From a merchant's perspective, new legal requirements always cause upheaval and extra effort. The current cause of this is the European Price Indication Directive. In the last Release News we introduced you to some adjustments to the product. In this blog post, legal expert Sandra May explains what exactly the directive is all about.
The Price Indication Directive (Directive 98/6/EC) is intended to ensure that companies within the EU adhere to the same standards. This standardization is intended to strengthen the single market by facilitating cross-border trade.
However, as this is a directive, it does not have direct effect in the individual member states. Instead, EU states must pass their own laws, which in turn implement the framework of the Price Indication Directive. In Germany, this is done through the Price Indication Ordinance.
Current development through the Omnibus Directive
There is a lot currently happening at EU level in terms of consumer protection with the Omnibus Directive. Among the directives that have been adapted as a result of the reform is the Price Indication Directive. This, of course, has a direct impact on our Price Indication Ordinance. With effect from 28 May 2022, this has now been amended and holds some new warning pitfalls for sellers.
Policy: Requirements for clarity and truthfulness in pricing
Of course, the principles of the price indications remain in effect. As an online merchant you are – like any other commercial seller – obliged to provide clarity and truthfulness in pricing. From these principles, many practices can be derived that you can follow in your everyday work.
Prices must be presented in such a way that the consumer can directly see what the total price is. Accordingly, basic prices, for example, must not be emphasized compared to the total price, so as not to create confusion. Furthermore, you must inform consumers that VAT is already included and whether and to what extent shipping costs are incurred. This information should not be hidden, but should be directly visible with the product price.
New rules for basic prices
One amendment to the Omnibus Directive concerns basic prices. Any seller offering products by length, volume, weight or area is obliged to state a basic price. Until now, it has been the case that for products whose nominal weight or nominal volume did not exceed 250 milliliters or grams, for example the classic yoghurt pot, the basic prices per 100 milliliters or grams could be indicated. Since this is a voluntary rule, it results in a situation where in the same store one yoghurt is offered with a basic price per kilogram and another with a basic price per 100 grams.
Since the mandatory basic price is supposed to ensure that prices are comparable for consumers at a glance, this exception is now seen as rather obstructive. For this reason it has been withdrawn.
In practice, for you as an online merchant this means that basic prices may only be indicated in "large" units, i.e. liters and kilograms, even for products sold in small quantities.
Advertising with strikethrough prices should be clearer
Another change concerns advertising with strikethrough prices. This advertising is often used to attract customers. The greater the gap between the strikethrough price and the current price, the better the sales. Of course, this advertising is also subject to honesty in pricing. The strikethrough price must actually have been charged at one time.
However, this can also mean that a merchant artificially pushes up prices shortly before a planned discount campaign in order to then be able to advertise with larger percentage discounts. This practice was already regarded as highly likely to be anti-competitive even before the planned change. But with the amendment on 28 May, it certainly will be.
Strikethrough prices may still be used for advertising
From 28 May 2022 onwards, the exact price that may be used as a strikethrough price will be prescribed. Only the price that was the cheapest price in the last 30 days may then be used as the reference price for discounts. This means that artificially raising prices shortly before a discount campaign will become clearly illegal.
What is unfortunately not clarified by law, however, is the question of how long the strikethrough price may be advertised in the case of non-limited discount campaigns, because at some point the new low price eventually becomes the normal price. Advertising permanently with strikethrough prices is simply misleading. Here again, it has to be weighed up on a case-by-case basis how long such an advertising campaign may last.
Don't get caught sleeping, or it will cost you
As is usual with such legislative changes, there is no transition period at all. The changes will come into force from 28 May. Since there are potentials for easily recognizable violations when it comes to basic pricing, it can be expected that the typical warnings are already lurking.
But the good thing is that you can implement the changes to the Price Indication Ordinance in your online shop right away. After all, the changes are currently already legal. The basic price requirement for small packages is an optional requirement. So you can already change all basic prices to the large units. Even with strikethrough prices, you can't go wrong by changing early.
About the author
Sandra May has been writing for the German merchant news blog called "OnlinehändlerNews" as a legal expert since September 2018. During her studies, she specialized in the field of competition and copyright law. After completing her legal traineeship, she took the rather unorthodox plunge into journalism. She is passionate about explaining legal issues in a way that is clear and comprehensible for laypeople.