You probably see pricing claims all the time that reference the Manufacturer’s Suggested Resale Price (“MSRP”) When you see those claims do you believe that the MSRP reflects the price that the product is typically sold at? Well NAD apparently thinks most of us do.
In a recent NAD case against a discount appliance and consumer electronics retailer, NAD concluded that it was deceptive to list the MRSP and compare it to the store price unless the MRSP reflected average resale prices. An example of one of the contested claims was “LG 30.7 Cu. Ft. Stainless Steel French Door Refrigerator SRP $3299.99. Now $2999.”. NAD cited to the FTC’s Guides Against Deceptive Pricing – which are still on the books even though the FTC has not brought a deceptive pricing case since 1979. The guides prohibit use of an inflated regular price as a benchmark for a sale claim. In other words you cannot take a $10 pen, say its regular price is $20 and that you are having a 50 percent off sale. And that makes perfect sense. The Guides go on to say that “a retailer who advertises a manufacturer’s or distributor’s suggested retail price should be careful to avoid creating a false impression that he is offering a reduction from the price at which the product is generally sold in his trade area Here some of the ads showed only the MSRP and the store price. There was no allegation that the MSRP was an inflated price from the manufacturer. The challenger, another retailer, asserted that “consumers interpret suggested retail prices as the typical cost for a product in the relevant trade area.” NAD appeared to agree and decided “when an item is discounted, or marked down from a suggested retail price, the advertiser must demonstrate this is a bona fide regular price” NAD said it was “necessary and proper” that any future advertising will not use any MSRP “unless there is validation that MSRP reflects the marketplace pricing.”. At least at NAD the takeaway seems to be that you have to do a pricing basket survey to substantiate any sale claim where the reference is MRSP.
It would be interesting to see some solid consumer research showing whether or not consumers understand what a suggested manufacturer’s price is and whether or not they would confuse this with average local pricing. But until there is solid survey data on this point, we suspect NAD will stick to this party line. What are options for a retailer who wants to offer a sale but does not want to do a market walk first? A retailer can reference a sale as compared to its own past prices (as long as there is not an ongoing never-ending sale as many state AGs go after perma-sales as deceptive). A retailer can forgo sales and try an EDLP strategy — something JCPenney is trying. A retailer can benchmark to a particular competitor, although the pricing offered by the competitor must be confirmed and updated on an ongoing basis.