False promotions: we explain to you what the “recommended retail prices” are, ubiquitous in our stores
2023-05-31 17:30:00
Question from Leah
I never understand what a “recommended” price is…traders can do whatever they want?
Hello Lea,
This Wednesday, May 31, the consumer defense association UFC-Que Choisir filed a complaint against 8 online sales sites, including the most famous Amazon and Cdiscount. They are accused of “deceptive marketing practices”. Their wrong? Abusing certain tools, in particular the “recommended retail price”, PVC in commercial languageto give the impression of false promotions.
But you are right to ask the question, what is this recommended retail price and do traders have the right not to follow it?
It’s what ?
In Europe, unlike the United States for example, manufacturers and other companies do not have the right to set the resale price of their product themselves.
It is considered that price fixing would harm the freedom of competition, and could be considered as an agreement within the meaning of Article L.420-1 of the Commercial Code or as an abuse of a dominant position within the meaning of article L.420-2.
On the other hand, companies have the right to recommend a resale price for the distributor: it is PVC, which we were talking about earlier. Concretely, if we take the example of a box of tissues, the company that manufactures the product will record its production costs, its margin, and that of the distributor, to give a recommended resale price.
But if the distributor, that is to say the store, wants to modify the price, he has every right to do so. He can sell it for more, to increase its margin and cover its costs. This is often the case, for example, in city center supermarkets, where the charges and delivery of products are more expensive than for a hypermarket. Otherwise, the company can sell cheaper than PVC, to create a loss leader.
PVC changes over time
Moreover, as pointed out UFC-What to choose, the recommended price of a product may vary over time. This may be due to inflation, which causes prices to vary: this is often the case for food products, or for everyday products.
But if we take computers for example, the recommended price will drop over time, because the technology used will be more and more obsolete compared to new products. This is also the case for clothes, since the recommended price will go down or up depending on fashion.
A promotion compared to a PVC therefore makes little sensesince its variation is constant and is possible from one day to another: this is what UFC-Que Choisir denounces.
Some concrete examples
In 2018, Intermarché launched a new range of products called “The producers say THANK YOU!”, with the promise of better remuneration for them. A boosted remuneration perhaps, but which is calculated in relation to a PVC, written on the product label, with the words “maximum recommended price”.
Except that this mention has no valuesince legally, it is the price on the shelf that is law: the supermarket that will sell the product at the end of the chain remains free to set a different price, which may well be higher than that written on the product.
The proof is with this liquid honey, which displays a maximum recommended price of €5.40, which is actually sold at €5.67.
This honey has a “maximum recommended price” listed on the label of €5.40, which the store did not take into account.Screenshot – Intermarche.com DR.
Another example, with the price of the latest Zelda game, which has already sold more than 10 million copies at a price of €70… but that’s in theory, since there too, it’s a PVC. In reality, each distributor what he wants, and video games are very regularly used as a loss leaderwhether for supermarkets or for online sales sites.
Thus, in France, the prices charged by retail giants such as Carrefour and Leclerc, or by Amazon, were rather between €50 and €60 per unit, by trimming as much as possible on their margins respective. They hope to make up for this lost margin on the simultaneous purchase of other products. This is done to the detriment of specialized brands, forced to sell the product as close as possible to PVC, to maintain their margin.
To help you when shopping for PVC, price comparison sites are bornas an ideal or The Unearther.