Prohibition on price reductions
Das Prohibition on price reductions is a central term in German competition and price law. It regulates in which cases and to what extent price discounts, especially in the form of reductions or rebates, are not permitted. The aim of the prohibition on price reductions is to ensure fair competition, prevent misleading pricing practices, and to guarantee consumer protection.
Historical development
The prohibition on price reductions arises from the need to ensure market transparency and equal opportunities among market participants. Its legal foundations go back to price maintenance systems and early market regulations, which aimed to prevent abuse through aggressive discounts. In particular, the Law on Discounts and the Free Gift Ordinance, which were in force until 2001, significantly shaped the design of the prohibition on price reductions.
Legal foundations
Statutory basis
After the repeal of the Law on Discounts and the Free Gift Ordinance in 2001, the prohibition on price reductions is now primarily governed by general competition law provisions, especially the Act Against Unfair Competition (UWG), as well as specific legal regulations. Other relevant provisions can be found, among others, in the German Medicines Advertising Act (HWG), Medicinal Products Act (AMG), Social Code (SGB V), and in price indication laws.
Relationship to rebate prohibition and price maintenance
The prohibition on price reductions is closely linked to prohibitions on rebates and price maintenance provisions. While the prohibition on rebates generally regulates the exclusion of discounts, the prohibition on price reductions, in the narrower sense, prohibits granting certain reductions on fixed prices. In the field of vertical price maintenance, for example with price-fixed books or prescription medicines, the prohibition on price reductions must be strictly applied.
Areas of application
Pharmaceutical and health law
In pharmaceutical law, the prohibition on price reductions is particularly strict. According to Section 78(3) of the Medicinal Products Act (AMG) and the Medicines Price Ordinance, the sale of prescription medicines is subject to legally mandated price maintenance. Pharmacies are thus prohibited from granting reductions or rebates on the fixed sale price. Violations can have both civil and administrative legal consequences.
Social law regulations (Sections 129 et seq. SGB V)
In the statutory health insurance law (Social Code, SGB V), there are specific regulations on reductions for pharmacies and pharmaceutical wholesalers vis-à-vis statutory health insurance funds (the so-called pharmacy discount). However, these do not regulate the relationship between pharmacies and private consumers and represent an exception to the general prohibition on price reductions.
Medicines Advertising Act (HWG)
The Medicines Advertising Act contains its own prohibitions and restrictions with regard to price reductions in advertising for pharmaceuticals and medical devices. Rebates, free gifts, and discounts may only be granted to the extent provided by law and under certain conditions to avoid influencing consumer behavior.
Price Indication Ordinance (PAngV)
The Price Indication Ordinance regulates the transparency of price information to end consumers. It requires that final prices, including all reductions, all discounts, and additional costs must be clearly and comprehensibly stated. The prohibition on price reductions serves as a benchmark for the permissibility and transparency of advertised discounts.
Functions and objectives
Consumer protection
The prohibition on price reductions contributes to protecting consumers from non-transparent or misleading offers. It is intended to prevent excessive or unfair reductions from creating false expectations or artificial price differences.
Competition regulation
By prohibiting certain price reductions, ruinous competition is prevented and the functioning of the free market is ensured. At the same time, market participants are protected from being pushed out of the market by aggressive discount strategies.
Price maintenance
Especially in regulated markets, such as the book trade or the pharmaceutical sector, the prohibition on price reductions enables the consistent enforcement of price maintenance and thus secures supply, quality of advice, and infrastructure.
Case law and enforcement
Supervision and penalties
The enforcement of the prohibition on price reductions is carried out by the competent supervisory authorities, such as market surveillance offices, competition associations, and chambers. Violations can result in warnings, cease-and-desist actions, administrative offence proceedings, or, in individual cases, criminal sanctions.
Key court decisions
The case law has clarified the prohibition on price reductions in numerous decisions, especially with regard to the permissibility of certain advertising practices, the interpretation of “hidden” price reductions, and its applicability to online sales. Fundamental rulings of the Federal Court of Justice in pharmacy law and on price-fixed products are of central importance.
Exceptions and special cases
Legal reductions
There are exceptions to the general prohibition on price reductions. For example, statutory reductions within the framework of Social Code provisions, rebates from pharmaceutical wholesalers to pharmacies, or time-limited promotional offers are permissible under certain conditions.
