Consumer fears confirmed by Competition Council: Black Friday discounts aren’t real

Online retailers don’t follow the law during Black Friday and other discount campaigns, as their reference prices (before discounts are applied) are in many cases higher than the law states, according to an investigation by the Competition Council.

The Council found that the reference prices, the ones before the discount, are higher than the level required by the law for around 80 percent of the monitored products. According to legislation, any retailer that wants to make a discount must report it to a reference price, which should be the lowest price shown for the product in the previous 30 days.

The investigation also showed that for 29 percent of the products monitored during Black Friday 2017, the reference price was actually higher than the maximum price that had been practiced over the previous 30 days, which shows an artificial growth of the Black Friday reference price.

The data analysed by the Competition Council found a general non-compliance to legal norms related to discount campaigns. In this context, the competition mechanisms through pricing during promotional campaigns are distorted, and so is the customers’ perception regarding the real (reference) prices.

Bogdan Chiritoiu, CC president, said: “This practice of raising or artificially maintaining the reference price during promotional campaigns like Black Friday creates for consumers the impression that they are getting a much better deal. In fact, consumers end up paying a price that’s close to the one practiced outside the campaign, which can mean the retailers are breaking the law.”

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Therefore, Black Friday stands out more like a volume campaign rather than a discount one.

The main source of final price discounts is a negotiation of price reductions with suppliers, which increases the gap between large and small retailers

The online retail sector still has the characteristics of an isolated national market, as cross-border transactions are still low. The Romanian market is not mature enough (both in terms of demand and supply), but there is a potential for development and a breakdown of geographic barriers.

The share of online retail in the total retail sector has grown every year since 2012, from 1.3 percent to 5.6 percent in 2017. From 2016 to 2017 alone, online retail grew by 55 percent, up to EUR 2.8 billion. Sales made during the main promotional campaign Black Friday reached EUR 200 million in 2017, representing 7 percent of the entire year’s sales.

Although it has been growing, the share of Romanian internet users who have turned to online retailers for the purchase of goods or services was only 12 percent in 2016, which put Romania in the last place in the EU. However, there was a significant growth in 2017, from 12 to 16 percent.

As a result of the investigation, the Competition Council says that the legislation needs to be changed so as to require each online store to show information about the evolution of the reference price over the last 30 days for each product featured on the website.

Furthermore, the Council recommends that retailers provide a system for customers to check the price history, even if there is no legal obligation to do so.