At marketinglaw we think this particular piece of EU legislation is a good idea. On the eve of the crucial European Parliament September vote, we take a look at the DTI’s consultation paper.
Topic: Promotion marketing
Who: The Department of Trade and Industry
When: August 2002
On 2 August 2002 the Department of Trade and Industry published its consultation paper on the proposed EU Regulation "concerning sales promotion in the internal market". Comments are requested by 25 October 2002. They can be sent by email to firstname.lastname@example.org while copies of the consultation document can be obtained from the DTI website on www.dti.gov.uk/cacp/ca/consulta.htm.
As previously reported on marketinglaw, the aim of the proposed regulation is to create a harmonised, European regime for sales promotions involving offers of discounts, free gifts, premiums and promotional competitions and games. The idea is to achieve this by a combination of an overall prohibition on "general restrictions" on the use and marketing of these offers, a mutual recognition regime for cross border sales promotions and new transparency requirements, in other words rules requiring disclosure, as to various aspects of promotions.
The UK is very much in favour of the Regulation. In the 'benefits to business' section of the regulatory impact assessment forming part of the consultation document, substantial savings in respect of marketing and legal search costs are cited as two particular advantages to be derived, as well as a growth in media sales: 80% of respondents to a recent European Commission survey said they sold advertising space to users of commercial communications in other member states.
Consumers will also benefit by way of increased choice and competition as more EU markets make use of sales promotions, with lower marketing costs and a more competitive business environment likely to lead to more competitive pricing, and the consumer being able to make better-informed decisions. The transparency/disclosure provisions are also intended to give consumers greater protection so that they can be sure, for example, that discounts are real and be fully aware of the value and nature of sales promotions.
The consultation paper highlights various areas in which differences currently exist across Europe. It mentions that the UK has a far less regulatory approach to sales promotions generally compared to countries such as France, Germany, Italy, Portugal, Greece and Spain, which operate a ban on sales below cost, and Belgium, where a ban on seasonal sales exists outside certain months of the year.
Looking at particular types of sales promotion, the paper highlights the French prohibition on the resale of books at a discount greater than 5% of the retail price set by the publisher or importer. With resale price maintenance for books now banned in the UK, this means that the same book can be sold at a 50% discount in the UK, but only a 5% discount in France. When it comes to discounts preceding sales, there are no restrictions in the UK, but in Germany for example, sales are limited to 12 working days every 6 months and must start on the last Monday in January and on the last Monday in July. Such restrictions will be swept away by this new proposed regulation.
The paper also looks at the question of who will be responsible for complying with the new regulation if and when it comes into force. This obligation will rest with the 'Promoter' which is defined in the regulation as 'a user of a sales promotion, meaning a company, organisation or person by whom or on whose behalf a sales promotion is undertaken'. The paper comments that this term applies jointly to manufacturers, intermediaries and retailers. It would mean that there could be more than one entity responsible for complying with the Regulation in respect of a single sales promotion. Agencies, brand owners and retailers please take note.
Amongst the suggested disclosure requirements are some which already apply in the UK, but others which do not. One such requirement is that if a sale is below cost, an indication should be given that this is the case. Another is a requirement that the actual value of a free gift is given as well as the value of any prize as well as the actual or estimated odds of winning it. Another departure from current UK rules would be a requirement to state 'the need to obtain permission to enter from an adult or employer' and a requirement that the criteria for judging entries, the selection procedure for the awarding of prizes and, where the selection is made by jury, the composition of the jury would also be new.
Why this matters:
The paper helpfully sets out all proposed harmonising provisions contained in the Regulation. In many cases these will not mean any major changes to current UK law, but views are sought from all interested parties nevertheless. This is a hugely important EU initiative. It is evident that there are still a number of EU member states who are hotly opposed to the Regulation making its way to adoption. Marketinglaw's view is that along with the UK Government and the Governments of other EU member states who have more liberal regimes in this area, such as Ireland and the Netherlands, we should wholeheartedly support this initiative and give the DTI as much in the way of helpful comments as we can by the 25 October 2002 end date for its consultation period. The European Parliament is separately due to vote on the current form of the regulation in September 2002. Just how quickly things are likely to progress in this regard is unclear, but if the UK industry wants to make sure its voice is heard, then it should do its best to respond to the DTI's consultation paper as soon as possible.