How to avoid competition law bear-traps in Black Friday promotions in the UK and EU
Published on 17th Nov 2023
As the Christmas shopping season kicks off, retailers need to be cautious about compliance on pricing as they seek to attract bargain-hunters
In part as a response to the cost-of-living crisis, 46% consumers spent more in the 2022 Black Friday sales as compared to 2021 (according to consumer intelligence company, Nielson) and that trend is set to continue. As inflation continues to rage, predictions are for a record Black Friday this year.
For many shoppers, the hunt for a bargain began earlier than ever, with brands and retailers increasingly running early access campaigns. The promotional period is also expected to extend for longer throughout what is becoming termed "Black November", as budget-conscious consumers take advantage of the promotions and start their Christmas shopping early.
Retailers, and online retailers in particular, will inevitably treat this time as a prime opportunity to boost sales volumes which have otherwise been in decline across the retail sector.
Amid the shopping frenzy, brands and suppliers are understandably keen to ensure that their products remain well positioned. While for some this means encouraging and incentivising retailers to drive volumes during this period, others will be concerned to protect their brand image and instinctively oppose their reputation for premium quality being jeopardised.
For a few, the focus is on the increasing consumer emphasis on sustainability. Some brands are bucking the trend by running anti-Black Friday campaigns, resisting the promotion-fever and bolstering their sustainability credibility.
… but beware of competition law
As the battle for control over brand positioning and retail pricing intensifies, all sides should bear in mind that competition law places clear limits on the extent to which retailers’ freedom to set retail prices may be fettered.
In short, manufacturers may not impose fixed or minimum resale prices, nor can they limit the level of discount offered by retailers on particular products. Retailers may be obliged to comply with qualitative criteria that exist to protect brand image, but these cannot be used to force retailers into pricing at certain levels.
For the increasing number of brands who sell direct to consumer, healthy caution is needed to avoid any unlawful co-ordination of pricing and promotions with their independent reseller channel.
Online sale specifics
Retailers must remain free at all times to sell online, with limited exceptions, and EU consumers must be able to shop online across the EU without digital barriers.
The Geo-blocking Regulation prevents retailers selling within the EU from discriminating against a customer based on their nationality, place of residence or place of establishment in the EU. Cross-border retailers in the EU must therefore carefully consider their pricing policies, as they will not be permitted to block or reroute consumers within the EU seeking the best Black Friday deals across different channels.
Luxury and high-tech brands operating selective distribution systems can impose minimum quality criteria on online reselling to protecting the brands' quality and luxury aura.
Some brands may also opt to apply higher supply prices for products resold online, reflecting the additional investments made in the consumer journey by bricks and mortar retailers.
Algorithms, artificial intelligence and other digitals tools can be game-changing for monitoring reseller and competitor pricing. But thought must be given to how these tools interact with competitor price-setting, to avoid inadvertent price-coordination, and to ensure the outputs are used only for legitimate purposes within the business, and not as a means to identify and unlawfully penalise discounters.
Osborne Clarke comment
Given the severe penalties that exist for breaching competition law (in the worst case fines of up to 10% of worldwide turnover and personal liability in certain jurisdictions), brands and retailers are advised to speak to a competition law expert if they have any concerns about retail pricing, particularly in the context of online sales.