Is It Legal To Use Out Of Date List Prices For Comparison On Sales?

Last week we pointed out how Apple artificially inflates the discount of its refurbished units by using the original introductory list price as a comparison, even if the price has since dropped and the true list price is now lower. Now a reader writes in to say he caught Toys R Us doing the same thing on sale prices of Playstation 3 bundles and 30 gig Zunes. Our question: is this legal? New York City’s consumer protection law seems to imply that—at least for retailers doing business in NYC—it’s not, unless you clearly indicate the trail of price reductions, something neither company is doing.

The reader, Gizmo Sprocket (we’ll call him GS), noticed the price difference on the PS3 bundle.

con_ps3saleprice.jpg

The implication is that Toys R Us is discounting the console further from the list price, but GS knew that the list price is now $499 no matter where you buy the console—hence, this was no discount at all. He decided to ask Toys R Us what was going on:

There was no option for simple pre-order questions or to report problems with the website…. So I navigate phone-tree hell and finally get somebody on the phone. They insisted that the list price was $599. I explained that the initial launch PS3 bundles were indeed listed at this price, but the item they mentioned was not $599. There was some discussion surrounding that the launch PS3 was an entirely different model and SKU- including a 60gb model (not 80) and didn’t include Motorstorm as indicated in this online listing. In fact, this sku was always $499. [see image at left. -Consumerist] con_ps3listprice.jpgThey went to the Sony store online and told me they searched on SonyStyle for “PS3″ and again insisted that the list price was $599. I repeated the search on my end of the phone call and saw what they saw.

They then conceded there was a problem (finally) and said it would be looked into. I asked if they would honor selling me this PS3 for $100 off the list price as Toys R Us Dot Com showed they were selling it (the list price actually being $499 not $599 as listed) and they said they would not.

Note: Today we visited the Sony link and any mention of a price had been removed. Here is the original page as sent in by GS, taken earlier this week. He continues:

I am not sure this is illegal or unethical- as a consumer I was prepared to buy it for $399 if they would honor that price. I am still prepared to buy the 80gb motorstorm bundle for $399 if they would honor that price, but that is besides the point.

So- it is definitely illegal to indicate an inflated list-price in NY State and probably other areas. As I live in NY State and this product would be shipped to NY State. Toys R Us Dot Com markets in NY State and it would seem that this consumer protection applies. This could be an innocent mistake, but part of me thinks it would be reasonable for them to honor their posted discounted price in either proportion ($100 off of $599 is a discount of 16.66667 percent) or as a drop of $100 off off the $499 actual list. Either way I’d buy it..

What are your thoughts?

The next day, GS found a similar pricing issue on Toys R Us with a Zune:

con_zunesaleprice.jpg I check Techbargains.com occasionally. At lunch i noticed a clearance sale over at Toys R Us dot com. I wondered if the list price issue was fixed on the PS3 so I clicked through techbargains and then clicked for items over $100 and found the 30gb Zune listed.. the list price is noted as $249.99 and then, below it- Our price: 199.99… I just checked on http://www.zune.net/en-us/products/compare.htm and found the 30gb is listed at $199.00. The price was dropped when the new Zune models were announced. Now what is really troubling is that this page is supposed to show things on a clearance sale! It says so at the top of the page.con_zunelistprice.jpg
 

Gizmo Sprocket makes an interesting point from a business liability perspective: if you list an inflated percentage of savings based on an out-of-date list price—which is what Apple does on its refurbished products—and a customer catches it, can he demand you honor that percentage discount on the real list price? If so, that’s reason enough to start being completely honest with list prices, “original prices,” and reductions.

As to the legality of it (we’re getting there, we just had to get through a lot of backstory first), here’s the actual law in New York City:

Rules of the City of New York -
Title 6
Department of Consumer Affairs

§5-91 Reductions Based on Advertiser’s Own Price; “Formerly,” “Regularly,” “Reduced,” “Percent Off,” “Save,” and Similar Terms.

(a) Immediately preceding price. If an advertiser uses the words:

          “percent off”
          “formerly .., now …”
          “reduced”
          “reduced to”
          “regularly…, now …”
          “now only”
          “save $ …”
          “was …, now …,
          “item now $ …”

or any similar term implying a reduction from a prior price charged by the advertiser, the price to which the reduced offering price is being compared must be the advertiser’s bona fide selling price for that item or service unless the advertiser clearly discloses another basis of comparison or qualification.

(b) Intermediate reductions. If the term “originally,” or any similar term, is used in any advertisement, the price stated as the “original” price must be the advertiser’s bona fide selling price for the same article or service prior to intermediate reductions, and the price immediately prior to the current reduction must be disclosed, unless intermediate reductions are clearly indicated by the language used.

Example: “Originally $75; then $68; now $65″; “Earlier this year $75; now $65″; “Further reduced to $50.”

