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Updated: 24th April 2023
EU Directive 98/6/EC, more commonly known as the Price Indication Directive (‘PID’), establishes common rules for consumer protection in the indication of the prices of products offered to consumers. As stated in the preamble of the Directive, consumers must be guaranteed a high level of protection, and the information on prices ought to be precise, transparent as well as unambiguous. Although consumer protection is considered to be a crucial matter in the European Union and consumer protection laws should be applied effectively throughout the EU, the actual application of the European consumer protection policy has turned out to be challenging.
The comprehensive Fitness Check of consumer and marketing law carried out by the Commission in 2016 and 2017 in the framework of the Regulatory Fitness and Performance (‘REFIT’) programme concluded that the effectiveness of EU consumer protection laws was compromised by a lack of awareness among both traders and consumers. Furthermore, the findings of various EU-wide screenings (‘sweeps’) of over 500 e-shops selling clothing, footwear, furniture, household items and electric appliances revealed that the majority of the screened websites are not in compliance with the very basic EU consumer protection rules. The sweeps focused not merely on price transparency and drip pricing (2018) but on telecommunication and other digital services (2017), delivery and right of withdrawal (2019), consumer scams related to the COVID-19 pandemic (2020), misleading sustainability claims (2020), consumer credit (2021) and online consumer reviews (2021). This legal research paper highlights issues related to price indications and price reductions, therefore we will only look into the sweep from 2018.
In 2018, an EU-wide sweep was conducted on 560 e-commerce sites by national consumer protection enforcement authorities (CPC authorities). The results were published in February 2019 and showed that around 60% of the websites were not in compliance with EU consumer rules. The main irregularities concerned how prices and special offers were presented. For over 31% of the websites offering discounts, the CPC authorities suspected that the special offers and discounted prices were not genuine. Some businesses raised their prices just before announcing a price reduction or a specific pricing campaign to make the offer seem more attractive, which can lead to confusion and potentially infringe on EU consumer protection laws.
The rise of e-commerce, especially in B2C, and the findings of the 2018 sweep and Fitness Check on consumer and marketing laws highlighted the need to update and harmonize consumer protection regulations in the EU. To address this, the EU adopted the Enforcement and Modernization Directive 2019/2161 (Omnibus Directive) on 27 November 2019. Member States were required to adopt the Directive by 28 November 2021, and the new provisions will take effect on 28 May 2022.
The Omnibus Directive, a part of the EU's Consumer legislative package, modifies four EU consumer protection directives: the Consumer Rights Directive, Price Indication Directive, Unfair Contract Terms Directive, and Unfair Commercial Practices Directive. The purpose of these changes is to standardize contract regulations in the EU, enhance consumer protection measures, impose more consistent penalties for consumer rights violations, and boost transparency in online marketplaces.
Regarding pricing, the Omnibus Directive revises the Price Indication Directive by including explicit guidelines on price reductions, particularly Article 6a. Additionally, the Omnibus Directive modifies the current Article 8 on applicable penalties. While not within the ambit of Article 6a, the Omnibus Directive also adds a new Article 6(1)(ea) to the Consumer Rights Directive, requiring traders to disclose whether the price was personalized using automated decision-making in the case of distance and off-premises contracts (known as "personalized pricing").
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The European Commission issued a Commission Notice on December 29, 2021, providing guidance on the interpretation and application of Article 6a of the Price Indication Directive. This document is currently the only official source of guidance on the matter. The main objective of the new provision is to increase transparency in the announcements of price reductions and prevent traders from inflating reference prices or misleading consumers about the amount of discount. The Article sets clear rules on the reference "prior" price on which the announced reduction must be based, making it easier for enforcement and market surveillance authorities to ensure the fairness of price reductions. This increased transparency benefits customers as well.