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שושנה רבינוביץ | משרד עורכי דין

Shoshana Rabinowitz | Law Office

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The end to end of season sales?

Thoughts on the consumer law proposal on price reductions
Published in the Jerusalem Post of  11.5.17

Although a revision is necessary, the current proposal is not practical as of yet as is explained in this article which appeared in The Jerusalem Post of 11.5.17.

Israeli's 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, tries 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 offering it 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 thirty days will cause businesses difficulty 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, the 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, it automatically means that the price change needs to be marked on each and every product, a cost-effective job. 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 be 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 sales 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 ahead their special offers without the ability to maneuver. The retail market is dynamic and calls for a quick response to consumer behavior. Businesses make prospects but nevertheless need to give themselves the liberty to change prices in case a product is not sold as expected. The amendment will limit this liberty.

3. Sales of seasonal products (defined as products which are sold up to three months or products of which 80% of their yearly sales are sold within three executive months) are not limited to a specific amount 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 to act upon this rule. For example: A business ordered Purim costumes which arrived late in his shop and therefore on display only one month before purim. His intention is to sell them as soon as possible and at a competitive price. However, in order to be allowed to sell the costumes at a reduced price prior to Purim, they must be offered by him at their regular price at least two weeks, during which his competitors already sell similar merchandise for a much more attractive price.

And what if due to a soft 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 impose an administrative fine of 45,000 NIS, whereas other rules regarding sales are subject to a fine of 22,000 NIS.

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 the Consumer Commissioner to issue special regulations on these issues.

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 the retailer to manage and plan its 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) are exempted and that the rules regarding seasonal products shall be facilitated.

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