What Are the Legal Standards for Advertising Discounts on Digital Platforms?

Advertising discounts is a common and effective marketing tool used by businesses on digital platforms to attract consumers. However, these promotions must comply with various legal standards to ensure that they are clear, truthful, and not misleading. Misleading discount advertising can misinform consumers, lead to unfair competition, and result in legal consequences for businesses. Both consumer protection laws and advertising regulations govern how discounts can be advertised on e-commerce platforms, websites, and social media.

Key Legal Standards for Advertising Discounts on Digital Platforms

1. Truth in Advertising and Accuracy:
   • General Principle: Under both U.S. and EU laws, all advertising—including discount claims—must be truthful and non-deceptive. Advertising that misrepresents the nature or value of a discount may be considered false advertising and subject to legal action.
   • U.S. Law: The Federal Trade Commission (FTC) enforces laws against deceptive advertising, including advertising discounts. According to the FTC Act, businesses must ensure that any advertised discount is genuine and not misleading. This includes ensuring that the original price is a bona fide price and not inflated just to create the illusion of a bigger discount.
   • EU Law: In the European Union, the Unfair Commercial Practices Directive requires that discounts be clearly and accurately described, and that the original price used to calculate the discount reflects the price at which the product was most recently sold.
2. Clear and Unambiguous Disclosure:
   • Businesses must clearly display the discounted price and the original price in a manner that allows consumers to easily understand the value of the discount. If a discount is contingent on certain conditions, such as a minimum purchase amount, those conditions must also be disclosed upfront.

   Example: A retailer advertising a product as 50% off must ensure that the original price shown reflects the price at which the product was regularly sold, and not a manipulated or inflated price.

3. Was-Now Pricing (Comparative Pricing):
   • In the U.S., was-now pricing (i.e., the comparison between an original price and a discounted price) must be genuine. The original price must reflect the most recent price at which the product was sold, and the discount cannot be based on an inflated or artificially high original price.
   • FTC Guidelines: The FTC has issued specific guidelines for businesses using comparative pricing. For example, if a product is advertised as being discounted 30%, the original price must have been the price at which the product was regularly sold for a sufficient period before the discount.

   Example: If a digital platform advertises a jacket with 40% off, the original price must be a valid price that the jacket has been regularly sold for over a specific period, not a randomly inflated figure used to make the discount appear larger.

4. Temporary and Limited-Time Offers:
   • If a discount is advertised as part of a limited-time offer or flash sale, businesses must clearly communicate the time limits and the validity period of the offer. Misleading consumers into believing they are getting a time-limited discount when the offer is actually ongoing or perpetual can lead to accusations of deceptive advertising.

   Example: A platform advertising a 48-hour flash sale must ensure the sale ends within 48 hours, and not extend beyond the advertised time frame or re-run the offer repeatedly.

   • In the EU, the Unfair Commercial Practices Directive also requires that any time-limited offers be communicated transparently, so consumers do not feel pressured into making a quick purchase under false pretenses.
5. Discounts on Multiple Products or Bulk Purchases:
   • When advertising discounts on multiple products (e.g., Buy one, get one 50% off), it is important that the terms are clear and not misleading. If the promotion applies only to specific products or categories, this must be disclosed. Similarly, if the discount only applies to certain quantities or products purchased together, the restrictions should be clearly stated.

   Example: A digital platform offering a Buy one, get one free deal must clearly state whether the offer applies to all items or only specific categories of products, and whether the promotion requires purchasing two items at full price.

6. Bait-and-Switch and Pressure Tactics:
   • Laws prohibit bait-and-switch advertising, where businesses advertise a discounted product to lure customers but then try to sell them a different product at a higher price. Such tactics are considered unfair trade practices and are illegal.

   Example: An e-commerce site advertising a product at a deep discount but then claiming that the discounted product is out of stock and trying to sell a more expensive alternative instead would be a clear example of bait-and-switch advertising.

7. Social Media and Influencer Promotions:
   • Advertising discounts via social media influencers must adhere to the same legal standards as traditional advertising. In many jurisdictions, influencers must disclose any material connection to the brand, such as being paid to promote the discount or being given free products.
   • FTC Guidelines: The FTC in the U.S. has specific rules for influencer marketing, including requiring clear disclosures when influencers promote discounts or products. For example, influencers must include hashtags like #ad or #sponsored if they are paid to promote a product.

   Example: An influencer promoting a 20% discount on a brand’s products must disclose whether they are receiving compensation for the promotion, ensuring that the promotion is transparent and not misleading to consumers.

8. Bundled and Package Discounts:
   • When offering discounts on bundled products (e.g., Buy a laptop and get a 10% discount on accessories), businesses must ensure that the advertised discount applies only to the bundled package and not to individual items in the bundle, unless stated otherwise.

   Example: A digital marketplace offering a Buy two, get one free promotion must ensure the customer understands which items are eligible for the offer and whether certain conditions apply (such as all items in a specific category).

9. EU Regulations on Discounts and Pricing:
   • The EU has specific rules on how discounts should be advertised, particularly in the context of the Price Marking Directive and the Consumer Rights Directive. These rules require businesses to present pricing in a way that does not mislead consumers, and any discount or sale must be based on a legitimate original price.

   Example: If a product was regularly sold for €100 and is now being offered for €70, the seller must be able to demonstrate that the €100 price is the price at which the product was regularly sold before the discount.

10. Refunds on Discounted Products:
    • Discounts that apply to certain products may affect refund policies. For example, if a consumer buys a discounted item and later returns it, the refund may be based on the amount the consumer paid (the discounted price), not the original price.
    • Businesses must ensure that their return policies are clear about how discounts affect returns and refunds, so consumers are not surprised when they attempt to return a discounted item.

Example Scenario

A consumer sees an advertisement for a 50% off smartphone on a popular digital marketplace. The ad claims the smartphone is originally priced at $1,000, but after the discount, it costs $500. Upon investigation, the consumer finds that the $1,000 price was rarely the actual selling price; it was only marked at that price during occasional promotions. The actual regular price was $600, which means the discount isn’t as substantial as advertised. In this case, the FTC or EU authorities might intervene for deceptive pricing, as the discount was based on an inflated price, not the regular price.

Conclusion

Legal standards for advertising discounts on digital platforms are primarily focused on ensuring transparency and truthfulness in pricing. Businesses must avoid misleading consumers with inflated original prices, ensure that discounts are clearly communicated and genuinely reflect a lower price, and disclose any conditions or limitations associated with the promotion. Both consumer protection laws in the U.S. and EU regulations require businesses to follow fair advertising practices and offer remedies for consumers misled by deceptive discount claims.