Promotion is almost an integral part of the marketing activities of any retail store, this is a form of marketing that helps increase sales without spending a lot of advertising or marketing costs.
However, the promotion is not only implementing a discount program or giving products, but also need to consider the promotion program that is suitable for businesses, bringing the highest economic benefits and especially the implementation of promotion programs must comply with the provisions of law.
Under Article 88 of Commercial Law 2005, promotion means activities of commercial promotion conducted by traders to promote the purchase and sale of goods or the provision of services by offering certain benefits to customers.
Buy 01 get 01 or discount 50% of product price are popular promotions and are selected to increase sales without much effort to advertise products. These two types of promotions are at first glance the same, but upon closer analysis, the two types of promotions are differ in both economic benefits and legal.
Regarding economic benefits
Both of the above promotions bring economic benefits to both consumers and traders who carry out the promotion, however, for the form of buy 1 get 1 free, the trader when applying this form want to sale more products with “the more you buy, the higher the benefits”. On the other hand, traders when applying the 50% discount promotion will attract more consumers, because consumers’ buying needs are limited, they only want to buy what is needed but get a discount. And 50% discount will help them buy less with constant quality and get 50% discount.
Regarding legal aspects
According to the provisions of Decree 81/2018 / ND-CP on trade promotion activities, there are 08 forms of promotion currently applied.
- Regarding the form of promotion
The form of buy 1 get 1 is defined as a form of promotion which gifting of goods or services, detail, Gifting of goods or services with accompanied goods sale and purchase or service provision;
50% discount is a form of promotion, sale of goods or provision of services at discounted prices during the announced period of sales promotion.
- Compliance with legal regulations
Under Clause 1 and Clause 2 Article 6 of Decree 81/2018 / ND-CP stipulating the maximum limit on the value of goods and services used for sales promotion as follows:
“1. The promotional value of a unit of promoted product must not exceed 50% of the price of such promoted product unit before the promotion, except for promotion in the forms prescribed in Clause 8 in Article 92 of the Commercial Law and Article 8, Clause 2 in Article 9, Article 12, 13 and 14 of this Decree.
2. Total value of promotional product of a sales promotion program conducted by traders must not exceed 50% of total value of promoted product, except for forms of promotion prescribed in Clause 8 in Article 92 of the Commercial Law, Article 8 and Clause 2 in Article 9 of this Decree.”
Therefore, the total value of goods and services used for sales promotion that a trader implements in a promotion program must not exceed 50% of the total value of goods and services being promoted.
Accordingly, when implementing the promotion form of buy 1 get 1 free, the total value of goods and services used for sales promotion is 100%.
According to the above regulations, it is not possible to apply the promotion of buy 1 get 1 free for products because it exceeds the limit on the value of goods and services used for sales promotion.
In contrast, the form of 50% discount fully meets the regulations on value limits of goods and services used for sales promotion under Article 6 of Decree 81/2018 / ND-CP, when implementing 50% discount, traders who conduct promotions must notify the Department of Industry and Trade in accordance with Article 17 of this Decree.
Some inadequacies in the management of promotional activities
Promotion activities have positively impacted on consumers’ psychology and tastes, stimulated consumption, and boosted trade and service revenue. However, besides the benefits, there are still many difficulties and difficulties for management. According to the provisions of law, promotion activities must meet the requirements as prescribed by law, for example: Traders must notify in writing the promotion program to the Department of Industry and Trade where the promotion is organized within 7 days before the promotion. The form of chance promotion must be registered at the authorized state agency. With the form of discount, the maximum discount rate of the promoted goods or services does not exceed 50% of the previous sale price. The law also stipulates the quality assurance of goods for sales promotion. But in fact some traders have taken advantage of promotions to bring fake goods, poor quality goods, nearly expired goods into consumption; raising the original price to high, then offering discounted promotions, resulting in actual promotions that are not beneficial to consumers but only a way for traders to increase sales.
In order to ensure that promotional activities are strictly complied with the provisions of law, in addition to strengthening the propagation and publicity of promotion units and controlling promotion activities, the management agencies need to strictly handle with the violations of promotional activities. Besides, for customers, it is necessary to find out carefully about the promotion program, ask the salesperson to strictly implement the promotional content as committed, notify the Standards Association and protect the rights of consumers. When seeing signs of violations, promotional fraud; request settlement and compensation for damage upon detecting that their rights have been violated.
If you have any questions or require any additional information, please contact Apolat Legal – An International Law Firm in Viet Nam.
This article is for general information only and is not a substitute for legal advice.