IP, IT & Life Sciences

Austria: Promotional bonuses – anything goes?

Following the abolishment of the Austrian prohibition of promotional bonuses, the admissibility of such sales promotion activities businesses is still confronted with certain pitfalls.

Abolishment of the per-se prohibition on promotional bonuses

Until the beginning of 2013, the Austrian Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb, UWG) in its Sec 9a contained a strict per se prohibition of announcing the intent to grant promotional bonuses to customers (Zugaben, meaning provision of free goods in addition to a main product). Following CJEU decision C-540/08, Mediaprint/Österreich, of 9 November  2010, which declared the Austrian per se prohibition (at least as with regard to B2C relationships) to be non-compliant with EU law (ie contradicting Directive (EC) 2005/29 on Unfair Commercial Practices, UCP-Directive), the Austrian Supreme Court no longer applied the provision of Sec 9a UWG to B2C cases. However, the Court still applied it in pure B2B relationships (ie in cases where businesses granted such bonuses to their commercial customers), as this relationship had not been affected by the CJEU ruling. This led to the rather strange situation in which the law treated B2B relationships more strictly than B2C relationships.

Finally, Sec 9a UWG was abolished in its entirety at the beginning of 2013. Thus, the announcement and granting of promotional bonuses is generally allowed in Austria.

Current situation

However, this does not mean that all sales promotions involving the free provision of goods are now admissible. Based on the UCP Directive, the CJEU (followed by the Austrian Supreme Court) requires an assessment on a case-by-case basis on whether the measures are to be considered as aggressive, misleading, or otherwise unfair commercial practice.

Aggressive commercial practices (Sec 1a UWG)

A commercial practice is to be considered as being aggressive if by harassment, coercion (including the use of physical force), or undue influence it significantly impairs or is likely to significantly impair the average consumer’s freedom of choice or conduct with regard to the product and thereby causes him/her or is likely to cause him/her to take a transactional decision that he/she would not have taken otherwise.

Although for customers promotional bonuses are usually a significant inducement to buy (that is what they are typically intended for), these promotional measures are usually admissible. However, they could turn out to be problematic if high value products or participation in prize draws with significantly high prizes would be offered for free together with the main product. Future court cases will show how strict this needs to be seen.

Misleading commercial practices (Sec 2 UWG)

A commercial practice may be considered to be misleading if it contains false information and is therefore untruthful or in any way, including overall presentation, deceives or is likely to deceive the average consumer, even if the information is factually correct and causes or is likely to cause him/her to take a transactional decision that he/she would not have taken otherwise. This also includes misleading omissions of relevant information.

Applied to promotional bonuses, this requires that information on the bonuses and the prerequisites for receiving such must be complete, understandable, and true in order to enable the customer to take an informed decision on whether or not to buy or even considering buying the advertised product.

Other unfair commercial practices (Sec 1 UWG)

Sec 1 UWG generally prohibits commercial practices that materially distort or are likely to materially distort economic behaviour with regard to the product on the part of the average consumer whom it reaches or to whom it is addressed. This provision aims at catching any other unfair practices that do not directly fall into the other categories described above. This provision may be applied to promotional bonuses that may be an exaggerating inducement to buy the advertised product. This could be the case with respect to particularly expensive or hardly available products or high-value prizes in prize draws (granted for free in addition to a main product). Such may induce the customers to decide on buying the advertised product for reasons that may be far removed from a rational buying decision and based only on the (prospect of) free goods.

Moreover, such sales promotions might also be problematic if they specifically aim at harming competitors or at foreclosing markets.

Bribery (Sec 10 UWG)

Announcing or granting promotional bonuses in the B2B environment (incentives) may raise concerns based on the bribery provision of Sec 10 UWG if such incentives were to be granted to the employees of business partners in order to entice them to – by way of unfair behaviour – grant benefits to the undertaking granting the bonus.

Gambling tax

Finally, Sec 58 (3) of the Austrian Gambling Act needs to be considered with respect to promotional prize draws: According to this provision, a tax amounting to 5% of the value of the prizes applies if the total value of all prizes drawn in a calendar year exceeds EUR 10,000.

After the abolishment of the Austrian law on promotional bonuses (Zugabenverbot), sales promotion activities involving free goods or prize draws require case-by-case assessment.