(c) Comparison not recent. If a claim is based on a past bona fide selling price of the advertiser prior to the recent, regular course of business, the advertiser must clearly disclose that fact.
Example: “Last year $40, now $20.”

That seems to be saying that, if you’re going to list original prices in order to accentuate the appeal of your discount, you have to show a clear trail of the item’s pricing history—sort of like how Filene’s Basement or Daffy’s lists an original price, a reduced price, and then the current sales price on their tags.

RELATED
“You Can’t Discount The Past, Apple”
(Photo: Getty)

Comments

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  1. RandoX says:

    Since when do we trust retailers to tell us when something is a good deal? Do your own homework.

  2. mopar_man says:

    Amazon does the same thing.

  3. joemono says:

    @RandoX: You may be okay with companies outright lying to you (because after all, you’ve done your homework and are an expert on what you’re purchasing), but not everyone is.

  4. Antediluvian says:

    That’s why the Macy’s ads all say “Intermediate markdowns may have been taken” when they list the “original” price and the new “sale” price.

    Bastards.

  5. Sure I could agree with you, but then we'd BOTH be wrong. says:

    @RandoX:
    Agreed! Caveot Emptor!

  6. itsallme says:

    @RandoX: Apparently lots of people trust other people to tell them it’s a good deal otherwise we wouldn’t have this subprime mortgage mess.

  7. socalrob of the 24 and a half century says:

    @RandoX:
    I don’t. I felt somewhat dirty when I worked at Toys R Us in the videogames department. The big thing that year was PS2 (just launched) and GameBoy colors. We were sent a nice shipment of Sega GameGears. ok this thing is over 9 years old at this point. They want us to sell them. Well, we did. We hyped them and how you could get one and like 5 games for the price of a GameBoy. I felt somewhat dirty since they really wanted to get a GameBoy, but only somewhat because I personally love the GameGear.

    There are certain retailers to not trust and Toys R Us is one of them. Employees are or were at least rewarded by being allowed to keep their seasonal jobs by doing a good job and pushing crap off on consumers during the holidays. And when it comes to videogames, just look for a place that DOESN’T force a bundle on something, and they are most likely legit on their prices. Target comes to mind…

  8. Chris Walters says:

    @mopar_man: Yes, I actually think the PS3 listing is debatable—as long as Toys R Us doesn’t imply that they’re discounting the list price, all they’re doing is listing an original price and current price. The Zune is another issue, because they’re implying a savings based on a higher price that no longer exists. Same with Apple.

  9. DrGirlfriend says:

    Well, sure, buyer beware and all that, but at what point does “buyer beware” turn into “I am too caught up in the idea of personal responsibility to call companies out on their bullshit, so I will just let them lie to me and I will just shoulder all responsibility during any transactions I have with them”?

  10. ThomFabian says:

    This only serves to show an error in the logic of many consumers. You buy something because you have deemed that the amount of money that they are asking for an object is worth trading to them in exchange for that good or service. There is no reason to purchase something due to its markdown (from some mythical amount).

    The question is “Would I trade X Dollars for this good or service” not “Should I save X dollars by purchasing this good or service now”.

  11. thefezman says:

    I love the “Add to baby registry” button in the PS3 ad. My baby defintely needs a PS3 as a gift. And by baby I mean me.

  12. hotel02 says:

    This reminds me of Tivo’s practices. After my tivo series 3 broke and I called for a replacement, they charged $900 to my credit card for the re-conditioned replacement, until I sent them my broken one. I know you can buy a series 3 brand new for $600 from circuit city and many times much cheaper than that. So, if I were to forget to return my tivo, they will have hugely profitted off of me.

  13. Antediluvian says:

    I have a friend who very much falls into the trap of “but it’s a great price!” when in fact, “it’s a piece of crap that you don’t need.”

    “Oooh — eggplant sorters — 3 for $10!”
    “Yes, but do you NEED them?”
    “But they’re marked down from $20 each! It’s a bargain.”

    I’m totally guilty of that too, but the first step is admitting I have a problem, right?

  14. coan_net says:

    I mean, doesn’t everyplace do this. This is the second story about this issue, and it was always in my mind that most stores doe this all the time.

    It’s called marketing – A consumer is more willing to purchased a $20 item marked down from $100 then they are willing to purchase a $20 marked down from $25 (even if it is the same exact item).

    Kind of like how most DVD’s are MVRP $30, but many stores offer great discounts of around $15-$20

  15. Antediluvian says:

    @ThomFabian: You’re absolutely right that consumers should think that way, but it’s not easy.

  16. ivanthepig says:

    One thing that I’m thinking is that at the time of product introduction, showing the original list price for that exact product with the same specs as it had when first introduced – should be okay.

