Over the past few years, a number of retailers have been challenged over their promotional pricing practices. Those challenges have been brought, primarily, by plaintiffs’ attorneys in class action suits and, occasionally, by regulators. This month, though, NAD issued a decision in a challenge that was brought by a company’s competitor.
According to the challenger, Nectar had advertised a “limited offer” of $125 off the price of a mattress continuously since October 2017. Pointing to the FTC’s guides on deceptive pricing, the challenger argued that a price at which an item was never offered at all – or a price that was used at some remote period in the past – is a fictitious price. Although Nectar claimed that it had offered mattresses for sale at the regular price for a “substantial period of time,” it did not present any evidence of that. NAD sated that when an item is marked down from a “regular” price, “the advertiser must demonstrate that the regular price is a bona fide price, rather than one that has been artificially inflated for the sole purpose of producing dramatic markdowns that exaggerate the actual value of the sale and savings to consumers.” Because Nectar did not do that, NAD recommended that it stop advertising the “limited time” offer.
The challenger also raised concerns about Nectar’s long-running “2 free pillows” offer. The challenger pointed to the FTC’s guides on the word “free” which, among other things, advise that an item should not be advertised as “free” for more than six months in any 12-month period. Although there was a disagreement about how many pillows had been sold a the regular price, Nectar did not present any evidence of sales at the regular price or that the “free” offer was made for a limited amount of time. Again, NAD recommended that Nectar stop advertising the “2 free pillows” offer.
Although the consequences of losing this type of case could have been worse if it had been brought as a class action or by a regulator, this decision demonstrates that retailers can also face challenges from their competitors.