The Omnibus Directive - what is it and how does it change your e-commerce?

Author:
Julia Łączyńska
Published:
19.1.2023
W

hy is everyone suddenly talking about prices and promotions? Why are people on the internet flipping through screenshots of shops with a higher price on promotion than before? It's all thanks to the EU's Omnibus Directive, the biggest trade regulation since the introduction of RODO.

What the Omnibus Directive is all about

The Enforcement and Modernisation Directive, more widely known as the Omnibus Directive, is a regulation concerning the protection of consumer rights in European Union member states. The document entered into force on 7 January 2020 and has been successively implemented in EU countries since then. It has also been in force in Poland since 1 January 2023. 

What the directive means for customers and retailers

The Omnibus introduces changes to 4 existing directives on consumer rights: misleading advertising, unfair terms in consumer contracts, personal data, and information on product prices. The most important changes that the regulation introduces to the Polish market include:

1. Obligation to inform about the price of the product before the promotion

From 1 January 2023, retailers are obliged to include information next to promotional products on what the lowest price of the item or service was in the last 30 days before the discount. The regulation applies to all online and offline promotional materials, i.e. product pages, banners, advertisements, posters, etc. This practice ensures that consumers are protected against unfair practices like false overpricing.

2. Verification of product review authors

For many customers, social proof is an important factor in their purchasing decisions, and there's no better recommendation than positive feedback from other users. The only problem is that it's not always clear whether the author of the review has actually tested the product or is just a marketer or employee paid by the company. The Omnibus Directive is supposed to put an end to such doubts, as from now on retailers are obliged to include information on whether the author of the review is a verified user who purchased the product.

3. Information on whether a third party is an entrepreneur

Many e-commerce platforms, like Allegro or eBay, allow us to buy products from traders, but also private sellers. In this case, the service is obliged to inform its customers whether the seller is a trader or not, as private individuals are not covered by consumer protection regulations.  

Lowest price information in practice

The necessity to inform about the price before a reduction is the most widely commented on in the media and requires specific solutions, so we’ll look at it in a little more detail. The main purpose of this regulation is to protect customers from practices such as deliberate overpricing just before a promotion or 'perpetual promotions', in which the price of a product is always marked as promotional even though the item has never actually been available at the regular price. 

Omnibus Directive in practice

When the seller is not obliged to inform about the lowest price in the last 30 days?

Regular prices

The Omnibus Directive forces sellers to provide information on the lowest price of a product in the last 30 days only in the case of a promotional offer, i.e. when the old higher price and the new lower price are displayed on the product page. A shop doesn't have to provide this information when only the regular price is shown on the page, even if this price has changed recently.

Promotions like 2+1, 3 for the price of 2, etc.

Promotions where the customer gets a better offer when they buy two products from a collection or when buying 2 products they get the third one free also do not need to be informed about the lowest price in the last 30 days. This is because, on the product page, the customer only sees the regular price for the item, while the lower price is changed in the shopping cart when a certain condition is met. 

Promotions using discount codes

As in the previous case, the regular price is shown on the product page and the discount is only added in the cart when the code is entered. In this way, the promotional price is not displayed at the moment the customer decides to buy a product and there is no need to report the lowest price of the 30-day period.

"Although the Omnibus Directive looks straightforward, in practice it leaves a lot of uncertainty, which is a source for diverging legal interpretations. The market is still adapting to the new standards, but agencies and e-commerce platforms are doing their best to offer shops efficient solutions. In the case of our clients, we have relied on an automated process to update prices visible to customers. We use a custom module that collects archive price information for all client segments and product variants in the catalogue and then displays the lowest price from 30 days before the promotion. This allows us to save time and avoid errors."
Paula Wasiluk, IT Project Manager at Strix

The biggest challenges for online shops

Unclear content of the document

One of the biggest barriers to implementing the Omnibus Directive is the content of the document itself, which leaves several ambiguities. According to the regulation, the lowest price of a product within 30 days should be posted at the point where the consumer makes a purchase decision. As any experienced retailer knows, it is impossible to clearly assess when such a moment occurs. Most shops assume that this place is the product page, but equally, the purchase decision can be made at the listing or during the checkout (the problem of abandoned cats shows how many customers make their final choice right then). In the context of e-commerce, it is also questionable whether it is necessary to include the initial price on the product carousel, wish list, and other places where there is no available action button. 

Large database

The amount of data that needs to be taken into account is also a major challenge when posting the lowest price information. In more advanced e-commerce that uses personalisation and customer segmentation, the prices of products may be different for separate groups of users. In addition, for customisable products that have different colour versions and specifications, the price may vary from one unit to the next, so the shop needs to store price information for all variants. Large databases require additional solutions to automate the updating of price information.

How to adapt e-commerce to the Omnibus directive?

The Omnibus Directive is a very fresh topic on the market, so many solutions are still in the testing phase and need to be further developed. At our clients, we have implemented a custom module that collects archived price data for each product and automatically updates the information in case of promotions. We also use a special index that runs when prices change and daily cleans the archive data that is older than 30 days. On the frontend layer, the information will look slightly different for each shop, which is based on the assumption of at what point the customer makes a purchase decision.

Possible consequences of the Directive

Financial penalties

The main tool for enforcing the Omnibus commandments is financial penalties. According to the Polish Agency for Enterprise Development, in case of companies that fail to inform about the lowest prices before the reduction, the Inspector of the Trade Inspection will be able to impose a fine of up to PLN 20,000. If an entrepreneur fails to fulfill the new obligations at least three times within a period of 12 months, counting from the day on which a breach of these obligations was found for the first time, the Inspector will be able to impose a fine of up to PLN 40,000. 

Moreover, the companies' actions will be assessed by the President of the Office of Competition and Consumer Protection, who will be able to declare that they violate the collective interests of consumers and thus impose a penalty of up to 10 % of the turnover achieved in the year preceding the year in which the penalty is imposed. 

In addition, "the President of the OCCP may impose a fine of up to PLN 2,000,000 on a person managing an entrepreneur if that person, in the exercise of his or her function during the period of the established infringement, intentionally allowed by his or her action or omission the occurrence of practices infringing collective consumer interests." (PARP, 2022).

Image crisis

Today's consumers are aware and vigilant, watching retailers' practices and discussing them extensively on social media. No slip-up escapes their attention, and if it goes viral - it can be a serious blow to a company's reputation. The Omnibus Directive exposes the pricing policies of shops, exposing them to the watchful eye of customers who will not hesitate to comment on the unfair practice. Since the new regulations came into force, the internet has been swarming with screenshots and comments on brands that maintain or even rise prices under the guise of promotions. 

Does the Omnibus Directive only cause problems?

Every regulation requires firm action, a lot of work, and adaptation to the new reality. We all still remember the fuss that the introduction of RODO made in business, and Omnibus will also leave its mark on the trade sector. The question, however, is whether the new directive means problems alone? 

The evolution of the e-commerce market has long been discussed, also in terms of a more respectful and transparent approach to customers. In the age of open online discussions, consumers are aware of sales practices and are suspicious of companies that try to deceive or rip them off. They are looking for shops they can trust, so responsible business conduct is fundamental to building customer loyalty. Apart from the obvious inconveniences, the Omnibus Directive, in the long term, can bring many benefits to e-commerce, becoming an opportunity to rehabilitate companies in the eyes of consumers. 

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