Czech and Slovak price reduction regulation – what is the same and what is different?

The new price reduction rules adopted to protect consumers from “fake” price reductions and price manipulation continue to be a hotly debated topic. While in the Czech Republic, the rules have been in force for almost two years, in Slovakia companies had to prepare for them as late as this July. For Czech entrepreneurs operating in both markets, the twofold legislative change may be a challenge but also an opportunity. In our article, we will reveal how legislators and regulators in the two countries apply different approach and how companies can get ready for the different rules. 

Determining the amount of the price reduction

As far as we know, the most debated issue among retailers now is how to correctly determine the (percentage) amount of the price reduction to be announced in advertisements and on price tags. Some retailers fulfil their information obligation by adding a note to the current price tags on the lowest price in the last 30 days and continue to calculate the price reduction from the price in place immediately before the price was reduced. Others, on the other hand, interpret their information obligation more strictly and determine the amount of the price reduction solely by reference to the lowest price in the last 30 days.

The Czech Trade Inspection Authority (CTIA) asserts that the amount of the reduction cannot, under any circumstances, be calculated from a price other than the lowest price at which the goods were offered and sold in the 30 days before the price was reduced.[1] Determining the amount of a price reduction by reference to the price in place immediately before the reduction is considered a violation of the Consumer Protection Act. From our experience, it is sanctioned quite severely by the CTIA. The Slovak inspection authorities (Slovak Trade Inspection) have adopted a similar approach to this issue, asserting that the prior price is the lowest price in the last 30 days before the price was reduced; the price reduction must be calculated from the prior price.[2]

The issue of determining price reductions was also addressed by the Court of Justice of the European Union (“CJEU”) in the ALDI case[3] a few days ago. The CJEU concluded that the amount of the price reduction always had to be calculated on the basis of the lowest price at which the goods were sold during the 30-day period. By its decision, the CJEU unified the approach of the national inspection authorities. Thus, it can be summarised that if the seller reduces the price, the amount of the price reduction must be calculated solely from the lowest price at which the goods were offered and sold in the last 30 days before the price was reduced.

The law does not expressly prohibit provision of other price-related information, such as the recommended retail price or the price at which the goods were offered immediately before the price was reduced. However, any additional price information must be presented in such a way as not to detract the customer’s attention from the lowest price in the last 30 days. The Czech inspection authorities are diligent in fulfilling this obligation, as evidenced by a recent decision of the Supreme Administrative Court.[4]

Long-lasting price reductions

Recently, the issue of long-lasting price reductions and their impact on consumer behaviour has been an increasingly hot topic of discussion. Although the ban on excessively long price reductions was already in force before the implementation of the Omnibus Directive,[5] the adoption of the new price reduction regulation has led to its enhanced enforcement. From our experience, when assessing compliance with the obligation to inform about the lowest price in the last 30 days, inspection authorities often seem to also focus on the duration of the price reduction offered.

Based on the approach promoted in the Czech Republic and Slovakia, the price reduction is linked to a short, specified period of time during which the seller offers the product at a reduced price. If the price was reduced for a longer period of time (for example, several months), it would no longer be a reduction in the true sense of the word, and therefore could constitute a prohibited unfair commercial practice. However, whether or not certain duration of the price reduction is reasonable is always determined by comparing it with the period during which the goods were sold at full price, or also with regard to the type of goods sold.

In Slovakia, an exception has been expressly granted in connection with the sale of the last items, which can be offered at reduced price until they are sold out. However, in this case it is the seller’s obligation to credibly demonstrate to the inspection authority that the reason for the price reduction is precisely to sell out the last pieces of the goods and that these pieces will no longer be stocked in the future. If the inspection authority agrees with the retailer’s explanation, it may take this fact into account when assessing whether certain commercial practice is unfair. In connection with the above Slovak Ministry of Economy  interpretation, we would like to add that to better justify long-lasting price reductions, retailers should clearly and transparently inform consumers that the price has been reduced for the purpose of selling off the last pieces of certain goods.

Sale of defective goods

Another exception, which is treated the same in both countries, is the exception concerning the sale of defective goods. The inspection authorities state that it would be unreasonable to require retailers informing of a price reduction due to a defect, to also state the lowest price at which the goods were sold without defect in the 30 days before the reduction. However, the Slovak Ministry adds in its guidelines that if the price of specific defective goods is subsequently reduced, the seller should indicate as the prior price the lowest price at which the specific defective goods were sold in the 30-day period prior to the subsequent price reduction.

In the Czech Republic, we have not yet encountered an interpretation similar to that of the Slovak Ministry. However, the Czech inspection authorities may be expected to adopt a similar approach.

Food sales

The price reduction announcement obligation in both countries does not apply to perishable or short-life products. However, the two jurisdictions treat this exception in a strikingly different ways. The Czech inspection authorities take a rather restrictive approach and only apply this exception to products marked with an expiry date (“use by”) and to products intended for immediate consumption, which do not have to be marked with an expiry date. However, the Czech inspection authorities no longer allow this exception for products marked with a best before date.

In contrast, the Slovak Ministry took a less restrictive approach in the guidelines and allowed the use of the exception for both perishable products and those with a best before date. The Slovak Ministry’s guidelines state that in the case of foodstuffs marked with a best before date, it is always necessary to assess individually whether the goods are perishable or subject to quick deterioration. Such goods should in particular include foodstuffs to be best consumed within 60 days. However, even foodstuffs with a best before date of over 60 days may be considered as perishable or subject to quick deterioration if they are of a type that other manufacturers commonly mark with an expiry date (e.g. butter). Again, it will be on the sellers to prove that the goods in question are indeed perishable and therefore eligible for the exception. 

Conclusion

As can be seen from the above, the Czech and Slovak inspection authorities do not always interpret the legal rules in the same way; therefore, each country may apply different rules. If the entrepreneur operates in both the Czech and Slovak markets, it is necessary to follow the interpretative practice of the relevant inspection authority in each country.