Definition and legal classification of sales promotion
In a legal context, sales promotion encompasses all measures and activities undertaken by a company to increase the sales of its goods or services. The legal analysis of sales promotion is shaped by various factors, particularly competition law, tax law, antitrust law, and labor law. Below, the relevant legal frameworks and consequences of sales promotion are explained in detail.
Competition law aspects of sales promotion
Act Against Unfair Competition (UWG)
An essential basis for the legal assessment of sales promotion measures is the Act Against Unfair Competition (UWG). According to § 3 UWG, sales promotion measures may neither improperly influence market participants nor result in a significant distortion of competition.
Impermissible advertising measures
Impermissible measures include, in particular, misleading advertising (§ 5 UWG), comparative advertising (§ 6 UWG), and aggressive commercial practices (§ 4a UWG). When undertaking sales promotion, it is important, for example, to ensure that advertising promises are accurate and that no misleading information is given regarding prices, quality, or availability.
Discount campaigns and prize draws
Discount campaigns, vouchers, or prize draws are regularly used as part of sales promotion. These measures are generally permissible, provided they are structured transparently and do not result in market distortions. According to § 4 UWG, misleading or manipulative conditions are particularly prohibited.
Specific provisions of the law of fairness
Sales promotion measures must also comply with specific regulations for certain industries or forms of advertising, for example, the German Law on Advertising in the Health Care System (HWG), the Interstate Broadcasting Treaty (RStV), or online marketing in accordance with the Telemedia Act (TMG).
Antitrust requirements for sales promotion
Price fixing prohibition and price recommendations
The Act Against Restraints of Competition (GWB) governs the admissibility of price fixing and price recommendations within the context of sales promotion. According to § 1 GWB, agreements between companies on prices or conditions are generally prohibited (antitrust ban). Non-binding price recommendations, on the other hand, are permitted under antitrust law, provided they do not effectively lead to price fixing (§ 22 GWB).
Cooperative and joint advertising
Sales-promoting cooperative measures between companies, known as joint or co-operative advertising, are also subject to antitrust restrictions. It is particularly important to ensure that no coordinated conduct impairs the market freedom of third parties.
Tax law implications of sales promotion measures
Deductibility as business expenses and tax treatment
Under tax law, particularly the Income Tax Act (EStG) and the Corporate Income Tax Act (KStG), specific provisions apply to the tax treatment of sales promotion measures. Expenditure on advertising and sales promotion is generally deductible as business expenses (§ 4 para. 4 EStG), provided it is business-related and verifiable.
VAT treatment
Sales promotion measures, for example in the form of non-cash benefits, discounts, or vouchers, may have VAT implications. According to § 3 para. 1 UStG, the free transfer in certain cases constitutes a taxable supply, which must be taxed on the purchase price.
Labor law aspects of sales promotion
Incentives and bonuses for employees
In the context of internal sales promotion, for example through bonuses, rewards, or incentives for employees, the provisions of labor law and wage tax law must be observed. Bonuses generally constitute taxable income and are subject to the pertinent social security regulations.
Involvement of third parties
If sales promotion measures are to be carried out through commercial agents, authorized dealers, or distribution partners, the relevant statutory provisions of the Commercial Code (HGB), particularly §§ 84 et seq. HGB for commercial agents, apply.
Data protection aspects of sales promotion
Sales promotion measures, particularly in the field of direct marketing, must strictly comply with the General Data Protection Regulation (GDPR) and the Federal Data Protection Act (BDSG). The collection, storage, and processing of personal data for advertising purposes is permissible only on the basis of effective consent or specific legal grounds.
Intellectual property law requirements
Sales promotion measures frequently involve trademark law, copyright law, and design law. In particular, the use of brands or copyright-protected elements in advertising requires prior clarification of usage rights in order to exclude warnings and claims for injunction.
Summary
Sales promotion encompasses a multitude of legal aspects that are extensively regulated at both the national and European level. When planning and implementing respective measures, companies must observe the provisions of competition, antitrust, tax, labor, data protection, and intellectual property law as well as industry-specific legislation. Careful legal review of the relevant sales promotion measures is essential to avoid legal risks and economic disadvantages.
Literature and further regulations
- Act Against Unfair Competition (UWG)
- Act Against Restraints of Competition (GWB)
- Income Tax Act (EStG)
- Commercial Code (HGB)
- General Data Protection Regulation (GDPR)
- Telemedia Act (TMG)
- German Law on Advertising in the Health Care System (HWG)
This overview provides a detailed legal introduction to the concept of sales promotion. For practical implementation, attention should always be paid to the relevant statutory provisions and current case law.
Frequently Asked Questions
What legal foundations govern state sales promotion in Germany?
