Promotional discounts can give rise to unfair predatory competition and infringe competition law. The Landgericht Frankfurt (Regional Court of Frankfurt) prohibited a promotional discount from the provider of a taxi app for this very reason.
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: For many businesses and service providers, advertising is an important means of informing consumers and convincing them to use their products and services. One popular form of advertising is price reductions. However, not all promotional discounts are legal. For instance, the Landgericht Frankfurt prohibited a broker of taxi services from offering passengers fare discounts for competitive purposes in its ruling of January 19, 2016 (Az.: 3-06 O 72/15).
Passengers were able to order a taxi from the broker using an app. The broker additionally granted its clients a special bonus, offering a promotional discount in a number of cities. Clients were granted a discount of up to 50 per cent off the statutory taxi fare in the form of credit or a voucher. The LG Frankfurt held that granting this discount represented an unfair business practice and constituted an infringement of Germany’s Personenbeförderungsgesetz (Passenger Transportation Act). The statutory price levels for taxi rides were neither allowed to be decreased nor increased. The Oberlandesgericht Köln (Higher Regional Court of Cologne) had already prohibited granting these discounts. Having said that, other courts have reached the opposite conclusion.
The inconsistent case law demonstrates that advertising with promotional discounts can be a tightrope walk for a lot businesses and service providers. Notwithstanding consumers’ delight when it comes to discounts and promotional offers, the legislature has set strict boundaries for these kinds of promotions. The idea behind this is to prevent unfair predatory competition. It is therefore always important to be mindful of the regulatory framework in cases involving promotional offers and discounts. Violations of Germany’s Gesetz gegen den unlauteren Wettbewerb (UWG) [Unfair Competition Act] can readily occur. The consequences of this can include formal written warnings, injunction suits and damages claims. Businesses can turn to lawyers who are competent in the field of competition law to fend off or enforce these types of legal actions.