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Another French regulation for the « reference price »?
Article IT and Data Protection Competition, Retail and Consumer Law Commercial and International Contracts | 16/10/15 | 6 min. | Alexandra Berg-Moussa
By an order of 8 September 2015 concerning the French regulation imposing restrictions on announcements of price reductions, the Court of Justice of the European Union (“CJEU”) confirmed that Member States cannot generally prohibit price reduction announcements which do not indicate a reference price. Thus, a case-by-case assessment is imperative to determine the unfair or fair nature of price reduction announcements, according to the provisions of the Directive 2005/29/EC of May 11, 2005 relating to unfair commercial practices (“the Directive”).
As a reminder, the Arrêté of December 31, 2008, referred to in the CJEU’s decision, provided a mandatory indication of a reference price on announcements of price reductions, and furthermore defined restrictively the notion of reference price.
This Arrêté was recently repealed in France, following CJEU‘s decision of July 10, 2014 sanctioning Belgium for non-conformity of its announcements of price reductions’ regulation, under which there was a mandatory indication of a reference price, which was defined by Belgian law as being the lowest price applied during the month preceding the first day for which the new price is announced.
A new Arrêté suppressing the legal definition of reference price
Following this decision, the Arrêté of March 11, 2015 (“the Order”) repealed the Arrêté of December 31, 2008 and regulated less restrictively the advertising of price reductions towards consumers.
Article 2 of the Order specifies that when the announcement of a price is made in a commercial establishment, the labeling, marking or display of prices achieved must specify
(i) the reduced price announced and
(ii) the reference price determined by the announcer and on the basis of which the price reduction is announced.
Thus, the new Order had already stopped imposing to announcers to determine price reductions with an indication of a reference price defined by law, which is now being defined on a case-by-case basis by the announcers.
However, the announcer shall still, under the Order,
(i) indicate a reference price and
(ii) be able to justify the reality of reference price applied (article 4 of the Order).
Therefore, the reference price determination is more flexible than previously and the professional has a greater freedom in its practice of advertising of price reductions towards consumers, provided that this does not constitute an unfair commercial practice within the meaning of article L.120-1 of the French Consumer Code.
The CJEU’s opposition to a general prohibition of price reduction announcements which do not indicate the reference price
In the context of a claim against a major online distributor regarding the failure to indicate the reference price of items sold online at a reduced price, the French Supreme Court (Cour de cassation) has submitted a reference for preliminary ruling on the interpretation of the Directive relating to unfair commercial practices under the Arrêté of 2008 (which had not been repealed at the time the question was referred to the CJEU).
The issue was whether the Unfair Commercial Practices Directive must be interpreted as precluding provisions of national law, which impose a general prohibition of price reduction announcements which do not indicate the reference price.
In this context, the CJEU ruled that:
- Relevant French regulation focuses on the marking or display of price reduction’s announcements, which constitute commercial practices, within the meaning of Article 2, paragraph d) of the Directive and subsequently fall under the scope of application of such Directive.
- The Directive achieved a full harmonization of rules regarding unfair commercial practices against consumers. Thus, Member States cannot adopt domestic rules that are more restrictive than those set forth by the Directive. Only commercial practices included in the exhaustive list of Annex I of the Directive, among which the referred practice do not appear, are deemed to be considered as unfair in all circumstances without being the object of a case-by-case assessment.
- Within the meaning of the Directive, announcements of price reductions which do not indicate the reference price in the labeling, marking or display of prices cannot be subject to a general prohibition without being subject to a case-by-case assessment enabling to establish their unfair nature based on the criteria set out in Articles 5 to 9 of the Directive.
Therefore, national regulations cannot generally prohibit announcements of price reductions which do not indicate the reference price in the labeling, marking or display of prices.
A new French regulation to come?
Although, the French legislator had taken the initiative to repeal the Arrêté of December, 31, 2008, following the CJEU’s first decision of 2014 on the Belgian legislation, and even though more freedom is granted to professionals regarding the determination of the reference price, the new Order still provides an obligation to mark or display a reference price in relation to an announcement of a price reduction.
Yet, the CJEU’s order of September, 8, 2015 clearly establishes the non-compliance with the Directive of a general prohibition of price reduction announcements which do not indicate a reference price.
Therefore, the new Order also seems to be in contradiction with the Directive.
As a result, it seems that the French regulation needs to be modified once again.
Thus, a new text should in the future remove the obligation to display a price reference. Without going as far as taking the position of the law makers, one can imagine that the notion of price reference should not be suppressed in its entirety, but should rather be kept in a view of indicating that, if an announcer choses to announce a price reduction by using a double marking (or price strikeout) with a reference price (still freely chosen by the announcer), this display or marking ought to be fairly carried out. This would also allow the legislator to maintain the obligation for the professional to justify the reality of the reference price that the latter would use, to verify that the reduction price announcement does not constitute an unfair commercial practice.
In other words, the current obligation (indicating a reference price) would become an option, however regulated by the need to be able to demonstrate and justify the reality of the reference price used, if so, by the announcer.
Noteworthy also, even if the display of a reference price is no longer required, the announcer may always be requested, in the context of a control, to demonstrate the reality of the price decrease or reduction that he announces and the fairness of the announcement. In this respect, such demonstration will require the justification and communication of a documented reference price to the authorities.
Will the marking or display of a reference disappear in practice?
This order of the CJEU contributes to the liberalization of the regulations of promotional practices, but in practice, will this order and the potential new text that will come out of it regarding announcements of price reduction towards consumers lead to real upheavals for the announcers?
Raising this issue appears legitimate. Indeed, in terms of marketing and communication, isn’t an announcement of a price reduction always more attractive and efficient when displaying a “starting” price from which the reduction applies (i.e. a reference price), thus justifying the importance of the price reduction that is being granted to the consumer?
If theoretically professionals shall have more freedom to display or not a reference price, the benefit of pursuing the display of such a reference price remains in our opinion undeniable to gain the consumer’s attention on the reduction that is being granted (and announced) to it, especially in a context where consumers are constantly solicited with announcements of promotions, cut prices, exceptional price reductions, etc., more and more regularly and numerously along the year./.
Alexandra Berg-Moussa, counsel