Vouchers and other benefits
The granting of vouchers, bonus programs, or other monetary benefits can fall under the prohibition on price reductions. Here, the specific structure determines whether an inadmissible price reduction is present. The legal situation is particularly restrictive for prescription medicines, while it can be more flexibly designed for non-price-fixed products.
International aspects
Many other European Union member states have similar rules regarding the prohibition on price reductions, especially in regulated sectors such as pharmaceuticals. European competition law and consumer protection directives set higher-level frameworks that influence national implementation.
Summary
The prohibition on price reductions is an important part of German and European price law. It protects consumers, ensures fair market conditions, and secures compliance with statutory price maintenance, especially for prescription medicines. The specific design varies depending on the market and legal basis, with numerous exceptions and special regulations in place. Various court judgments and specific legal provisions ensure that questions of interpretation and application arise in individual cases.
References
- Act Against Unfair Competition (UWG)
- Medicinal Products Act (AMG)
- Social Code Book V (SGB V)
- Price Indication Ordinance (PAngV)
- Medicines Advertising Act (HWG)
- Federal Court of Justice (BGH), relevant case law
Note: The above explanations provide a systematic presentation of the prohibition on price reductions in Germany and take into account the most important legal and practical aspects. For specific individual cases, an assessment based on the relevant legal norms is required.
Frequently asked questions
What exceptions to the prohibition on price reductions exist according to current case law?
According to Section 7 of the Medicines Advertising Act (HWG), the prohibition on price reductions generally bans special offers, discounts, or other price benefits in the sale of medicines. However, there are exceptions to this strict prohibition, some permitted by case law and some by the law itself. The most important exceptions include so-called de minimis limits, according to which minor incentives (as a rule, up to a value of 1 euro per transaction, see for example BGH, Judgment of 06.09.2012, I ZR 58/11 – “Customer Magazine for Pharmacists” and BGH, Judgment of 17.08.2017, I ZR 77/16 – “Voucher Campaign of a Pharmacist”) do not fall under the prohibition. In addition, Section 7(1) sentence 1 nos. 2-5 HWG provides for privileged exceptions such as customary ancillary services or legally regulated price reductions (for example, social discounts under statutory health insurance). Furthermore, the so-called Pharmacy Judgments of the European Court of Justice (ECJ, Judgment of 19.10.2016, C-148/15 “DocMorris”) created significant exceptions for foreign mail-order pharmacies in the EU, since national price law does not apply there; conversely, the prohibition on price reductions remains strictly in place for domestic pharmacies. It is important that each exception is interpreted restrictively; the granting of premiums, vouchers, or larger material benefits remains generally inadmissible unless they clearly fall below the de minimis limit or are expressly permitted by law.
How is the prohibition on price reductions implemented in online trade in medicines?
In the online trade of medicines, in principle, the same provisions of the prohibition on price reductions apply as in stationary trade. For pharmacies based in Germany, price maintenance for prescription medicines must be observed in particular (Section 78(1), sentence 1, Medicinal Products Act (AMG) in conjunction with the Medicine Price Ordinance – AMPreisV). Promotional discounts, vouchers, or other benefits are generally inadmissible here. This applies to both obvious and hidden discounts that are passed on to the consumer directly or indirectly. According to the latest rulings from the Federal Court of Justice (BGH) and the European courts, however, it should be noted that for foreign mail-order pharmacies based in the EU, German price maintenance regulations do not necessarily apply. Thus, these pharmacies can also grant bonuses and discounts to customers in Germany. Therefore, it requires a differentiated assessment of whether the supply actually originates from Germany. In any case, violations by German pharmacies can lead to warnings and sanctions under competition law.
What are the legal consequences of violations of the prohibition on price reductions?
Violations of the prohibition on price reductions usually constitute an administrative offence pursuant to Section 7(2) HWG and can be punished with a fine. In addition, they are regularly viewed as anti-competitive within the meaning of the Act Against Unfair Competition (UWG), meaning that competitors, associations, or consumers may warn against the granting of inadmissible price reductions and, if necessary, pursue injunctive relief (see Sections 8 et seq. UWG). The case law sees the inadmissible granting of bonuses and price reductions as particularly capable of significantly impairing competition to the detriment of competitors and consumers. In the event of court proceedings, there may be injunctive orders, claims for damages, and the obligation to assume warning and legal costs. Furthermore, it should be noted that violations may also entail regulatory consequences for the responsible pharmacist, such as professional penalties by the relevant chambers.
