‘Below-cost’ sales to face restrictions

Date: 28/03/02

By Laurence Frost

THE European Parliament is set to put the brake on plans to allow shops across the EU to sell goods at a loss during sales.

Liberal MEP Ward Beysen will table amendments aimed at restricting below-cost sales to 'exceptional circumstances' such as economic crises. The move is a blow to Frits Bolkestein, the internal market commissioner, as well as to governments backing his efforts to lift existing bans on the sales in some EU countries.

Beysen, who is drafting the Parliament's official position, has until now been seen as a key supporter of Bolkestein's overall proposals to create a level playing field for sales promotions. The planned regulation would also allow firms to sell goods below production cost during sales promotions.

But some MEPs and governments fear selling below cost allows large companies to squeeze smaller rivals out of the market by temporarily lowering prices to unsustainable levels.

Beysen's decision comes after a meeting of the Parliament's legal affairs committee earlier this month which revealed only minority support for more liberal rules.

The Belgian MEP said he would now table amendments 'that go in the direction of keeping it very exceptional', while also introducing strict time limits on below-cost sales. 'My concern is to get a majority,' he said. 'I can't find a majority for the Commission's proposal as it stands.'

The Parliament is likely to approve rules preventing companies using below-cost sales to enter new markets or simply win more customers. Instead, they would only be allowed to sell below cost if jobs were under threat or if they were struggling with high levels of overstocking.

EU member states are split over whether to allow below-cost sales.

They are outlawed in seven countries, including France, Spain, Belgium and Greece - which introduced its ban just six months ago - and allowed in the remaining eight, notably Germany, Britain, the Netherlands and Scandinavian countries. In a written reply to Greek MEP Alexandros Alavanos, Bolkestein recently said below-cost sales would boost competition by allowing firms to use 'temporary loss-leading campaigns to establish a foothold' in new markets.

But MEP Beysen dismissed the use of below-cost sales to boost market share. 'It can't be justified in terms of fair competition,' he said. 'It favours the big companies at the expense of small and medium-sized enterprises.'

The divide between EU governments promises a rough ride for Bolkestein's sales regulation in the Council of Ministers.

Bolkestein's supporters fear that consumer affairs chief David Byrne's green paper on fair trade, a parallel initiative, could be used to introduce more prescriptive rules on sales promotions and other commercial practices.

The European Parliament is set to restrict plans to allow shops across the EU to sell goods at a loss during sales.