Discrepancy in Point-of-Sale Price? Compensation of up to ₪10,000 Available Without Proof of Damages.

A discrepancy between the advertised price and the price at the checkout is unlawful. In certain cases, compensation of up to NIS 10,000 may be claimed without proof of damages.

You entered a store, saw a product, noted its price, and decided to purchase it. However, at checkout, the price was different (and likely higher).

You complained, but the cashier refused to comply; you, in turn, reluctantly paid. Congratulations – you’ve become a victim of consumer injustice.

Unfortunately, this injustice takes many forms (and isn’t limited to physical stores): a business might advertise a sale price but not honor it; fail to display a price on the product; or list a price with an asterisk stating “*excluding VAT*” (or other charges). All these scenarios constitute consumer injustice (and sometimes a criminal offense): breach of the obligation to display an inclusive price.

This article explains: what constitutes an “inclusive price”; the legal ramifications of discrepancies between advertised and checkout prices; who is obligated to display an inclusive price; and the legal consequences for businesses that fail to comply.

Please note! This article addresses the obligation to display an inclusive price on products only. The obligation to display prices for services is discussed in a separate article.

What is an “Inclusive Price”?

The price includes “the total amount payable for a good or service, including all taxes applicable to the good or service or its sale, and collected by the business.” This includes VAT, levies, mandatory payments, and any other payment associated with the product’s purchase that the consumer cannot practically waive (e.g., handling fees).

The Obligation to Display an Inclusive Price

The Consumer Protection Law, enacted in 1981, applies solely to transactions between businesses and consumers. The law meticulously defines the obligations of businesses and the rights of consumers, prioritizing consumer rights. However, it’s important to note that there are businesses to which the Consumer Protection Law does not apply; consequently, the obligation to display an inclusive price does not apply to them.

According to Section 17b of the Law, a business offering, displaying, or selling goods to a consumer must display the inclusive price on the goods or their packaging, meeting three criteria:

1. In a clearly visible location;
2. In clear and legible numerals;
3. Only in Israeli currency.

This obligation also applies to goods displayed in a manner suggesting they – or similar goods – are for sale.

To Which Products Does the Obligation Not Apply?

Businesses are exempt from displaying the full price on goods intended for sale outside of Israel. (Section 17z(a)(1) of the Consumer Protection Law).

What Happens When VAT Changes? A “Grace Period” for Partial Pricing

The legislature acknowledges that taxes on product prices change periodically. Therefore, businesses cannot be required to instantly replace all prices whenever the VAT rate changes.

Consequently, the legislature has provided businesses with a seven-day “grace period.” For seven days following a change in the rate of a tax, levy, or other mandatory payment applicable to a sale, the business may exclude the change from the displayed price.

However, this is conditional on the business clearly stating that the price excludes the increased/reduced rate (Section 17e of the Consumer Protection Law).

If you unfortunately encounter a business during this grace period, and the business has clearly indicated it, you will now know not to be upset about the discrepancy between the checkout and product prices.

Checkout Price Differs from Product Price – Which Prevails?

The legislature recognizes that pricing errors on products, particularly in stores with numerous products, can occur. However, it remains consumer-centric. Therefore, a specific and explicit section leaves no room for doubt:

The binding price is that displayed on the product, even if the checkout price differs (Section b(d) of the Consumer Protection Law).

While it could be argued that this section is bi-directional, meaning that if the checkout price is lower than the product price, the consumer could still be asked to pay the higher price,

reality shows such errors are rare or, at the very least, not misused by businesses.

What About Online Purchases?

The same obligation applies, with necessary modifications. Instead of a cash register, there’s a payment page. Thus, if a business displays a certain price on its website, and the price at checkout is only partial, it’s a breach of the obligation to display an inclusive price.

This manifests in several ways: a business might list a partial price but stipulate in its terms and conditions that prices exclude VAT and additional fees; or indicate below the price that “*the price excludes VAT and additional fees*”.

However, these attempts at circumvention will not hold up under legal scrutiny. Any instance where a product’s price is not displayed as inclusive constitutes a clear violation.

Consumer Rights in Case of Breach of Inclusive Pricing Obligation (Compensation Without Proof of Damages)

Amendment 21 to the Consumer Protection Law lists cases where a court may order a business to pay compensation without proof of damages, up to NIS 10,000 per violation (hereinafter: “exemplary damages“).

Breaching the obligation to display a full price – such as a discrepancy between the checkout and product prices – is on this list. However, the consumer may only claim exemplary damages if the following two conditions are met:

1. The consumer asked the business to pay the price displayed on the product (not the checkout price), and the business refused;
2. Before filing a lawsuit, the consumer sent the business a written pre-litigation notice detailing their demands (see note**). (Sections 31a(a)(5) and 31a(b) of the Consumer Protection Law)

Don’t get confused! A written demand is only relevant to a claim for compensation without proof of damages. Therefore, even without a written demand, you can still sue for other types of compensation.

For example, you can claim compensation with proof of monetary or non-monetary damages (such as distress). You can, of course, pursue both avenues: send a written demand and file a lawsuit for compensation other than exemplary damages.

But it doesn’t have to end at NIS 10,000! In some instances, the court may award compensation without proof of damages up to NIS 50,000: repeated, ongoing, or aggravated breaches (Section 31a(c) of the Consumer Protection Law, 5741-1981).

Court Considerations When Awarding Exemplary Damages

Section 31a of the Consumer Protection Law sets a “pro-consumer” standard. When ordering exemplary damages, the court does not consider the amount of damages.

This simplifies claims for consumers, eliminating the need to provide extensive proof that the claim amount reflects the actual damages. This is especially relevant in cases where no damage has occurred except for some inconvenience.

According to Section 31a(e) of the Law, the court will consider the following: (a) law enforcement and deterrence; (b) encouraging consumers to exercise their rights; (c) the severity, financial scope, and circumstances of the violation; (d) the financial value of the transaction in which the violation occurred; (e) the financial scope of the business’s operations; (f) the statutory fine for such a violation (if any).

Beyond Compensation Without Proof of Damages: Businesses Face Monetary Sanctions and Criminal Fines of Tens of Thousands of NIS

The Consumer Protection Law empowers the Israeli government to appoint a supervisor to manage the Authority for Consumer Protection and Fair Trading. The supervisor is responsible for enforcing the law and imposing fines on violators.

Among other things, the law authorizes the supervisor to impose monetary sanctions on service providers who fail to display an inclusive price (Sections 1, 19, and 19a of the Consumer Protection Law).

The amount of the monetary sanction varies depending on the type of business: a non-corporate business (exempt/licensed) – up to NIS 7,170. And a corporate business (limited company, non-profit, etc.) – up to NIS 22,530 (as of January 2023).

Additionally, the violating business faces a criminal fine of up to NIS 87,600 (updated as of January 2023) (Section 23(c)(8) of the Consumer Protection Law; Section 61(a)(2) of the Penal Code).

Important Note: The supervisor is not authorized to impose monetary sanctions immediately. The law requires the supervisor to send the business a letter detailing the violation and stating their intention to impose a monetary sanction.

Conversely, the business is entitled to present its arguments to the supervisor (orally or in writing). A business wishing to do so must notify the supervisor within 45 days of receiving the supervisor’s notice.

If the business requests, the supervisor may extend the business’s “notification period” by an additional 45 days (Section 22f of the Consumer Protection Law).