Since 1 January 2023, new rules apply in the Netherlands regarding announcements of price reductions. These rules are to designed to protect consumers from being misled by marketing tricks that make price reductions appear more generous than they are. Despite being in force for over two years, many retailers still seem to misunderstand - or simply misapply - the rules. The rules originate from a European directive (the “Price Indication Directive”), which the Netherlands has implemented through various measures, including the Price Indication Decree (Besluit Prijsaanduiding).
What is required when announcing a price reduction?
The Price Indication Directive applies to all public announcements of price reductions. These announcements can take the form of a percentage (e.g. “20% off”) or the display of a new (lower) price alongside a previous (higher) price (e.g. “now € 10, previously € 20”) or a combination thereof.
When a seller announces such price reduction, they are required to indicate, in addition to the new sale price, the lowest price they applied during the 30-day period preceding the price reduction (the “reference price”). This prevents sellers from artificially inflating prices in advance and falsely claiming a price reduction when this price reduction is actually not existent. Sellers are not required to explicitly label this as the “reference price”. However, if a seller wants to advertise a price reduction, it must be done in a proper and transparent manner.
The reference price must be displayed at the point of sale, meaning on price tags in physical stores or in the price sections of online shop interfaces. If the price reduction is announced via general communication (e.g. a physical banner or online message), the reference price does not need to be included in that general statement.
Exceptions to the reference price 30-day rule
Perishable and short-shelf-life products
The Price Indication Directive introduces an optional differentiated regime with regards to the reference price for perishable and short-shelf-life products. Member States may introduce exceptions to the 30-day rule for perishable and short-shelf-life products, such as bananas and pineapples. Germany, where the above case occurred, allows such an exception when a price reduction is due to the impending expiration of the product’s shelf life (e.g. selling fresh rolls at a 50% price reduction just before closing), provided this is clearly communicated to the consumer.
The Dutch exception is broader: for certain categories of perishable products[1] (e.g. fresh fruit, flowers, meat, and bread), there is no obligation to refer to the lowest price in the previous 30 days. Instead, the seller may use the price that was applied immediately prior to the reduction.
New arrivals goods
The 30-day rule does further not apply to new arrivals - that is, products which the seller has been selling for less than 30 days prior to the price reduction. In these cases, it is permitted to use a shorter reference period for establishing the “prior” price.
This exception only applies to genuinely new products being sold for the first time by the seller. It does not apply to seasonal or returning stock (e.g. a coat reappearing in winter after being out of stock in summer). In those cases, sellers may use a longer historical reference period, as long as the product was offered for at least 30 days in total and the “was” price reflects the lowest price charged during that full period.
Progressive price reductions
Lastly, the 30-day reference price rule does not apply in the case of progressive price reductions, such as a promotional campaign where a product is discounted by 10% in week one, 20% in week two, and eventually 50% by week five.
If the price reduction increases continuously and without interruption during a single, ongoing sales campaign, the trader is permitted to use the initial reference price (i.e. the lowest price in the 30 days prior to the first price reduction) as the “prior” price throughout the entire campaign. This flexibility is allowed for a maximum period of three months.
However, this exception applies only to uninterrupted campaigns. If there are gaps, resets, or increases in the reference price between promotions (e.g. separate one-day discounts like “Black Friday” or “Cyber Monday”), then each new reduction must follow the general rule: the reference price must be the lowest price applied during the preceding 30 days, including any earlier promotional prices.
In short: the progressive price reduction rule works like a down escalator. Once you start descending, you can keep going, but you can’t pause, step back up, or switch staircases mid-ride.
Recommended retail price
Finally, it is important not to confuse the reference price with the recommended retail price (“RRP”). An RRP reflects the price the manufacturer believes consumers are willing to pay. Legally, manufacturers cannot require retailers to adhere to this RRP. The product may be sold for more or less than the RRP. RRPs may be shown alongside the reference price and sales price, but the RRP may not be crossed out if it was never actually charged, nor may a price reduction percentage be displayed based on it.
Penalties for non-compliance
The Directive requires that sanctions imposed by Member States be effective, proportionate, and dissuasive. In the Netherlands, one important sanction is the possibility to impose fines of EUR 900.000, or, if higher 10% of the offender’s annual turnover. In addition to fines, consumers can bring collective redress actions for compensation in cases of violations of the Price Indication Decree. Lastly, the Dutch Authority for Consumers and Markets can publicly name and shame offenders by publishing imposed sanctions.
