CJEU Clarifies Price Reduction Rules: Key Insights for Traders and Consumers

Introduction

With Black Friday, Cyber Monday and the holiday season on the horizon, many consumers are eager to identify any price reductions to items they have had their eyes on. Traders advertise jaw-dropping price reductions with flashy and alluring advertisements which can affect the purchasing behaviour of consumers, making them believe they have struck incredible bargains and encouraging them to buy on impulse on the premise that they are availing themselves of the lowest prices of the season. Yet there are specific rules that traders must abide by when presenting price reductions to consumers. The recent judgment of the Court of Justice of the European Union (the “CJEU”) in the Aldi Süd case (Case C-330/23) (the "Aldi case") provides a definitive interpretation of the Price Indication Directive (Directive 98/6/EC as amended, “Directive”) and how traders must make their price reduction announcements.

Background

The Aldi case concerned indications of price reductions in a brochure of Aldi Süd Dienstleistungs SE & Co. OHG (‘Aldi’) for the sale of bananas and pineapples. Each item featured two price indications:

(i) the reduced price presented with a larger font and an asterisk (€1.29 for bananas and €1.49 for pineapples); and

(ii) the prior selling price presented with a strikethrough on a much smaller font (€1.69 for both bananas and pineapples).

The bananas also featured an indication of the price reduction as a percentage (-23%), whereas pineapples featured a “Price highlight” text. Each item also included a notice below the price stating: “Last selling price. Lowest price in the last 30 days: …”. For bananas this price was 1.29 and for pineapples 1.39. Aldi therefore based its price reduction percentage and claim on the prior selling price immediately before the price reduction in question and not on the lowest price in the last 30 days.

Verbraucherzentrale Baden-Württemberg eV, a Consumer’s Association in Germany brought an action against Aldi arguing that advertised price reductions should not be based on the prior selling price (i.e. €1.69) but instead calculated on the lowest price charged in the last 30 days as Aldi’s practice negatively impacted consumers’ interests and was unfair. The German court considered that the Directive was not clear as to whether the reference price for the price reduction must necessarily be the lowest price in the last 30 days and referred the case for preliminary ruling to the CJEU.

Legal framework

Article 6a(1) of the Directive provides that any announcement of a price reduction must indicate the prior price applied by the trader for a determined time period prior to the application of the price reduction. Article 6a(2), defines “prior price” as the lowest price applied by the trader during a period of time not shorter than 30 days prior to the application of the price reduction.

CJEU's ruling

The CJEU concluded that the announced price reduction must be calculated based on the "prior price” as per Article 6a(2) of the Directive, i.e. the lowest price applied by the trader in the 30 days preceding the price reduction. The CJEU noted that mentioning the "prior price" for mere information purposes, without that price constituting the actual basis for calculating that reduction would allow traders to mislead consumers through announcements of price reductions which are artificial, and which would undermine the objectives of the Directive. The CJEU’s judgment aligns with the European Commission’s communication^{^[1]} noting that the reason to use the “prior price” as a reference for any price reduction “is to prevent traders from juggling with prices and displaying fake price reductions, such as increasing the price for a short period in order to decrease it afterwards by presenting it as a (significant) price reduction that misleads consumers.”

The judgement brings much needed clarity to an ambiguous area of law clarifying the obligations of traders and the rights of consumers with respect to price reduction announcements.

The position in Cyprus

The Consumer Protection Service of Cyprus has published guidelines for traders regarding, among others, price reductions on 05/08/2024. The guidelines aim to enable traders to understand and apply the national law which transposed the Directive, namely, the Consumer Protection Law of 2021 (112(I)/2021). Traders are required to indicate the price reductions in a clear and transparent manner and refrain from artificially inflating the reference price and/or misleading consumers about the amount of the discount. The rules set out in the guidelines are fully in line with the ruling of the Aldi Case, specifically the obligation to comply with the thirty (30) days rule concerning the announcement of a price reduction.

Traders must ensure that their promotional material relating to price reductions are in line with the relevant legal obligations to avoid any legal actions against them that could lead to, among others, the imposition of administrative fines.

_{[1] ‘Guidance on the interpretation and application of Article 6a of [Directive 98/6]’ (OJ 2021 C 526, p. 130)}

Authors:

Michalis Georgiou

Senior Managing Associate

Hadjianastassiou, Ioannides LLC (member of the Deloitte Legal network)

Email: migeorgiou@deloitte.com

Theodora Petrova

Associate

Hadjianastassiou, Ioannides LLC (member of the Deloitte Legal network)

Email: tpetrova@deloitte.com

Chrystalla Karalouka

Associate