As Black Friday, Cyber Monday, and Christmas deals approach, online businesses operating in the European Union (EU) need to be mindful of the regulations governing promotions and sales. Reports of shopping scams and strict penalties for misleading practices emphasize the need for online retailers to align their promotional strategies with both legal and consumer expectations.
To ensure your business takes advantage of these sales opportunities while staying compliant with EU law, here are updated tips for a transparent and lawful promotional strategy:
1. Do's
Have Specific Terms and Conditions for Promotions:
Clearly define the terms and conditions for your promotions, covering details such as the promotion nature, participation methods, restrictions (like age or location), start and end dates, and product availability limitations. Ensure the terms are written in plain language, easily accessible, and understandable.
Ensure Transparency in Sponsored Search Results and Automated Decision-Making:
If your promotion involves sponsored search results or paid advertising, disclose this to your customers. Additionally, if you employ algorithms or automated decision-making for personalising offers or pricing, clearly communicate this process.
Displaying Before-and-After Pricing:
When showcasing a price reduction, present both the original and discounted prices. The original price should reflect the lowest amount you charged for the product within the 30 days preceding the discount period. For example, if the current selling price is EUR 120, and the lowest price in the last 30 days was EUR 100, announcing a 20% reduction should be calculated from EUR 100, resulting in a new selling price of EUR 80 rather than EUR 96. In cases of successive price reductions, display the price applied before the first reduction.
2. Don'ts
Avoid Misleading Promotional Communications:
Ensure that your promotional communications are transparent and do not mislead consumers through actions or omissions. Practices to steer clear of include providing false information about limited availability, exaggerating promotional benefits, and offering misleading return policies. A concrete example of such deceptive practices is the display of a "No-Questions-Asked Returns" policy when, in reality, certain conditions apply.
Refrain from Including the Final Price:
Businesses must state a clear total price, including any additional costs, from the moment they offer products at a certain price. If stating the total price in advance is not possible, make sure to clearly explain how these extra costs will be calculated. If businesses do not provide information the relevant price information, consumers may not obligated to pay them. This information must always be provided, even in cases with limited space, such as on a mobile website or in an agreement sent by SMS.
Don't Forget Post-Promotion Responsibilities:
After the promotion concludes, adhere to commitments regarding your obligations as per the agreed terms and conditions. For instance, if your promotion promised prizes for a contest, make sure to promptly hand out those prizes within the agreed-upon time to the winners. Similarly, if you committed to delivering goods by a certain date, such as before Christmas, ensure that you follow through on that commitment.
Legal consequences
Failure to comply with legal obligations outlined above might lead to significant penalties. The Omnibus Directive, which includes a series of legal obligations pertaining promotions rules, has instituted a penalty framework akin to the one established in GDPR, entailing fines of up to 4% of the entity's annual turnover in the Member State (or States) where the violation occurred. In instances where information on turnover is unavailable, fines may be imposed at a minimum of EUR 2 million. Member States retain the authority to implement even higher fines through their own legislation while adopting the Directive.
Stringent scrutiny of these provisions is already underway in various Member States. For example, in Poland, the Office for the Protection of Competition and Consumers (OCCP) has conducted investigations into approximately 40 businesses concerning the accurate disclosure of product prices to consumers during discount periods. Notably, four international businesses are currently facing charges related to the improper communication of the lowest price within the 30 days preceding a price reduction. These legal actions centre on the obligation to communicate the lowest price within the specified timeframe in the event of a price reduction for products or services offered to consumers.
Conclusion
As part of our services, we offer you an internal audit of the application of the provisions of the Omnibus Directive, including your promotional strategy. We can assist your online business in navigating these rules effectively and maintaining compliance. If you have any questions, feel free to contact us for a free consultation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
