A common worldwide commercial practice is product bundling4, i.e. the practice of selling two or more products physically packed in one bundle and offered at one price which is normally lower than the sum of the prices of all products included if bought separately, so that often one or more of the products in the bundle seem to be for free for the consumer or as a “gift”.
Questions arise as to whether the prohibition of offering free supplements should apply to product bundling. While one or more of the products in the bundle may turn to be for free or at ostensible price, it may be argued that the bundle represents a new, distinct product and should not be deemed a technical combination of two or more products, one of which a supplement. In addition, product bundling is often very beneficial for both consumers and traders.
The CPC in its case law seems to be more inclined to treat product bundling under the free supplement regulations. Therefore, the price of the bundle should be carefully formed having in mind the prices of the products included, if bought separately.
It is questionable whether article 36, paragraph 2 of the CPA should be applicable with respect to business-to-business relations, i.e. between a producer and distributors or retailers. This area is generally regulated by the vertical agreements rules.
Taking into account the idea of preserving consumer demand, it is arguable how a company that does not sell to end consumers but to retailers only, can directly influence consumer demand.
Price formation turns to be a major question in relation to the free supplement prohibition (especially in case of product bundling) but the producer has no legitimate mechanisms to control price formation within the chain of distributors and retailers as price fixing is a serious infringement of competition law. A producer making a bundle of 3 products and setting a price of the bundle equal to the prices of the three products included, if bought separately, cannot ensure that the final price of the bundle on which it would be offered to end consumers would be the same and would conform to the legal framework. Thus, a consumer may buy the bundle from a retailer at a price which makes one of the products in the bundle a free supplement, without the producer even knowing about that.
The CPC has not yet given specific guidelines how to treat such relations in the event of product bundling. Some of the old case law holds that since the name of article 32 of the CPA is “unfair solicitation of clients” rather than just “consumers”, all economic operators on the market should be included in the scope of application of the provisions.
However, amendments to the prohibition of offering free supplements may need to be discussed with a view of further optimization of the regulation.
This Publication has been prepared for information purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this without seeking professional counsel.