The aim is to protect consumers from the misleading practices of sellers in the form of purposeful short-term increases in prices and their subsequent immediate reduction, which is presented as a significant discount. Currently, extensive checks on compliance with these rules are being carried out by supervisory authorities (in particular the Czech Trade Inspection Authority). Let us therefore recall the limits and pitfalls of the new discount regulation.
The new rules for the implementation of discount promotions are undoubtedly the most discussed topic in relation to the latest amendment to the Consumer Protection Act. Under Section 12a of the Consumer Protection Act, in discounted goods entrepreneurs are now obliged to indicate information on the lowest price at which the goods were sold in the last 30 days before the discount was granted. The purpose of this 30-day reference period is to prevent entrepreneurs from manipulating prices by granting false discounts, for example by purposefully increasing the price for a short period of time and then reducing it. This artificially created discount may look attractive, but in reality, it misleads consumers.
Any announcements that may give the consumer the impression of a reduction in the purchase price are considered discounts. Typically, this will include promotions such as "Black Friday", "minus 20% on everything", but also more general promotional statements such as "special offer", etc. As simple as this basic rule may look, we have encountered a number of practical problems and borderline situations that will only be finally answered by the practice of the Czech Trade Inspection Authority (CTIA) and the case law of the courts. Below we have prepared an overview of the most problematic areas that entrepreneurs have to deal with.
1. What information must be included in the price tag in the case of discounts?
In addition to the lowest price at which the goods were sold in the last 30 days before the discount was granted, the goods must (even in the case of short-term general discounts) also be marked with the final price applicable at the time of the offer, i.e., the discounted price. In practice, it may happen that the day before the discount, the seller will sell the goods at a higher price than the lowest price in the last 30 days. The seller may also indicate this higher price as an additional price reference (e.g., the recommended retail price), but must be careful not to mislead the consumer by such indication - i.e., it must not cause confusion with the lowest price in the last 30 days, otherwise such conduct may be regarded by the supervisory authorities as an unfair commercial practice, which carries a fine of up to CZK 5 million.
The purpose of the new legislation is to achieve greater transparency and consumer awareness - so if the individual price information and discounts are clearly explained to the consumer and clearly displayed, it should be a permitted price presentation. However, it is questionable to what extent the price tags are clear for consumers, as the final price after discount, the lowest price in the last 30 days, the percentage discount, the recommended price or the promotional price from the previous week are in some cases accompanied by a specific price (i.e., the price per unit). With so much information on the price tag, the consumer's willingness to analyse the final price or the advantage of a discount will be minimal.
In addition, as part of the inspections currently underway, the CTIA explicitly requires that the previous price (from which the communicated discount is calculated) is the lowest price in the last 30 days; the opposite procedure (i.e. calculation of the discount from a previous price other than the lowest price in the last 30 days) is still viewed as being contrary with Section 12a of the Consumer Protection Act.
2. Is it necessary to keep price records?
The pressure on entrepreneurs to comply with the new rules is compounded by the statutory obligation for sellers to keep records of prices of goods sold to consumers for 3 years after the prices expire. The CTIA is entitled to request the disclosure of data from such records in the event of an inspection and, in our experience, it does so.
If the seller operates an e-shop in addition to a brick-and-mortar shop, where it sells goods at different prices, it must keep records of prices in duplicate.
3. Are there any exemptions to the new discount regulation?
There are exemptions to the obligation to indicate the lowest price - the new rules do not apply, for example, to perishable or short-life goods, 2+1 free promotions and, in some cases, loyalty programmes.
- What can be classified as perishable or short-life goods?
According to the statutory exemption, sellers do not have to indicate the lowest price in the last 30 days when selling goods that are easily perishable. The Act does not define the specific types of goods to which this exemption will apply and therefore goods must be assessed on a case-by-case basis, which creates room for different interpretations/categorization of goods. However, according to the CTIA’s guidelines, this will mainly concern foods that have a limited expiry date (“use by”) or products intended for immediate consumption (e.g., dairy products, fresh bakery products, fish, etc.). In the case of non-food products, according to the CTIA, these should be products that exhibit characteristics similar to food products marked with an expiry date or intended for immediate consumption (e.g., cut flowers).
- What are the rules for discounts under loyalty programmes?
Here we distinguish between so-called “truly customised discounts”, i.e. discounts that are customised to a specific customer, either on the basis of previous purchases (voucher for the next purchase) or on the occasion of a specific event, such as registration for a loyalty programme or a birthday voucher. These discounts are not subject to the lowest price information obligation. Conversely, in the case of generally announced discount promotions, such as discount codes available to many or most customers, the seller must indicate the lowest price in the last 30 days (except for discount cards or vouchers under loyalty programmes, which entitle consumers to a price reduction on all products or on specified product lines over long continuous periods, such as six months or one year).
4. What obligations do entrepreneurs have in the event of a gradual increase of discounts?
A specific presentation method often used by entrepreneurs in practice is the gradual increase of discounts, i.e. the gradual reduction of product prices. Here, the lowest price is the price at which the goods were sold in the 30-day period prior to the first discount. This exemption to the general rule is mainly aimed at longer campaigns (however, there must not be a break in the campaign, i.e., a temporary price increase, as the lowest price in the last 30 days would then have to be indicated again). The Act does not stipulate how often the seller must discount the goods or the maximum possible duration of the discount. In our opinion, sellers should increase discounts rather in the order of days or weeks, because discounts lasting for very long periods would not in fact be discounts (in the absence of sufficient justification for their duration) and this practice could be considered unfair in the event of an inspection by the CTIA. Again, it is advisable to transparently communicate the reason for long-term discounts, such as seasonal sales, etc.
5. What are the most common mistakes entrepreneurs make when granting discounts?
Given the many variations in the presentation of prices both online and in brick-and-mortar shops, market practice is very diverse. Common mistakes are, for example, misleading presentation of prices, when more price information is indicated, but it is not immediately obvious from which price the discount is calculated and which price is the lowest in the last 30 days, or calculation of the discount from the price of goods at which the goods were never sold. In view of the ongoing nationwide inspection of sellers’ practices in the field of selling prices by the CTIA and the threat of fines, we recommend that all those affected by the new changes pay due attention to the setting of discount policy.