Germany Takes a Step Toward Easing Restraints on Retailers

Chancellor Gerhard Schroeder’s government kicked another brick out of the wall shielding German retailers from competition Wednesday by revoking a Nazi-era law prohibiting discounts, rebates and lifetime guarantees.

The change reflects the center-left leadership’s drive since it took power two years ago to improve the lot of the consumer and to drag overprotected shop owners and department store chains into the Internet era.

Laws enacted during the 1930s, when German tradesmen sought legal protection against competition from Jewish businesspeople, had deemed discounts of more than 3%, rebates, free-parking-with-purchase and other promotions as unfair on the basis of national tradition.

But for the last few years, legal challenges and consumer demand have been gradually chipping away at the ossified practices. Since 1996, stores have been allowed to stay open as late as 8 p.m. on weekdays and until 4 p.m. on Saturdays. Even the sacrosanct ban on Sunday retailing has been tested at times in the last year by big department stores feeling the pinch of round-the-clock e-commerce and legal loopholes that allow stores near travel and tourist venues to operate beyond the allowed hours.

Laws to protect local businesses “are not necessarily suited for the Internet era,” Economics Minister Werner Mueller observed after Schroeder’s Cabinet voted to drop the discount restrictions.

Strict enforcement of the restrictions has confronted foreign mail-order businesses and the increasingly popular online retailers with lawsuits and fines for violating German practices. U.S.-based Lands’ End, for instance, was sued by a German retail lobby group a few years ago for offering lifetime warranties on all goods sold to German consumers. Wal-Mart Stores Inc. and several large grocery chains ran afoul of the rules this year and were ordered to pay hefty fines and stop undercutting their competitors with discounts below the approved levels on staples such as flour, sugar and butter.

The shopping wars in Germany have been intensifying as e-commerce expands and consumers living in border regions have increasingly opted to travel to more shopping-friendly states to make major purchases at their leisure.

That sharpening competition for shoppers’ marks and the greater willingness of eastern German retailers to open their shops during what has long been protected as “family time” is undermining the long-standing opposition to more liberal commerce.

With big retail chains such as Karstadt, Kaufhof and Wal-Mart now willing and eager to stay open longer, the fight has shifted more to a battle between the huge department stores and small shop owners who want to take weekends off without losing sales to more flexible competition.

“No one should fear that now everything will be allowed in competition,” Justice Minister Herta Daeubler-Gmelin said in an effort to reassure the small and medium-size businesses that remain the bedrock of Germany’s economy.

But the eased regulations probably will mean that consumers can expect to benefit from marketing practices taken for granted in other countries and that retailers will be under growing pressure to back their wares with better return policies and repair service.