OMNIBUS DIRECTIVE – IS THERE A REASON TO BE AFRAID?

One of the amendments entered with the package of legal documents, called the short Omnibus Directive, is aimed to ensure that consumers are not misled by price reductions. It is about promotions that in practice might not be a fair bargain at all. Why was such a change in the law necessary? The study by the Consumer Protection Cooperation Network (in 2018) showed, that more than 31% of e-commerce sites introduced irregularities in how prices and special offers were presented. Thus, EU authorities had to modernize the regulations of consumer protection laws. As a result, it should increase transparency when a price reduction is announced.

How does it work? EU member states were obliged to implement (among other changes) new Article 6a of the Price Indication Directive by the 28th of May 2023. The record focuses on the transparency of price reduction announcements. It says each company that announces a promotion or a sale has to provide, in addition to the current price, also the lowest price of the given products from the last 30 days. In other words, the ‘prior price’ is the lowest price of a product during a period of no less than 30 days before applying a price reduction (with an exception to FMCG products that might be different in each EU state).?

As Marek Ma?achowski, CEO of PricePanorama believes, “Article 6a equalized access to information between retailers and consumers. Retailers, using tools such as PricePanorama, have been aware of what the actual price trends on the market look like for a long time. While consumers are able to make a cursory assessment (whether something is cheaper/more expensive than a month ago) easily only now”.?

The head of PricePanorama explains that it does not mean that beforehand consumers were not aware of the price differences at all. “They were used to searching data about products anyway. For instance, by checking prices on comparison websites, taking down similar products in different e-stores, or even hunting for them abroad. Now they just don't have to search so much because they have a piece of helpful information in one place. In the case of designing an efficient pricing policy, it sets the bar for retailers even higher. Therefore, professionals need reliable data more than ahead of time when Article 6a had been implemented”.?

UE member States implemented the Omnibus Directive at different schedules, some with delays. Germany and France fit in the required date of May 28, 2023. In Sweden, the Directive became applicable on September 1st, 2022, as in Finland – on January 1st, 2023. The first day of January was also the date that regulations were adopted in Poland.?

How has the implementation gone in the earliest adopters? As Felix Hoffman, co-founder at 7Learnings –? pricing software for retailers – observes, quite reluctantly. “In Germany, it was not that fast at all. I think, right now, still many retailers are not compliant”, he says.?

As he noticed, one of the main issues, were… technical problems. Many shop front-ends could not display an unlimited amount of prices, as well as calculations in the backend turned out to be difficult. Sellers also seem to be lost in the new regulations. “As an effect, more retailers don't show any discounts anymore as they are afraid that it might not be in line with the new law. And this affects their business”.

“Assuredly, discounts are retail’s most commonly used pricing strategies to elevate profits and revenue. To explain more, optimized discounts can help reduce inventory while optimizing return on investment. (...) As inflation and economic downturn continue to make the headlines worldwide, global to local businesses are walking a tightrope between lowering prices and cutting costs. The best price can become a selling point for potential customers at the decisive moment. Given the current global economic slowdown, discounts are more popular than ever and are considered an essential instrument for increasing sales. With the new directive coming into effect, this process seems even more challenging”.

Felix Hoffman, co-founder at 7Learnings

How to cope with this? As Felix Hoffmann says, one needs to automate more to cover the increased complexity. This is where the role of companies specializing in professional pricing support begins.

“From the perspective of a professional market and price monitoring company, Omnibus Directive didn't change much. Sellers who use data from PricePanorama have insight into the prices offered by competitors day by day. They have been doing advanced analyzes even for periods longer than 30 days. For them, this is not any new information affecting price management. However, it can have a significant impact on marketing”.

Marek Ma?achowski, CEO of PricePanorama

As Marek Ma?achowski explains, introducing this amendment at a time when inflation is extremely high, and might be still growing, can make the consumer believe that prices are also – only going up. Thus, building a transparent, wise pricing policy is so important to maintain a long-term relationship with the client.?

Do you want to know more about reliable pricing data from PricePanorama?

Feel free to contact us!?