Advertising discount pricing in Swiss retail: a closer look at compliance with the Price Indication Ordinance

Swiss retailers advertise shift to discount pricing

"How Low Can We Go?" asks a Swiss retailer provocatively on the cover of its latest magazine. The answer that follows: "As low as the discounters."

Swiss retailers are lowering prices to match discounter levels, intensifying competition for customers. Consequently, Swiss retailers are stepping up their advertising with bold promotions using terms such as "TIEFPREIS" (German for "Low Price"), "FRISCH GESENKT" ("Freshly Reduced")" or "zum Discountpreis" ("Discount price"). These assertive price claims, however, raise the question: How are such claims qualified and how can they be considered compliant with the Swiss Price Indication Ordinance (PIO)?

Key compliance requirements for advertising price reductions under the PIO

The PIO is based on the Federal Act on Unfair Competition (UCA) and establishes standards and rules to ensure that pricing is fair, transparent and comparable for consumers. The PIO generally applies when products are marketed to consumers or when advertising includes price information or discounts on goods and services aimed at consumers. The PIO regulates, for example, how retailers may compare their prices to competitor prices in advertising or how price reductions must be presented to consumers. When advertising price reductions, Art. 16 PIO is applicable.

According to the PIO, there are three possibilities for announcing a price reduction: 

1. the self-comparison where the retailer’s current price is compared with the price, which was applicable before the reduction (e.g. "now only CHF 5.95, previously CHF 9.95");
2. the introduction price comparison of the retailer’s currently valid price with the later valid price (e.g. "introductory price until 22 December: CHF 130 instead of CHF 180"); and
3. the competitor comparison where the price is compared with the competitor's price (e.g. "competitor's price CHF 90, our price only CHF 60").

In practice, price reductions are frequently communicated using phrases like "30% discount", "half-price", "CHF 20 off" or "free gift worth CHF 100". Such numerical indications of discounts are an alternative method of presenting price reductions. For example, a statement like "10% discount" is equivalent to "CHF 90 instead of CHF 100".

According to Article 17 PIO, such numerical indications are subject to the same rules as outlined in Article 16 PIO.

Legal compliance of advertising with competitive pricing

The above advertising claims "(permanent) low price" or "discount price" refer to the products being sold at a lower price level than before. Even though they do not mention actual prices, they indicate that prices are lowered. Therefore, the PIO is applicable to these advertisements of price reductions.

It is unclear how such advertising is to be qualified. For a comprehensive assessment of such claims under the PIO, the exact wording, context, type of presentation and, of course, the understanding of the average customer is relevant. A general statement is not possible. Regarding the claims mentioned above, however, the following questions could be of relevance:

• Is the price applied lower than before, and, if so, is the previous price and the reduction presented to the consumer?
• Is the lower price applied permanently or just for a short period of time (e.g. sale)?
• Is the price the lowest on the market? Is it in the lowest range on the market?

Without going into the details and evaluating the claims, these claims are likely self-comparisons or comparisons with competitors. Such advertising can be understood as stating that the actual prices are reduced compared to the previous prices (i.e. a self-comparison). They can also be understood as stating that a retailer’s own prices are the lowest on the market or as low as the competitors’ prices (i.e. comparison with competitors).

Until the end of 2024, the following rules apply to such claims:

• In the case of self-comparison, the seller must apply the higher comparison price immediately before the comparison period, for a duration that is at least twice as long as the period during which the price comparison is made. This must be for the same goods or services. The maximum duration for a self-comparison is two months.
• A comparison with competitors is lawful if the competitor's price (i.e. the comparison price) announced by the seller is actually applied by other sellers for the majority of the same product or service within the relevant market area.

If an advertisement, however, states or implies that the prices are "the lowest" on the market, the ad would be qualified as a superlative advertisement or all-position advertisement ("Superlativwerbung" or "Alleinstellungswerbung"). Insofar as the superlative advertisement/all-position advertisement contains information that is objectively verifiable, it is covered by the unfairness offence of comparative advertising and the information provided must be true (Art. 3 para. 1 lit. e UCA). Anyone claiming that their product is the cheapest/best must be able to prove this assertion.

Of course, self-comparisons and comparisons with competitors must adhere to the general rules of the UCA, which require statements to be true, accurate and not misleading (Art. 2 UCA and Art. 3 para. 1 lit. b UCA).

Rules for Self-Comparison to be liberalized as of 1 January 2025

Recently, on 30 October 2024, the Federal Council announced that the rules regulating the self-comparison will be amended as of 1 January 2025. According to the Federal Council, this amendment is aimed at lowering the administrative work for sellers.

In particular, as of 1 January 2025, sellers can decide whether they want to apply the existing rules and make short-term comparisons (as explained above) or whether they want to practice an unlimited price comparison. The unlimited price comparison will allow sellers to use a comparison price without a time limit and for all subsequent price reductions. The only restriction is the requirement that the seller has offered the goods or services at the higher (comparison) price for at least 30 consecutive days beforehand.

In addition, sellers who temporarily remove goods or services from their assortment and then offer them again will be allowed to continue publishing the last comparison price used before the removal. This is permissible provided that the comparison price applied before the removal was maintained for at least 30 consecutive days.

Whether this liberalization of the PIO will actually reduce the administrative burden on the seller remains to be seen. From a consumer perspective, however, this liberalization will likely lead to more uncertainty and confusion when it comes to price comparisons.