Germany’s legislators have finally repealed the Rabattsgesetzt and Zugabeverordnung. But will it now be plain sailing for promotion marketing in Germany? Marcus Sacré of Osborne Clarke Cologne surveys the new legal landscape.
Topic: Promotion Marketing
Abolition of Regulation Concerning Complementary Extras (Zugabeverordnung) and Act Concerning Price Discounts (Rabattgesetz)
For years promoters operating in Germany have had to observe the strict provisions of the Rabattgesetz and Zugabeverordnung. In practice, both laws have played a major role in the sales promotion sector, hence the topic has been very much discussed by the various interest groups in the recent past.
Simultaneously, both laws have frequently been misunderstood or misrepresented. The Rabattgesetz did not forbid price discounts per se but merely prohibited comparisons of normal prices with "discount prices" for products of day-to-day use sold to end consumers. A car dealer could therefore deviate from the manufacturer's recommended retail price, for example, but not claim that his own sales price was a deviation from the normal price. The aim of the act was to prevent customers from being tempted too strongly by the amount of a granted discount. This did not include discounts of 3% for instant cash payment. The Zugabeverordnung had similar aims. This law was to curb the exaggerated promotional effect of complementary extras or free gifts. For example, to prevent consumers from buying bicycles just because they would get a free kilo of coffee or crate of beer into the bargain. Even small gifts like cloth bags for supermarket shopping were judged to be inadmissible complementary extras. In practice, the difficulty was always to distinguish between main purchase plus complementary extra and combined purchase packages. For example, the Federal Court of Justice did not see a side of pork added to a freezer purchase as a complementary extra but judged the two to be parts of a combined purchase package that was therefore admissible.
What will change:
The Zugabeverordnung of 9/3/32 and the Rabattgesetz of 25/9/93 have been abolished, but it will be interesting to see how the remaining provisions of German competition legislation – the strictest in Europe – will still prevent such discounts and complementary extras in future, even after the abolition of these two acts. For example, exaggerated promotional measures are also prohibited under s. 1 of the Act against Unfair Competition (UWG). However we can expect the criteria for violations to be lowered in order to comply with the lawmakers' intentions expressed by the abolition of the Zugabeverordnung and Rabattgesetz.
With regard to the Zugabeverordnung the key question will be whether EU anti-trust legislation will replace the act at least in some cases. The Zugabeverordnung ruled, for example, that it was inadmissible to combine car purchases with free replacement of wearing parts for a term of three years, say, because the courts saw this replacement (oil, windscreen wipers, filters, brake linings, etc.) as an inadmissible complementary extra. As such, however, complementary extras tie the customer to an after-sales market, for example the car spares market, and this may constitute an inadmissible customer loyalty scheme according to art. 81 (1) (e) of the EC Treaty. This provision renders it inadmissible to make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. In Germany first lawsuits are already pending where such customer loyalty schemes are no longer being examined according to the German Zugabeverordnung but rather under this EC anti-trust law. This could mean that European anti-trust law will at least partly replace the German Zugabeverordnung. The fierce discussion on the abolition of the law would then have been superfluous – at least regarding such customer loyalty schemes.
Timetable: the two laws were abolished with effect from 15 August 2001
What happens next:
The future is unclear, but promoters should not assume that it is yet the end of all major problems for promotion marketing in Germany!
Contributor: Marcus Sacré of Osborne Clarke, Cologne, firstname.lastname@example.org