Thoughts on the consumer law proposal on price reductions
By SHOSHANA RABINOWITZShekel money bills(photo credit: REUTERS)
Israelis love sales. This might be the reason why retailers offer their goods and services almost all year round as special offers, end-of-season sales, reductions and other sales, trying to convince the consumer to pay less and get more.But are these really sales? What do these reductions include? Was there a regular price prior to the sale? A proposed amendment to the Consumer Protection Law, initiated by the Authority of Consumer Protection and Fair Trade, looks to put some order in this field. The amendment sets clear rules as to how long a product needs to be sold at its regular price prior to being offered on sale and limits the period of the sale.Although clarity in sales and reduction practices is needed, the proposal raises questions and difficulties:1. A product must be offered at its regular price for at least 30 days prior to any sale. During this period the retailer may change the price of the product but is not allowed to call it a “sale.”It is logic and fair that the regular price must be real. However, a period of 30 days will make it difficult for businesses to react swiftly to consumer behavior in a competitive market. The amendment will influence marketing strategies, economic planning and limit the freedom of management.Moreover, despite the fact that the proposal allows for changing of the price during the 30-day period, this is mostly unfeasible. Firstly, Israeli law is extremely strict on marking of prices and the general rule is that each product must bear a price ticket. Special offers however enjoy some liberty, in that it is allowed to announce the reduced price on a sign near the products in question. Thus, if the change in price is not allowed to be regarded as a sale, that means that the price change needs to be marked on each and every product. Thus, shop owners will think twice before they change prices.Second, the prohibition to call such price change a “sale” complicates the marketing strategy of the business. Each advert which might hint at a reduction of price will be regarded as announcing a sale and thus against the law. It thus seems that, despite the intention of the legislator to allow the business some discretion, there will be no incentive to lower prices during the 30-day non-sale period. This is of course not in favor of the consumer.2. Once a product may be offered on sale, the sale may last for 45 days only and in any case, during one calendar year, the maximum period during which a product is on sale may not be longer than the period it was offered at its regular price. During the 45 days the sale may be changed, halted and renewed, however all these changes are counted within the 45-day period. After the sale period, the product must be offered again at its regular price for at least 30 days.These rules are too strict. Retailers will have to plan their special offers long in advance, without the ability to maneuver. The retail market is dynamic and calls for a quick response to consumer behavior. Businesses need to have the liberty to change prices in case a product doesn’t sell as expected. The amendment will limit this liberty.3. Sales of seasonal products (defined as products which are sold for up to three months or of which 80% of yearly sales occur within three consecutive months) are not limited to a specific number of days, as long as they do not exceed the period during which the product was offered at its regular price.Retailers will have difficulty acting upon this rule. For example: a business orders Purim costumes which arrive late at the shop and therefore go on display only one month before Purim. The business owner’s intention is to sell them as soon as possible and at a competitive price. However, to be allowed to sell the costumes at a reduced price prior to Purim, they must be offered at their regular price for at least two weeks, during which competitors will already be selling similar merchandise at much more attractive prices.And what if due to a mild winter, coats are not being sold? Unexpected incidents can change sales strategies. However, the new rules make marketing flexibility extremely difficult.4. Infringement of the new rules carries an administrative fine of NIS 45,000, whereas other rules regarding sales are subject to a fine of NIS 22,000.Furthermore, the proposed amendment does not give a definite solution to special sales such as total clearances, end-of-day or weekend sales. Instead it allows for special regulations on these issues down the line.It seems therefore that, in spite of the necessity to organize the conduct of sales, the current proposal is not practical as of yet. In order to enable retailers to manage and plan their business properly it is proposed that the period during which the product is offered at its regular price between sales might be shorter than 30 days, that short-time sales (end-of-day and weekend sales) be exempted and that sales of seasonal products be facilitated.The writer served as director of the Legal Department of the Federation of Israeli Chambers of Commerce and is currently heading her own law practice specializing in consumer law.
Related Tagseconomy of israelisrael economy
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