Black Friday, secure your price reduction ads!
November is a busy time for all companies in the retail sector. In fact, with Black Friday just one month before Christmas, it’s the perfect opportunity to set up flagship sales campaigns with substantial promotional discounts, and to relay them through advertising messages on one or more media.
Be careful, however, to comply with the relevant regulations. The DGCCRF is particularly vigilant in these matters, and does not hesitate to penalize professionals who fail to comply with the rules in force. This is particularly true in the e-commerce sector, for which the economic administration has set up a dedicated unit – the Centre de Surveillance du Commerce Electronique – within which agents are dedicated to monitoring e-commerce activity.
Against a backdrop of recent changes in the legal regime governing price reduction advertising, as a result of European Union regulations, it is important to have a clear vision of the obligations to which professionals are subject.
What are we talking about?
A price reduction advert is an advert in which a professional informs consumers that the price being offered is lower than the price previously offered for the good concerned. Price reduction announcements thus cover sale prices, any commercial operation that lends itself to a similar understanding for the consumer, such as “Black Friday”, and more generally any announcement that suggests to the average consumer a price reduction compared with a price previously charged.
A price reduction announcement can take various forms:
- as a percentage (%), e.g. “20% off”, or as a specific amount, e.g. “EUR 10 off”;
- by indicating a new (lower) price with a reference to the (higher) price previously applied. The previous price can be presented in crossed-out form. For example, “now 50 EUR, before 100 EUR” or “50 EUR/ 100 EUR”;
- using any other promotional technique such as “buy today without paying VAT”, which tells the consumer that the price reduction is equal to the value of the VAT (not meaning that VAT is not charged);
- presenting the current price as a “starting” or similar price and indicating a higher price as the price to come.
On the other hand, a price reduction announcement should not be confused with the broader term “promotional practice” or “promotional operation”, which includes price comparisons, conditional offers, introductory prices and price reduction announcements. Thus, general marketing claims that promote the seller’s offer by comparing it with offers from other sellers, without availing of or creating the impression of a price reduction, and any technique for promoting competitive prices are not to be understood as price reduction announcements. Similarly, the mere use of the expression “low price” is not sufficient to characterize a price reduction advertisement, as long as it is not accompanied by specific signs such as crossed-out prices which suggest to consumers that there is a price reduction compared to a price previously charged.
What rules apply to price reduction advertising?
Until May 28, 2022, and the entry into force of Ordinance no. 2021-1734 of December 22, 2021, transposing the Omnibus Directive, all promotional operations – including price reduction announcements – were subject to the provisions of articles L 121-1 et seq. of the French Consumer Code concerning unfair commercial practices.
As a result, price reduction advertisements were not subject to any specific regulations. To be valid, a price reduction announcement did not have to constitute an unfair commercial practice, and more specifically a misleading commercial practice. Professionals simply had to be able to justify the reality and fairness of their advertisements. Article L 112-1-1 of the French Consumer Code now provides a specific framework for price reduction advertisements, making their validity conditional on the indication of the previous price charged by the professional prior to the application of the price reduction.
What is meant by the previous price used as the basis for a price reduction advert?
Article L 112-1-1 of the French Consumer Code defines the previous price as “the lowest price charged by the professional to all consumers over the last thirty days prior to the application of the price reduction”. When a professional announces a price reduction, they must therefore refer to the lowest price charged during the 30 days preceding the reduction.
This notion refers without saying so to the famous “reference price” applicable until the entry into force of the order of March 11, 2015 on price reduction announcements to consumers.
In a communication dated December 29, 2021, the European Commission clarifies how the previous price is to be understood. This lowest price includes “any previous reduced price during that period”. Thus, the omission of prices applied during previous promotional periods in the thirty days preceding the announcement of the price reduction would be illegal. On the other hand, retailers are not obliged to indicate the length of time during which they have applied the previous price indicated.
Moreover, this has no impact on the duration of price reduction campaigns. Traders are simply required to indicate the “previous” price at the start of each price reduction, and may keep it throughout the period of the price reduction. It is possible to announce a price reduction for goods over a longer period, including more than thirty days. In addition, when the price reduction is longer than thirty days without interruption, the “previous” price to be indicated remains the lowest price applied during at least the thirty days preceding the price reduction. Finally, in the case of general price reduction announcements, such as “today, 20% off all products”, the previous price must not be indicated on the same medium as the price reduction announcement itself.
How do I apply the previous price rule to successive price reductions?
By way of exception, article L 112-1-1 of the French Consumer Code provides that “in the event of successive price reductions during a given period, the previous price is that charged before the first price reduction”. This means that when the price reduction is progressively increased over a given period, the previous price is the lowest price charged during the last thirty days prior to the first price reduction. It is possible to maintain the same previous reference price during the same sales period, clearance sale or promotional operation, regardless of the duration of the promotional operations, provided this does not constitute an unfair practice.
What operations are excluded from the scope of Article L 112-1-1 of the French Consumer Code?
Firstly, it should be remembered that the wording of article L 112-1-1 of the French Consumer Code requires that the previous price which must accompany price reduction announcements must be the “lowest price (…) charged to all consumers”. The expression “all consumers” refers to the normal clientele with whom the professional contracts, without any special conditions being proposed. Consequently, the obligation to mention the previous price charged over the last 30 days does not apply to promotional operations reserved for a certain category of clientele, or to price reductions under loyalty programs which consumers may or may not join, or to personalized price reduction announcements, or to the beneficiaries of a discount voucher.
Similarly, two situations are expressly excluded from the scope of article L 112-1-1 of the French Consumer Code:
- Price reduction advertisements for perishable products threatened by rapid deterioration. This refers to products likely to deteriorate or expire rapidly, due to their nature or physical properties, or to put it another way, all products with a short use-by date.
- Operations whereby a professional compares the prices he advertises with those of other professionals. This is the case of price comparisons where the professional advertises a selling price in comparison with a price other than the one he has previously charged. In this case, the rules set out in article L 121-1 of the French Consumer Code apply. Such a practice is valid provided it is not unfair.
What are the penalties for non-compliance with the rules on price reduction advertising?
Failure to comply with the rules set out in article L 112-1-1 of the French Consumer Code is treated as a misleading commercial practice within the meaning of article L 121-2 of the French Consumer Code. This is punishable by two years’ imprisonment and a fine of 300,000 euros for a natural person, and 1,500,000 euros for a legal entity, under article L. 132-2 of the same code. The amount of the fine may be increased, in proportion to the benefits derived from the offence, to 10% of average annual sales, calculated on the basis of the last three annual sales known on the date of the offence, or to 50% of the expenditure incurred in carrying out the advertising or practice constituting the offence.
In short, whatever the marketing technique used, the implementation of promotional operations calls for heightened vigilance, at the risk of being heavily penalized.
Our lawyers are at your disposal to answer all your questions and advise you. Our meetings can be held in person or by videoconference. You can make an appointment directly online at www.agn-avocats.com.
AGN AVOCATS – Distribution Department
