As part of the European Commission’s “New Deal for Consumers” Initiative, it has introduced wide-ranging reforms to the law underpinning how business advertise, sell and communicate to consumers. Building on this, the Consumer Rights Act 2022, which is designed to consolidate and update Irish law in the area (reported here and now commenced), was enacted last month and all of its provisions (other than section 161) were commenced on 29 November. The ultimate goal of these changes is to modernise the rules, particularly in light of the development of online shopping and e-commerce.
The European Union (Requirements to Indicate Product Prices) (Amendment) Regulations 2022 (“Price Indication Regulations”) reflect the recent amendments made at European level (in Directive (EU) 2019/2161) to the Price Indication Directive (Directive 98/6/EC) in 2019 and amend the European Communities (Requirements to Indicate Product Prices) Regulations 2002. The Department of Enterprise, Trade and Employment states that the purpose of the new Price Indication Regulations is to “tighten up the rules on sales advertising and to prevent misleading consumers when communicating price reductions”.
Under amendments introduced by the new Price Indication Regulations, traders are required to indicate the prior price of a product whenever a price reduction is announced. The prior price is now defined specifically as the “lowest selling price or unit price, as the case may be, applied by the trader to the product during a period of not less than 30 days before the application of the reduction”.
In effect, businesses are now prevented from increasing the price of a good for a short period in order to drop it shortly afterwards, thereby claiming that consumers can benefit from a significant price reduction. They must also ensure that any price announcement is 1) unambiguous and easily identifiable as referring to that product, and 2) clearly visible and legible to the public. Failure to do so could attract a Class A fine of up to €5,000.
For example, a high-street retailer may decide to drop the price of an air fryer model when it re-opens on St Stephen’s Day. If the air fryer was on sale for 100 euro in its stores in the run up to Christmas, but was previously reduced to 80 euro for first weekend of December as a special in-person offer, then the retailer must refer to the latter price in its promotional announcement.
Helpfully, the European Commission has published guidance on how to interpret the new restrictions. In essence, they state that their main concern is the effect a “price announcement” can have in inducing a consumer to purchase a product. With that in mind, the Price Indication Regulations:
- Apply to traders based outside of the EU that direct their sales to EU consumers;
- Apply to price reduction channels in both physical and online stores – however, if a business operates online and in brick-and-mortar stores, it should ensure their announcement does not have the effect of deceiving consumers if the price reduction is only available in one channel (as this could be construed as a misleading commercial practice under Consumer Protection Acts 2007 to 2019, as amended (the “Consumer Protection Acts”));
- Apply to price reduction announcements that last longer than 30 days without interruption (such prolonged discount periods may also be considered misleading under the Consumer Protection Acts);
- Do not prevent traders from extending a price reduction campaign, as long as it is not susceptible to creating a false impression on consumers that it is a new price reduction;
- Do not restrict price fluctuations or price changes that do not involve an announcement; and
- Do not require traders to indicate how long the prior price was available for, nor how long the current price reduction will last.
It should be noted that businesses are still permitted to announce price reductions in a general manner without referring to the prior price. For example, an announcement that there is “20% off on all Kitchen Appliances” is still permissible. However, if this marketing approach is used, the prior price for specific goods should be indicated at the point of sale – i.e. on the price tag of the kitchen appliance.
These new rules have come at a time when businesses are already preparing price reduction strategies with an eye to the traditional post-Christmas and January sales. Traders need to understand that, when applying the above restrictions to their own product lines, any price reduction announcement is required to be unambiguous, clearly visible and legible. A real risk may present itself in being in conformity with the new Regulations, but falling foul of the Consumer Protection Acts. Crucially, slip-ups in this icy cold shopping season can come with a cost.