EU discount regulation linked to higher prices, study finds
Study finds EU discount regulation tying advertised cuts to the lowest 30‑day price led to smaller discounts and average price rises of 1–2%.
The EU discount regulation intended to curb misleading sale claims has been linked to higher consumer prices, according to a new study by two competition economists. The research, which examined independent sellers on Amazon across several countries, finds that the rule requiring advertised discounts to reference the lowest price in the previous 30 days changed seller behaviour. The study reports that discounts became shallower, fewer promotions were offered, and average annual prices in the EU rose by roughly one to two percent.
Study finds pricing shifts after rule introduced in 2022
The economists Reinhold Kesler and Alexander Rasch analyzed price data following the introduction of the EU rule in 2022 that specifies the lowest price in the past 30 days as the legal reference for advertised discounts. Their objective was to assess whether the regulation reduced misleading “was/now” claims or produced unintended market effects. The analysis compared marketplace prices in the EU with those in the United Kingdom and the United States, where no identical reference-price rule applies.
Their results indicate a clear change in retailer strategy after implementation. Instead of restoring trust through more honest discounting, many sellers adjusted list prices and promotional practices in ways that reduced the depth and frequency of sales. The authors summarize this pattern as an unintended consequence of well‑intentioned consumer-protection measures.
Researchers examined Amazon marketplace across countries
Kesler and Rasch focused on offers from independent third‑party sellers operating on Amazon’s marketplace, selecting that platform because of its wide range of vendors and frequent promotional activity. They tracked price histories and advertised discount claims across several EU markets and compared those patterns with contemporaneous data from the UK and the US. This cross‑jurisdictional approach was designed to isolate the effect of the EU policy from broader global pricing trends.
The comparative evidence shows divergent outcomes: while UK and US shoppers benefited from stronger discounts and more frequent promotions, EU consumers saw a reduction in the magnitude of markdowns. The study attributes these differences to the mechanics of the EU rule, which made it harder for sellers to advertise large percentage reductions without maintaining lower historical prices.
Reduction in depth and frequency of discounts
One of the core findings is that average end‑of‑sale prices in the EU declined by only half as much during promotions as they had before the rule. At the same time, the number of advertised sales events fell, suggesting that sellers curtailed temporary discounts that might later complicate compliance. The net effect, the researchers report, was a leveling up of regular prices and a diminished incentive to run aggressive price cuts.
The study quantifies the effect: across the aggregate product sample, annual average prices increased by about one to two percent after the regulation took effect. For categories with heavy promotional activity, the impact was larger and in some cases comparable to a full year’s inflation rate. These shifts imply that the consumer-protection mechanism traded shorter-term clarity about discounts for higher baseline prices.
Effects strongest in fashion, electronics and video games
The researchers observed heterogeneity across product categories, with the largest price reactions in segments that rely heavily on promotional cycles. Clothing, consumer electronics, office supplies, tools and video games showed the most pronounced reductions in discount depth and the biggest relative price increases. In those sectors, retailers frequently use short-lived sales and percentage-based marketing, making them particularly sensitive to reference-price regulation.
By contrast, categories with more stable pricing or less reliance on marketing-driven spikes experienced smaller changes. The uneven distribution of effects highlights how a single regulatory rule can interact differently with sectoral pricing strategies and competition intensity.
Policy trade-offs and unintended consequences
Policymakers designed the EU discount regulation to protect shoppers from artificially inflated “was” prices that made subsequent reductions look larger than they were. The new evidence suggests the rule achieved greater transparency in advertised references but also altered market incentives in ways that may harm consumers. Regulators face a familiar trade‑off between clearer advertising standards and potential dampening of competitive promotional behaviour.
The authors caution against interpreting the findings as a categorical failure of regulation; rather, they frame the results as a signal that well-meaning rules can have complex economic ripple effects. Lawmakers and enforcement agencies may need to consider complementary measures, targeted adjustments, or monitoring mechanisms to preserve the intent of consumer protection without unintentionally raising average prices.
Practical steps consumers can take when shopping
Until regulators respond, shoppers can limit the impact of these changes by checking price histories with independent price-tracking tools and comparing offers across sellers and platforms. Paying attention to absolute price reductions and unit costs, rather than only percentage figures, helps reveal genuine bargains. Consumers should also consider waiting-period tactics such as tracking items for a few days before buying to see whether a claimed discount reflects a real deal.
Price comparison and a modest increase in buyer diligence will not eliminate the broader market effect, but they can help individual shoppers avoid overpaying when promotional claims are less informative.
Consumer-facing rules that require the lowest 30‑day price as the reference altered retailer behaviour in measurable ways, producing smaller discounts and modest price increases for many product categories. As regulators evaluate the law’s outcomes, the choices ahead will involve balancing clearer advertising against preserving the competitive promotions that often benefit buyers.
