As discussed by ecommerce law attorney Richard B. Newman, here, the FTC’s Deceptive Pricing Guides address different types of pricing representations. These include, without limitation, representations that a current price is a sales price or a discount from the former price, comparison prices and special prices based upon the purchase of other products (e.g., Buy-One-Get-One - “BOGO” offers).
As a general rule, advertisers must take care not to promote a price as being something special or different if it is, in fact, not true.
Covered previously are numerous substantive issues pertaining to former price comparisons, including price comparisons based on a fictitious former price. Also previously covered are retail price comparisons, comparable value comparison considerations, advertising retail prices that have been established or suggested by manufacturers or other non-retail distributors, bargain offers based upon the purchase of other merchandise, miscellaneous price comparisons and FTC guidance concerning use of the word “Free.”
In case digital advertisers are curious whether the FTC’s Deceptive Pricing Guidelines have real-world teeth, consider recent matters involving such pricing claims.
A recently filed class action lawsuit was filed against Safeway and its parent company alleging that the regular retail price of products were unlawfully inflated in conjunction with buy-one-get-one-free promotions. In short, the legal theory is that consumers still paid for the alleged free product. Here, the complaint actually cites to the FTC Deceptive Pricing Guides regarding use of the word “Free.” A consumer “has a right to believe that the merchant will not directly and immediately recover, in whole or in part, the cost of the free merchandise … by marking up the price of the article which must be purchased.”
In another matter that should be of interest to digital advertisers, Washington consumers recently filed a proposed class action under the Washington’s Consumer Protection Act and Commercial Electronic Mail Act alleging that Old Navy sent commercial emails that purportedly included misleading information about the duration of sales. Regulators strongly disfavor the creation of a “false sense of urgency” to act, including, but not limited to, fictitious sale/offer-end dates, countdown timers, limited space, etc.
The complaint against Old Navy alleges that some emails advertised that products were on sale “today only” or “this week only.” According to the plaintiffs, however, the received similar emails the following day or week with the same advertisement, or with last-chance deadlines followed by extension of offers.
And, as referenced above, the plaintiffs allege that some of the emails included ticking clocks and other indicia of urgency to act quickly, when such urgency, according to the plaintiffs, was misleading. The plaintiffs also allege that numerous subject lines in the emails are false and misleading.
This article should be of interest to digital marketers, ecommerce entrepreneurs and general counsel. Contact an experienced FTC compliance and defense lawyer if you are interested in discussing the design and implementation of marketing strategies designed to effectively walk-the-line between ecommerce and compliance.
Takeaway: These types of lawsuits (and regulatory inquiries related thereto) are likely to continue. Before advertising a discount price, a seller must offer an item in good faith at a price for a reasonable, substantial period of time and in the regular course of business. When comparing to others’ prices, whenever an advertiser represents that it is selling below the prices being charged in its area for a particular article, it should be reasonably certain that the higher price it advertises does not appreciably exceed the price at which substantial sales of the article are being made in the area. Offers based upon the purchase of other products, like a BOGO offer, if the advertiser increases his regular price of the article required to be bought, or decreases the quantity and quality of that article, or otherwise attaches strings (other than the basic condition that the article be purchased in order for the purchaser to be entitled to the “Free” or “1¢” additional merchandise) to the offer, the consumer may be deceived. Creating a false sense of urgency is not something that regulators and plaintiffs will easily overlook, either.