WRITTEN QUESTION E-3417/01

by Alexandros Alavanos (GUE/NGL) to the Commission

(21 December 2001)

Subject: Sales below cost

The Greek Parliament has introduced a law, No. 2941 of 12 September 2001, prohibiting from 1 October 2001 the sale of goods below cost, with certain exceptions. This law was passed following consultations between the representative bodies of the commercial and manufacturing sectors and was supported by all parties in the Greek Parliament without exception. Legal provisions prohibiting sales below cost have been in force for years in some Member States, such as France, with the aim of protecting consumers and competition from unfair practices.

In the light of the Commission's proposal for a regulation(1) of 2 October 2001 concerning sales promotions in the Internal Market, which allows sales below cost, will the Commission examine whether such commercial practices can be considered unfair since offers and inducements to consumers ultimately lead to continual centralisation and monopoly situations. As the Member States have introduced legislation, by general consent, to prohibit sales below cost in order to guard against monopoly situations, why has the Commission not opted to apply the subsidiarity principle?

(1) COM(2001) 546 final.

Answer given by Mr Bolkestein on behalf of the Commission

(26 February 2002)

The Commission thanks the Honourable Member for his update on the Greek legal situation in Greece concerning sales below cost. The Commission was aware of the new ban on sales below cost that was introduced in that Member State as of 1 October 2001.

The Honourable Member refers to the Commission's proposal for a regulation on sales promotions in the Internal Market(1) which proposes to lift general bans on sales below cost and replace them with strict information requirements.

The Commission recognises that, under certain circumstances, sales below cost can be used to prevent entry or incite exit in a market. Such predatory pricing is illegal under competition law in all Member States. However, sales below cost campaigns can also be pro-competitive. Product or service suppliers seeking to enter a foreign market where their brand is not known will resort to temporary loss-leading campaigns to establish a foothold. Likewise, innovative products or services competing with existing lines, often have to resort to such loss-leading campaigns to get clients or customers to try the new improved product or service.

The Commission therefore considers that such bans should be liberalised subject to strict information and transparency requirements. It wishes to ensure that loss-leading campaigns can continue to be used to stimulate competition by breaking into non-domestic existing markets or developing new product or service markets. It has therefore proposed that sales below costs should be allowed but that these should be made subject to strict information and transparency requirements that would help for more effective application of anti-trust law in this area.

The Honourable Member questions why the Commission feels obliged to harmonise this area instead of applying the principle of subsidiarity. In response the Commission wishes to point out that before proposing this Regulation, the Commission discussed these and other regulatory issues on sales promotions within the Expert Group on commercial communications made up of experts nominated by the Member States. That Expert Group recognised and made public its opinion that differing national regulations in this field would give rise to Internal Market barriers. It is the Commission's view that these differences in national laws limiting the value of discounts not only prevent companies from undertaking cross-border sales promotion campaigns but also reduce cross-border price transparency following the introduction of the Euro.

This undermines consumer confidence in cross-border trade which prevents the internal market working to the full benefit of both businesses and consumers. For these reasons the Commission believes that it is justified in proposing this harmonisation to achieve the Internal Market in this field of sales promotions.

(1) COM(2001) 546 final.