Springtime for Retailers

A 1933 German law that severely limited store discounting was abolished by the country's parliament last week. Also scrapped were 1932 rules forbidding promotional offers such as “buy two, get one free.” The measures, passed eight months after Adolf Hitler came to power, meant to protect small shopkeepers against what the government called a “degeneration”'of competition (disguised as a part of the Nazis'efforts against Jewish-owned major department stores).

But 70 years later, overturning these laws had become a test of Germany's ability to deregulate and modernize. It has been five years since the government finally relented by extending store opening hours. And it was also an acknowledgement of the laws'futility, as retailers were increasingly ignoring the antiquated restrictions. German Internet retailers, in particular, found their hands tied in fighting their less-regulated foreign competitors. The restrictions set a 3 percent cap on discounts outside certain limited periods, such as summer or winter sales. But many German stores have long been ignoring the restrictions, or at least phrasing their offers in ways to get around the rules. And instead of asking for a “discount,” savvy buyers have become trained to ask for the “house price.”

The German government says the new measures, passed by the majority Social Democrats and Greens, allow consumers the freedom they deserve to bargain. “This is the right signal also for the booming e-commerce sector,” said Greens Party lawmaker Volker Beck. “Germany's restrictive laws will no longer be an obstacle to investment.”

The Christian Democratic Party, which opposed the dropping of the restrictions, argued it would drive more small stores out of business. But officials have reassured small retailers that the government and courts will not allow what it called “wild west” competition in Germany, and that laws on unfair competition and price labeling will remain in force.