Up to 95% off: don't believe the hype?

Photo: CTK

Some New Year's Day sales left consumers holding the bag -- an empty bag, that is -- with complaints of "false advertising" by superstores and hypermarkets as precious few of the heavily promoted sales items were actually in stock. The Czech Commercial Inspectorate has launched a natiowide investigation and a move to strengthen the consumer protection law is under consideration.

Photo: CTK
The state's Commercial Inspectorate is taking a fresh look at how retailers operating in the Czech Republic promote sales after receiving complaints about how superstores and hypermarkets kicked off the year 2005.

Traffic ground to a halt outside many outlets the weekend of New Year's Day, as Czechs went on buying sprees, spurred on by promises of incredible deals on big-ticket items, like electronic goods and home appliances. But many bargain-hunters went home empty-handed, with only a few of the advertised discounted goods actually in stock - and these reportedly snapped up by store employees' before the doors even opened to customers.

Over one thousand people turned up at the French hypermarket chain Carrefour on Monday, the first workday of the New Year, spurred on by promises of discounts of up to 95 percent. Few left entirely happy. Groups of disgruntled people appealed to the Ministry of Industry and Trade and the Czech Commercial Inspectorate to take action.

Such was the media attention that the minister himself, Milan Urban, called for an investigation. On Tuesday, the Commercial Inspectorate began sniffing around into whether Carrefour acted in compliance with regulations on the guaranteed availability of goods promoted as sale items. Beginning on Thursday, the COI will launch such inspections at all retail chains.

Preliminary findings of the Commercial Inspectorate showed that certain advertised goods were only available at certain Carrefour stores, or that only a "symbolic" number of items were on hand. Carrefour could be fined, but whatever the outcome of the investigation, a change in the law itself is under consideration, says Commercial Inspectorate general director Jiri Pekny.

Jiri Pekny
"It's a bit premature to talk of fines because the investigation is still continuing. It appears to us that some unethical steps may have been taken by Carrefour, but this is something that needs further examination. As Minister Urban has already said, so far the findings of our investigation are that some unethical steps have been taken. But we are considering following Germany's example; meaning, that a company advertising discounted items must have those items in stock and on sale up to a specific period. In Germany now that period is 48 hours -- two days."

The Czech National Bank estimates that large retailers like Carrefour account for 70 percent of the Kc 520 billion crowns in annual retail sales. The number of hypermarkets in the Czech Republic is expected to grow this year by 15 to 20. The French chain Carrefour alone now operates 10 hypermarkets in Czech Republic. Advertisements promised that starting this past Monday, prices on some 10,000 items would be reduced, up to 95 percent off.

When asked in Carrefour had "tricked" its customers, which was how the sales were portrayed in many Czech media, spokesperson Jana Hlavackova:

Photo: CTK
"Close-out sales are a way of clearing out stock that has remained in the warehouse from the previous year. Every retailer does this and has its own way of doing it. If there were few of some items on sale, it means there weren't many in the warehouse. In no circumstances did Carrefour engage in false advertising or 'tricks'. The goods were available everywhere, even if in minimal amounts."

According to Frantisek Lobovsky, head of a Czech consumer protection association, Carrefour's ad campaign was "manipulative" but probably in accordance with the law. He doubts that a change in the law would make much difference.

"It may be that more specific regulations about how merchandisers can promote their products would be good for consumers. Nevertheless, we think the law already provides relatively many possibilities for monitoring how goods are sold on the market. In fact, Paragraph 6 of the consumer protection law says merchandisers must use ethical sales techniques. I think that the situation -- which is already much improved -- will keep getting better as long as watchdog institutions go in this direction."