”) qualify as a price reduction announcement. Generally, the ‘prior’ price must be indicated on or with the specific product. This does not prevent traders from announcing price reductions in a general manner. But in this case, the ‘prior’ price for the individual goods covered by the announcement must be indicated at the point of sale, i.e. on the respective price tags in shops or price sections in online shop interfaces.

Certain exceptions can be applied. These exceptions may include: an exception for goods which are liable to deteriorate or expire rapidly (‘perishable goods’, in particular fresh food and beverages); an exception for progressive, uninterrupted price reductions within a period of thirty (30) days during the same sales campaign; and an exception for goods that have been on the market for less than 30 days (‘new arrival’ goods). The relevant exceptions may vary per EU member state.

Unfair commercial practices

Certain price reduction practices do not fall under the PID but are governed by the regulations on unfair commercial practices, following from the Unfair Commercial Practices Directive (Directive 2005/29/EC, “UCPD”). Such practices include combined or tied conditional offers (e.g., “buy one, get two” or “30 % off when buying three”); comparisons with other prices, such as the manufacturer’s recommended retail price (‘RRP’) or the price of a competitor; and ‘cash-back’ announcements, whereby a third party, who is not the seller of the goods, but e.g., the manufacturer or distributor of the goods, promises to refund part of the price paid, at the consumers’ individual request and during a certain period. 

The UCPD prohibits unfair commercial practices in business-to-consumer transactions. Generally, the UCPD requires that consumers are not misled by unfair price reduction practices. For example, when a price comparison is actually perceived by an average consumer as a price reduction, this practice will likely be deemed a breach of both the PID and UCPD as such practice might suggest a discount that is not necessarily there.

Looking ahead

Looking ahead, we expect continued enforcement of the rules on price reduction announcements in the EU in the upcoming years. This will likely provide more clarity in the practical application of these rules. The evolving legal landscape and ongoing enforcement actions in the EU underscore the importance of focusing on compliance with rules governing price reduction announcements.