Furniture stores have faced fines for practices such as false discounts and perpetual sales campaigns.
Finland’s Competition and Consumer Authority has launched an investigation into misleading marketing practices within the furniture retail sector.
Pricing practices and the duration of discount sale periods have been an ongoing source of frustration for authorities as well as smaller businesses for a number of years, but a new law, set to come into force next month, is meant to tackle the problem.
Mika Hakamäki, of the Competition and Consumer Authority, told Yle that efforts have been made over the past 15 years to control furniture retailers’ misleading marketing practices, and penalty payments have been issued on numerous occasions to many businesses in the sector since 2007.
Hakamäki added he found it dispiriting that it was necessary for authorities to issue separate warning to individual retailers, even though the businesses should be very well aware about the acceptability of certain marketing practices.
In 2017, the Market Court issued a ban with a threat of a penalty if retailers failed to stop misleading advertising practices. The court ruled that sales campaigns which lasted continuously for more than two months affected consumers’ understanding of what regular price points were, as well as the actual advantages of the discounts being offered.
Furniture retail giant Indoor Group, owner of retail stores Asko and Sotka, was issued a 100,000 euro fine in 2017 for violating this ban.
Executive director at the Finnish Furniture Trade Association, Walter Ihander, said penalties like this have had little effect on the furniture giants, as they are too insignificant to dissuade them from continuing the practices. The furniture retail industry’s annual turnover is estimated at around 1.2 billion euros.
Furniture retail giants, like Masku or Indoor Group, are not part of the trade association.
Ihander added that the association has largely unsuccessfully tried to get industry players to follow market regulations, and he said that it is now up to authorities to take decisive action.
Discount percentages and duration of sales
In 2007, the Market Court ruled that discount sales were allowed to last up to a total of three months, while past prices on display should be the highest retail price with which sales have been demonstrably made, to properly reflect the true market value of the item to the consumer.
Ihander said that the ruling is interpreted in such a way that some retail companies issue brief, weekend-long campaigns throughout the year. Meanwhile, pricing and discount percentages displayed in stores are still misleading the consumer.
“There is no way a 4,000 euro bed can be sold for a 1,000 euros,” Ihander added.
Indoor Group denies the association’s claims that discount percentages used to persuade consumers were fictitious.
The CEO of furniture outlet Masku Kalustetalo, Hanna Kuronen, said the original prices displayed during sales reflect the true price point the furniture is sold at outside the discount sale periods. The sales are usually set to last up to a week rather than a weekend, Kuronen added, so that consumers have enough time to go shopping.
A new law regulating discount sales and their marketing is coming into effect in May.
Mika Hakamäki from the Competition and Consumer Authority said that he hopes the new law, as well as a new statement from the Consumer Ombudsman, will work to fully clarify what is allowed — and what is not. The statement, made in consultation with the Finnish Commerce Federation, will describe in detail what is expected of businesses engaging in sales and discount marketing in the future.
Hakamäki said he believed the most significant amendment in the new law has to do with product prices that retailers display and use to formulate their advertised discount percentages.
In the future, retailers will have to display the lowest price at which the item sold in the 30 days prior to the discount sale period. If the item’s price has been lowered at any point during these 30 days, it needs to be shown to consumers as well.
Jukka Hiltunen, the owner of RH-Huonekalu furniture stores in the towns of Pieksämäki and Varkaus, said he wishes the authorities would use harsher measures to reign in larger furniture companies when it comes to sales and discount marketing. Hiltunen said he thinks that the penalty fines should be in the millions of euros in order to be effective, as bigger furniture retailers have annual turnovers of 100-200 million euros each.
A healthy discount, Hiltunen said, is somewhere between five and fifteen percent.
“Everyone realises that you can’t buy two Mercedes for the price of one, nor a Toyota,” Hiltunen said.