Transposition of the Directive : reference prices in sales and changes to (digital) consumer legislation

RETAIL – As announced earlier this week by the cabinet of State Secretary for Budget and Consumer Protection Eva De Bleeker, the current seasonal sales period will be the last during which the current regulation regarding price reductions applies.

To refresh your memory: in the Belgian retail sector, announcements of price reductions, ‘sales’, ‘clearance sales’, ‘sales’ or ‘bargains’ must be handled with care. To promote competition and fair market practices between companies, these terms may only be used during the established sales periods from 3 January to 31 January and from 1 July to 31 July. In addition, in the clothing, leather goods and footwear sector, there is a restriction period during the month preceding these legally defined sales periods during which it is forbidden to announce price reductions. (Article VI.26 – 29 WER)

The old strict (formal) framework with which price reductions had to comply was abandoned as a result of European harmonisation through Directive 2005/29/EC. Price discounts and price indications may currently only not mislead the consumer.

That is precisely where the problem lies. It was found that consumers are often misled in relation to discounts. According to figures from the Economic Inspectorate[1], in 2021 an infringement was found in almost 25% of the inspections carried out with regard to the legal requirements of price indication. A conspicuous form of fraud identified is the practice whereby businesses apply a higher price indication just prior to the seasonal sales period, as a result of which the discount granted shortly afterwards during the seasonal sales period is only a partial and fictitious discount, thus misleading the consumer.

With the European Directive (EU) 2019/2161, “as regards the better enforcement and modernisation of Union consumer protection rules” (or the “Omnibus Directive”), and the proposed transposition into Belgian law, the regulation of price reductions is therefore being tightened up again. The directive had to be transposed by 28 November 2021 at the latest in order to enter into force by 28 May 2022.

From the next sales period onwards, it will therefore be compulsory to indicate a clear reference price. The reference price to be mentioned is the lowest price offered by the company during a minimum 30-day period preceding the price reduction (and therefore also the seasonal sales period), thereby increasing transparency for consumers and reducing the possibility of misleading and fraudulent practices.

The Omnibus Directive aims to introduce, in one movement, changes relating to the provision of digital services, the protection of consumer rights (specifically price indications and misleading practices) and the right of withdrawal. The Council of Ministers already approved the preliminary draft of this directive on 10 November 2021 and submitted the text to the Council of State for its opinion. According to the Omnibus Directive, the transposed regulations must enter into force on 28 May 2022 at the latest, which corresponds to the State Secretary’s ambitions to apply the reference prices one month prior to the next sales period.

In addition, the Omnibus Directive provides for a number of possibilities for the Member States to tighten up (digital) consumer legislation, which are briefly discussed below, pending the final Belgian text:

• Member States are given the possibility to punish infringements of consumer law more strictly and effectively by being able to impose (administrative) fines of up to 4% of the annual turnover of the companies in breach;
• The obligation of transparency in the provision of digital services is extended. The use of (paid) third parties to provide (false) ratings for a product or service is prohibited, and it must be ensured that consumer ratings can only come from consumers who have actually paid for the product or service. The provider must also clearly indicate whether all consumer reviews are displayed and not only the positive reviews, for example. If a product achieves a certain ranking when searching for this product online, but this ranking was obtained purely on the basis of paid advertising, this must be clearly indicated. Failure to comply with this will be qualified as a misleading commercial practice;
• Consumer law should offer similar protection to the consumer when he/she purchases a product or service in return for payment, where the product or service is offered to the consumer ‘free of charge’, but the consumer gives up valuable information relating to his/her personal data in exchange;
• The period for the right of withdrawal in the case of door-to-door sales or purchases made within the framework of an excursion organised by a company may be extended from 14 days to 30 days after the purchase;

The transposition of the Omnibus Directive will therefore have a number of implications for the way in which you want to reach consumers (digitally), whereby you will need to make the necessary changes, particularly at the start of the next sales period.

Do you have any questions about this? Do not hesitate to contact Racine’s commercial law team.