Steering Clear of Deceptive Pricing Claims
Selling windows and doors in today’s economy is hard. The replacement window business
has remained comparatively strong,
but selling directly to consumers is
stil a challenge. Homeowners are
spending more conservatively and
everyone is more skeptical and look-
ing for a “deal.”
In the midst of this, we want to
remind you of some pricing bound-
aries that exist legally so you can
plan accordingly. Namely, in order to
comply, sellers must understand the
basics of the requirements of federal
and state laws that affect the pricing
strategy used to sell windows, doors
and related products. This is definite-
ly easier said than done.
own pricing regulations, the federal
rules may trump the state laws if the
federal laws are more strict.
The requirements of some FTC
regulations are obvious, but others
are not. This can lead the unwary
company to unknowingly violate the
rules on pricing. The unlawful pricing schemes detailed in the CFRs are
former price comparisons ( 16 C.F.R.
§ 233.1), retail price comparisons
and comparable value comparisons
( 16 C.F.R. § 233.2), advertising retail
prices established or suggested by
manufacturers ( 16 C.F.R. § 233.3),
bargains based upon the purchase
of other merchandise ( 16 C.F.R. §
233.4), and price comparisons ( 16
C.F.R. § 233.5).
FORMER PRICE COMPARISONS
The basic rule of “former price
comparisons” is that if you sell a
product at what you claim is a reduction of the price at which you previously sold the product, you need to
have actually sold that product at the
price you claim it was previously sold
“on a regular basis for a reasonably
substantial period of time.” Pretty basic, right? If you advertise a product
at a reduced price, just make sure
that it is actually a price reduced from
what you regularly sold the product.
In other words, don’t jack up the
price for two weeks in order to later
sell the product at a reduced price.
PRICE COMPARISONS
For those selling the same exact
product as other companies, the
regulation concerning retail price
comparisons provides that if you are
offering a product at a price that is
advertised to be lower than offered by
your competitors, you need to make
sure (and be able to document) that
you are in fact selling the product at a
price that is less than the competition
in your area. If you are advertising a
product as selling for a certain amount
less than your competitor’s similar, but
not identical product, your advertise-
ment needs to make clear that the
comparable value comparison is being
made against a product that is similar,
but not identical, to the product you
are selling. Again, pretty straightfor-
ward, but it can be a time consum-
ing process to keep up to date with
your competitor’s fluctuating prices.
BU Y ONE, GET ONE
The last specific regulation deals
with offering bargains based upon
the purchase of other merchandise.
For example, “Buy 4 windows, get 1
free!,” “Buy 1 window, get 1 at 50%
off,” or “Buy 10 windows and receive
free installation!” The keys to offering
these deals while staying within the
bounds of the law is to not inflate
the price of the product that must be
bought in order to receive the other
product for free, don’t offer a product
of lesser quality or quantity than is
normally sold at the price advertised,
and make sure that all material terms
and conditions of the offer are included in the advertisement or sales
pitch. In other words, the free item
must be free and the item required
to be bought to receive the free item
must be sold at its regular price.