    On the other hand, if you’re selling a product with all current upgrades (OS, software updates, etc etc) and showing the original price of the product (before these updates) – I don’t think that would be a legitimate way of presenting the products original price.

    For instance:

    If you bought a monitor that had no USB ports originally. Sold for $800 originally. Now, the same product, comes with USB ports – it’s the same product just with a small upgrade. List price now is $500 (because tech-times change). And refurbished, it shows you the original product without the USB ports as for sale at $450 with the original list price of $800. That, technically, is correct.

    Crap. I think I just confused myself. Anyone understand what I’m saying?

  17. Beerad says:

    @coan_net: Yes, a consumer’s probably much more likely to buy your products if you’re allowed to lie to them about the amount the items are marked down.

    There’s marketing, and then there’s bullshit. Know the difference.

  18. ptkdude says:

    It’s one thing to say: Was $599, now $399 (think iPhone). It is something else entirely to say “List Price $599, now $349″ when the current normal selling price is $399. The former is perfectly acceptable to me. The iPhone was in fact $599, and it is now $399. The latter is not acceptable to me, since the list price is NOT $599… it is $399.

  19. ThinkerTDM says:

    It’s legal as long as Toy’s R Us has millions of more money than you do.
    You could sue them. When it gets settled in a few years, give us a call.

  20. BugMeNot2 says:

    My grand-father in law gets these ads geared toward seniors all the time with 5 yr. old computers for sale. And they are obviously (to me at least) way overpriced. But to him, it looks like a good deal, because it has stuff like:
    Original price: $2300, now $499
    but in reality, it isn’t even worth $199 because it is so old. Very annoying.

  21. crabbyman6 says:

    @ThomFabian: I agree 100%. I used to have a roommate that would buy just about anything based on the discount he got, not the actual price vs. value. It should be up to the buyer to research this, otherwise consider it a laziness tax.

  22. mac-phisto says:

    new york has very strict laws about pricing – many states do not. but the question i have is this: what state laws are internet merchants required to abide by? all of them? i would seem to think that they would only be required to follow the laws consistent with their “home” state (however that is determined). separately, i would expect a store with merchant locations within new york to follow new york pricing guidelines.

    i seem to recall the new york ag trying to get internet merchants in other states to abide by ny state law in a similar circumstance recently, but i could be wrong (& i don’t remember the outcome anyway…so why did i bring this up?).

    i don’t think this practice is fair, but merchants have never been known for their fairness. it’s up to us, as educated consumers, to shop for the best deal & avoid the pitfalls along the way.

  23. cde says:

    @crabbyman6: Tell your old roommate, I have a 2,005,000 dollar diamond for sale for 15,000.

  24. cde says:

    @mac-phisto: All the states they are willing to ship to.

  25. cde says:

    @mac-phisto: But the difference in this situation is that TRU has brick and mortar in NY, so they doubly have to follow NY laws.

  26. UpsetPanda says:

    If you don’t do your research and figure out what is a good sale and what is a bad sale, then it’s no one’s fault but your own. That $499 PS3 seems like a great deal until you find out everyone else is selling it for $499 too. But if you won’t do your research and see that it was reduced to $499, whose fault is it that you just didn’t do your homework? Not the store’s fault. It’s somewhat shady, sure, but whether they do it for the gullible consumer isn’t the point. It’s that someone fell for it, when they shouldn’t have. Personal responsibility for one’s own purchasing power.

  27. CumaeanSibyl says:

    @DrGirlfriend: Yes, this. I’ll do my research regardless, but I don’t want to buy from a retailer who’s willing to tell me a bald-faced lie.

    However, I’m not exactly interested in keeping a running list of places I’m not allowed to shop, so maybe the companies themselves should STOP LYING.

  28. mac-phisto says:

    @cde: is that your opinion or fact? here’s why i ask: i know connecticut requires a comparable price per unit -> [www.ct.gov]

    yet here is a 5-pack of toilet paper for sale with no per unit cost -> [www.amazon.com]

    isn’t the reason states have been unable to successfully tax internet sales relative to this argument? i was always under the impression that the jurisdiction of state agencies charged with oversight did not extend beyond their respective border (unless such prior jurisdiction was granted in a formal agreement).

  29. Mr. Gunn says:

    Amazon does this all the time, and if you look you can find some crazy markdowns.

    This wouldn’t be news, except Apple’s doing it, and the same people who went all crazy when apple dared lower their prices, and who went all crazy for the “internet communications device“, will probably go all crazy about this.

  30. snoop-blog says:

    then there are the things you need, and continue to need that if you buy low, you indeed save money. if gas went on sale for $2 per gallon, you should fill up to save money in the long run right?

    ex: winter coats. sure do you need one in the summer? no. but if you buy in the summer when they are on sale, the season will eventually change, and you indeed saved money.

