Select Committee on European Scrutiny Seventh Report


SALES PROMOTION


(22759)
12614/01
COM(01) 546

(a)
Commission Communication on sales promotion in the internal market.

(b)
Draft Regulation on sales promotion in the internal market.


Legal base: Article 95 (1) EC; co-decision; qualified majority voting
Document originated: 2 October 2001
Forwarded to the Council: 5 October 2001
Deposited in Parliament: 18 October 2001
Department: Trade and Industry
Basis of consideration: EM of 1 November 2001
Previous Committee Report: None; but see (17226) 7595/96: HC 51-xxiii (1995-96), paragraph 10 (26 June 1996)
To be discussed in Council: No date known
Committee's assessment: Legally and politically important
Committee's decision: Cleared

Background

12.1  In l996 a survey conducted by the Commission resulted in a Green Paper on Commercial Communications.[53] This concluded that outmoded and differing national legislation created legal uncertainty for companies and was a barrier to sales promotion within the EU. The Green Paper was followed two years later by a Commission Communication[54] which identified sales promotion as a priority area for Community legislative action. Both the present Communication and the draft Regulation arise from the previous surveys.

The Communication

12.2  The document identifies eight forms of sales promotion:

      "(i)simple price reductions;

      (ii)quantity discounts;

      (iii)coupons and vouchers;

      (iv)free gifts, i.e. gifts offered unconditional on sale;

      (v)premiums considered to be offers other than discounts which are provided to the consumer once the latter has ordered or bought the promoted product or service;

      (vi)promotional contests involving questions to consumers, the answer to which require certain skills;

      (vii)promotional games where the winner is designated by chance and where no payment is required to participate; and

      (viii)promotional games where the winner is designated by chance and where no payment nor obligation to buy is required to participate."

    It looks at the reasons for differences in treatment between Member States, which reflect their policies on consumer protection and protection against unfair competition.

12.3  Under the heading, 'necessity for community action', the Communication lists the types of services likely to be affected by differing rules in Member States. These include advertising agencies, media such as the radio and press, media sales services, direct marketing operations, retail services and customer relations services.

12.4  Numerous examples of difficulties are given. One concerns loyalty cards: new-entrant retailers who wish to operate a marketing strategy based on loyalty cards are prevented from doing so in some Member States. Similarly, small and medium-sized enterprises which wish to enter a market by offering "two for the price of one" promotions or by direct marketing of premium offers are sometimes unable to do so.

12.5  According to the Commission, issues to be addressed include:

    —the protection of children and minors, e.g. some Member States prohibit direct marketing aimed at children or free alcohol drinks aimed at the same group;

    —the information required for discount sales; retailers need clarity as do consumers so that they can better compare products and services;

    —provisions relating to discounts, premium promotional contests and games need to be open and transparent; and

    —non-legal/judicial measures are also required in order effectively to protect consumers without hampering sales promotion.

The Regulation

12.6  Article 3 of the draft Regulation provides that Member States shall not impose:

      —a general prohibition on the use or commercial communication of a sales promotion unless required by Community law;

      —a limitation on the value of a sales promotion except for discounts on books;

      —a prohibition on discounts preceding seasonal sales; or

      —a requirement to obtain prior authorisation, or any requirement having equivalent effect, for the use or commercial communication of a sales promotion.

    It also prevents them imposing restrictions on the provision of services or free movement of goods on the grounds of the use of sales promotions.

12.7  Article 4 requires promoters to make certain information on the promotion available to clients on request. Article 5 makes provision in respect of the protection of children and adolescents. Article 6 provides for redress by promoters in case of complaint, and is intended to facilitate cross-border redress.

The Government's view

12.8  In her Explanatory Memorandum the Parliamentary Under-Secretary of State for Competition, Consumers and Markets at the Department of Trade and Industry (Miss Melanie Johnson) says:

    "The Government considers that it is in the UK's interest to support measures taken by the Commission to remove barriers to the free movement of services, including commercial communication services, in the European Union. These are consistent with UK policy in this area. The prohibition of restrictions on the use of sales promotion in the EU will enable UK companies to market their goods and services more widely and more efficiently in the EU. Consumer choice and competition will increase as more EU markets make use of sales promotion, and UK suppliers and consumers will benefit from improved access to those markets."

Conclusion

12.9  We agree with the Government that harmonised sales promotion rules will promote a more open Internal Market which will benefit UK companies and consumers. We note that the draft Regulation contains provisions on the protection of minors. We clear the document.



53  (17226) 7595/96; see headnote to this paragraph. Commercial Communications are any form of communication designed to promote, directly or indirectly, the goods, services or image of a company, organisation or person pursuing a commercial or craft activity or exercising a regulated profession - in short advertising, marketing, sponsorship and sales promotion. Back

54  (18995) 6842/98; see HC 155-xxvi (1997-98), paragraph 20 (29 April 1998). Back


 
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