Project Description

The Legal Implications of Promotional Pricing

In December 2016 , Los Angeles prosecutors announced that they were suing four national retailers for deceptive pricing practices.

The suit alleged that customers had been fooled by these retailers (Kohl’s, Macy’s, J.C. Penney, and Sears) into believing that the discounts they had received were larger than they actually were.  In a public statement, Los Angeles City Attorney, Mike Feuer said, “Customers have the right to be told the truth about the prices they are paying, and to know if a bargain is really a bargain.”  This event points to a very real, and growing risk for retailers:  that their promotional practices may be leaving them open to legal action.

Retail promotions are conceived and executed by merchants and marketers who are largely unfamiliar with the laws and guidelines that apply to advertisements and discounts. They often follow pricing strategies and practices that were established long ago and may have evolved due to competitive pressures, causing these strategies to drift into legal gray area.

In addition, with the ubiquity of social media and email marketing, combined with advances in customer intelligence, the sheer volume of promotion in retail has escalated dramatically. This increased frequency of discounts and desire to communicate savings to customers has made it harder to comply with the tangle of laws that govern fair advertising practices. Nevertheless, it is important for retail decision makers to have an understanding of the legal implications of promotional pricing as well as guardrails they should apply to pricing strategies relative to promotions.

Disclaimer: Though we have relied on careful review of the relevant materials and consulted with legal counsel familiar with fair advertising practices, The Parker Avery Group is not comprised of lawyers and we do not claim to provide legal advice.  We highly recommend discussing advertising and pricing policy with corporate counsel or outside legal representation when setting corporate rules.