The legal foundations of state sales promotion in Germany are established at various levels. First, the Basic Law (GG) in Article 74 para. 1 no. 11 forms the basis by assigning the federal government concurrent legislative competence for economic law, including measures for market regulation. In the agricultural sector, the Market Structure Act (MarktStrukturG) and the Act on Measures to Promote the Marketing of Agricultural Products (Absatzfondsgesetz, now replaced by the Act on the German Agricultural Society – DLG Act) are particularly relevant. In addition, there are central requirements at the European level, especially through the Common Market Organisation (CMO) of the EU, which provides regulations for support measures under the Common Agricultural Policy (CAP). Furthermore, state aid law requirements set by the European Commission, in particular compliance with rules on state aid under Art. 107 et seq. TFEU, must be observed to ensure that sales promotion does not lead to distortions of competition. At the federal state level, supplementary regulations may also exist.
Who is legally entitled to apply for sales promotion support measures?
Eligibility to apply for government sales promotion support measures is clearly regulated by law and may vary depending on the support program. As a rule, the following are eligible to apply: companies in the agriculture and food industry, producer organizations (such as cooperatives), trade associations, marketing organizations, as well as legal entities under private and public law pursuing the goal of sales promotion. Under EU support programs, such as the so-called ‘information and sales promotion measures for agricultural products,’ organizations must meet certain union law admission criteria, for example, provide proof of representative representation of the relevant producer group. Furthermore, compliance with the relevant approval guidelines and funding regulations is required. These define in detail which actors are eligible for funding, how they prove their eligibility, and which proof and documentation requirements apply in the application process.
Under what legal conditions may government funds be awarded for advertising purposes?
Government funds for advertising purposes as part of sales promotion are subject to strict legal requirements to ensure equal treatment and transparency. First, each award of funds must be permissible under European law, in particular the state aid regulations of Art. 107 et seq. TFEU must be observed. Funds may only be granted if market distortions are excluded or minimized. Furthermore, national procurement law, in particular the Act Against Restraints of Competition (GWB) and the related ordinances, must be observed. Advertising measures must also be factual, truthful, and not harmful to the market. Many funding guidelines also require explicit proof of the dedicated use of the funds. In programs with European co-financing, an explicit separation between brand-related advertising and generic product advertising is required—manufacturer-specific advertising is excluded from funding.
What legal requirements exist for transparency and monitoring in the use of support funds?
According to funding and budgetary regulations, there are detailed requirements regarding transparency and control in the use of support funds. According to budgetary law, in particular the Federal Budget Code (BHO) or the relevant state law, earmarked grants must be carefully documented and verified. The grant recipient is obliged to provide proof of use documenting all expenditures and supported measures. Regularly, step-by-step factual reports, payment receipts, and invoices must be submitted, and evaluations and, where applicable, success measurements must be carried out. Oversight rights of the awarding authorities (e.g., Federal Office for Agriculture and Food – BLE) as well as the federal and EU courts of auditors are legally mandatory. Breaches of proof obligations result in repayment claims and may be sanctioned.
How are neutrality of competition and equal treatment legally ensured in state sales promotion?
In the legal context, a strict requirement of neutrality applies to state sales promotion. Ensuring competition neutrality and equal treatment of all market participants is primarily based on the principle of equal opportunity (Art. 3 GG) as well as the EU regulations of the TFEU. Funding guidelines and approval procedures must be designed to be non-discriminatory, meaning that all eligible applicants must have equal opportunities for support under comparable circumstances. No individual company or brand may be favored over competitors; rather, funding is limited to product-specific (generic) advertising. Specific tender requirements and transparency rules for the selection of funded projects further ensure equal treatment. Clear documentation and reporting obligations provide traceability.
What are the legal consequences of misuse or improper use of support funds for sales promotion?
Various legal sanctions apply in cases of misuse of support funds. The central basis for this is the provisions in the respective funding decision as well as relevant rules in the Federal Budget Code (BHO) or the Administrative Procedure Act (VwVfG). If funds are not used as intended, they may be reclaimed via repayment notices. In addition, administrative and, in some cases, criminal consequences may arise, especially if intent or negligence is involved (e.g., fraud under § 263 StGB or subsidy fraud under § 264 StGB). At the EU level, a report may also be submitted to the European Commission, potentially resulting in additional sanctions. Beneficiaries are therefore required to carefully comply with issued guidelines, conditions, and reporting obligations.
What are the legal particularities of international sales promotion?
International sales promotion—such as export promotion—is legally characterized in particular by international agreements and EU state aid law. The decisive factor is compliance with the rules of the World Trade Organization (WTO), especially the WTO Agreement on Subsidies and Countervailing Measures (SCM). According to this, export subsidies may in principle not be granted if they result in impermissible trade distortions. Within the EU, sales promotion for third countries must also withstand the strict requirements of state aid law and is therefore only granted under certain, detailed conditions (e.g., strengthening the image of European quality products as opposed to generic export subsidies). Each measure requires an explicit legal examination and approval by the competent authorities at national and EU level. Duties of competition, transparency, and equal treatment must be strictly observed.
