|Do Discounts and Gifts Portend a Free-For-All in German Product Markets?|
|Subject||Monopoly and Monopolistic Competition|
|Key Words||Laws, Discounts, Rebates, Sales, Free gifts, Unfair competition, Cooperatives, Competition, Market share, Consumers, Prices|
Since the 1930s, when the Nazis were in power, Germany has had laws that restrict discounts, rebates, and freebies. Discounts are limited to 3% of list price. There are no such things as half-priced drinks during Happy Hours. Clearance sales are permitted only twice a year. Rebates, such as through points redemptions on credit cards, cannot be advertised. Free gifts other than trinkets, are not permissible, even if they are only heavy-duty shopping bags. There is also a ban on unfair competition. The historical reason for the laws is that the Nazis were opposed to consumer-owned cooperatives. Since then courts have continued to enforce the laws to bolster business.
The German government is now about to repeal two of the laws - those governing free gifts and discounts. This has been forced by competition from foreign companies that sell products on the Internet free of any restrictions like those enshrined in German law. Without reform, German companies would lose market share. Consumers may find it harder to compare prices, but they are likely to gain.
(Updated May 1, 2001)
|Source||David Wessel, "German Shoppers Get Coupons," The Wall Street Journal, April 5, 2001.|
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