When is offering a litre of juice an unfair market practice?
On 11 February 2014 the Warsaw Regional Court issued a long-awaited ruling demonstrating the current approach of the Polish courts to the sensitive issue of how to designate promotional prices for goods.
The ruling was issued in an appeal filed by a juice producer against a decision by the President of the Office of Competition and Consumer Protection. The decision by the Polish competition regulator ordered the producer to cease and desist use of the statement “50% free” on 2-litre packages of juice and to pay a fine of over PLN 32,000. The court held that for the packaging to be properly labelled “50% free” and disclose the true benefit to the consumer, the consumer would have to be able to purchase the same product without that benefit. If that possibility does not exist, such labelling constitutes an unfair market practice.
What is or is not the same product is determined by the consumer’s perception. In this case, the producer argued in its defence that the statement “50% free” on a 2-litre carton of juice referred to the unit price of the same juice offered in a 300 ml glass bottle. The court found that this calculation was impermissible because the juice in a 2-litre carton and in a bottle of a fraction of a litre is not targeted to the same group of consumers and meets different needs. In the first instance the juice is intended for consumption by several people, typically at home, and in the second by one person on the go. The court also pointed out that the higher price of the juice (per litre) in small glass packaging than in a large carton is justified by the size and type of the packaging.
The proper determination of the reference price and specification of the time frame of the promotion are fundamental requirements for a promotional campaign to be in compliance with the law. If a producer wants to use the slogan “50% free,” it must justify the message by a fair comparison of the prices of the same product in packaging of the same or a similar size. In the example here, that would be the full price of the juice in a 2-litre or perhaps 1-litre carton. The court found that the producer in this case had not been offering juice in such packaging for several years, and a “promotion,” as the court pointed out, is a temporary campaign which has a strictly defined beginning and end.
The practice of the juice producer was held not only to be an unfair trade practice, but also to violate the collective interests of consumers. In the court’s opinion, it bore the hallmarks of an act of unfair competition, which would provide competitors grounds to seek damages for profits lost as a result of the practice.
This ruling leads to the conclusion that if it is not clear from the circumstances in which a promotional offer is introduced what price the discount refers to, it should be indicated in the promotional materials, for example by adding with an asterisk “compared to the regular suggested retail price of the product until [such and such date].” The reference price should concern the same type of product, offered in the same or similar size, and be expressed in the same currency as the reduced price.
Joanna Krakowiak, Life Science & Regulatory Practice, Wardyński & Partners