To what extent are customer loyalty measures such as loyalty points systems or bonus cards compatible with the prohibition on price reductions?
Loyalty points systems or bonus cards are regularly viewed critically in the context of the prohibition on price reductions. If there is a direct connection between the purchase of prescription medicines and the granting of a monetary benefit in these systems, it is usually a violation of the prohibition on price reductions, unless the benefit is below the de minimis limit or falls exceptionally under the privileged exceptions of Section 7 HWG. According to case law, it is not permitted to award loyalty points on the purchase of prescription medicines that can later be redeemed in the form of discounts, material premiums, or other benefits (see OLG Frankfurt, Judgment of 08.03.2012, Case No. 6 U 165/11). The same applies to bonus card campaigns concerning price-fixed products. For non-prescription or pharmacy-only medicines, the assessment can be different if no price maintenance applies and other advertising law provisions are complied with.
Does the prohibition on price reductions also apply to non-prescription medicines?
The prohibition on price reductions, as legally designed, primarily relates to prescription medicines and their advertising. For non-prescription medicines, especially those that are only pharmacy-only, the strict German Medicine Price Ordinance and thus the prohibition on price reductions does not apply in the same manner. For these products, pharmacies can set their own prices and may also grant discounts and price reductions to some extent. However, the general competition law provisions of the UWG as well as Section 7 HWG must also be observed here, in particular prohibitions on unfair advertising practices. It remains inadmissible to mislead consumers or exert undue influence on the choice of medicines. Incentives must therefore also remain within permissible limits for non-prescription medicines and must not particularly encourage adverse health choices.
How do the rules on the prohibition on price reductions differ on national and European level?
The German prohibition on price reductions is primarily derived from national regulations (Section 7 HWG in conjunction with AMPreisV), which are strictly applied to domestic pharmacies. In the European context, however, the European Court of Justice has ruled that the German price maintenance law can no longer be asserted for foreign pharmacies from other EU countries in mail order sales to Germany (see ECJ, Ruling of 19.10.2016, C-148/15 – “DocMorris”). For German mail-order and local pharmacies, price maintenance remains fully in force. This leads to the problematic situation under competition law that foreign mail-order pharmacies may offer promotional discounts, vouchers, or other bonuses, while domestic competitors are significantly restricted by the prohibition on price reductions. This legal situation is highly controversial but has been confirmed by both German and European case law.
What role do the supervisory authorities play in monitoring the prohibition on price reductions?
The monitoring and enforcement of the prohibition on price reductions primarily falls under the responsibility of the competent state authorities, specifically the state chambers of pharmacists and the respective authorities in charge of health and pharmaceuticals. Within the scope of their legal mandate, these authorities may carry out inspections and, upon identifying violations, impose regulatory measures such as warnings, fines, or, in the event of repeated violations, even revoke the pharmacy operating license. Additionally, supervision by industry associations and civil law claims by competitors are not precluded. In practice, however, the majority of detection and prosecution of violations is carried out through the system of competition law self-regulation—such as warnings issued by competitors or consumer associations pursuant to § 8 UWG—while direct administrative oversight is limited due to staffing shortages. Nevertheless, official measures have a preventive and deterrent effect.
What recent developments can be observed regarding the prohibition on price reductions?
In recent years, there has been an ongoing debate on the reform and adaptation of the prohibition on price reductions, particularly in the context of the digitalization of pharmaceutical distribution and the expansion of cross-border mail-order trade. Legislative initiatives such as the On-Site Pharmacy Strengthening Act (VOASG) aim to establish equal treatment between brick-and-mortar and mail-order pharmacies and to extend the price control for prescription medicines to pharmacies located in other EU countries in order to curb distortions of competition. However, there are still significant obstacles under EU law to such equalization. At the European level, there are considerations regarding the harmonization of advertising and pricing regulations for pharmaceuticals, but these have not yet been implemented in practice. The judiciary continues to take a restrictive approach in the interest of consumer protection, with only minor relaxations seemingly possible in trivial cases. In this regard, the sector continues to experience a phase of heightened legal uncertainty and scrutiny.