  31. Athenor says:

    Wait, did Sony ever officially lower the price of the PS3 + Motorstorm bundle? I know that the particular model in that picture is from a year ago, and the PS3 has had a ton of different SKU’s at different prices. Technically, the SKU that TRU is listing there might never have been discounted, so TRU is right in discounting it to the current market value for an equivalent PS3.

  32. keith4298 says:

    They already got $60 from the 10% restocking fee to return the phone. So they are making an additional profit on the refurbed phone? Seems sketchy.

  33. walterny says:

    There is nothing illegal about what Apple does or any company that clearly shows the original selling price and the current price. They state both the “Original Price” and the “current sales price”. The original price is indeed the original list price of the item and they do not have to give you a intermediate price just because they decided to change the retail value along the way. And while you quote NYC Laws, Apple clearly states on their site that:

    “all sales at the Apple Store are governed by California law”

    And as for Toy R Us:

    “Toys R US terms and Conditions will be governed by and construed in accordance with the laws of the State of New Jersey”

    All retail websites have a Terms of Service located on the bottom which clearly defines how they sell and what terms mean.

    Regarding this topic, the Bloomingdales site says it best:

    “When we refer to an “Original” price on the bloomingdales.com section of the site, this means that the merchandise was previously offered at the higher “original” price listed.”

    No one is ripping you off. Your just a smarter consumer that knows that the original list price was changed. You’re still getting a deal. There is no trickery here.

  34. Curiosity says:

    Generally you are asking what law applies to internet transactions, a good question and one that is hardly settled.

    The short side stepping answer is to ask the Attorney General of your State and hope that they actually have settled this question with a reasonable response.

    But basically, it is a question of Due Process, Jurisdiction and Long Arm Statutes, Conflict of Laws, with potentially Contract Interpretation thrown in. The analysis is usually something like the “purposeful availment” test [en.wikipedia.org]
    “purposeful availment” test to determine whether a company can be sued in a specific jurisdiction. “Courts have looked at 3 factors: availment of a company to another jurisdiction, whether an act was done in another jurisdiction, and whether the jurisdiction is reasonable for the defendant to expect to defend himself there.”

    However, the slightly longer (and partially incomplete) answer is who can actually compel these people to appear physically within a courthouse? In the USA, courts’ jurisdictional powers are limited by due process and by state statutes known as Long-Arm Statutes. These conflict at times, and the actual determination is very fact intensive simply because corporations have no physical body and people equate the internet to a magical disembodied place since they do not understand the technology.

    It is somewhat like asking if you order something on the phone from another state, where is the business “located”? Have they extended their reach to your state?

    Look at [ecommercelaw.typepad.com] for some examples.

  35. chstwnd says:

    @UpsetPanda:
    “…but whether they do it for the gullible consumer isn’t the point. It’s that someone fell for it, when they shouldn’t have.”

    Okay, I believe you’ve hit the very definition of a con artist’s work. So, I take it you’re in favor of letting con artists do their thing without any fear of legal ramifications?

  36. What are the legal standards for a valid list price? Anyone know?

    I mean, the concept of, for example marking up furniture the day before the 50% off sale is older than retail itself. Expressing the “value basis” in the most favorable way possible is obviously in the best interests of retailers.

  37. Curiosity says:

    The term List Price is a bit confusing since it usually refers to a certain list usually (the MSRP or Manufacturer’s Suggested Retail Price [www.wisegeek.com] [en.wikipedia.org]). However, this also means – “The stated price of a commodity before any discount or other reduction.” [www.bartleby.com]

    This is not usually the Market Price, which can be higher or lower. A good article on this is actually an old article ” http://www.time.com/time/printout/0,8816,863109,00.html

  38. magic8ball says:

    In Utah I frequently see items that are purportedly on sale, with tags that say “compare at X amount,” with X being a price much higher than the “sale” amount. I’ve always assumed they phrase it this way so they can technically avoid lying about the item’s original price.

  39. walterny says:

    @Curiosity:

    You might want to credit the sources that you plagiarize from as if it first hand knowledge. In this case:

    [en.wikipedia.org]

  40. karmaghost says:

    I could see how maybe the refurbished iPhones were the models that were originally released, thus justifying the original MSRP comparison. Otherwise, this is misleading, but I think people are familiar with this practice.

  41. no.no.notorious says:

    so i can bring in an add from decades ago and demand they can match that price?

    no thanks. i don’t think it’s legal.

  42. nequam says:

    Nequam solves it … by Nequam:

    What matters most in the decision whether to buy a product: the current price or the amount of any discount? Certainly it is the price. If Item X is a good value at $50, what difference does it make it was previously $55 or $550? It should not make any difference, because the purchaser has to pay $50. Not $55. Not $550.

    Famous last words of the unskilled consumer: “Well, it was a bit more than I wanted to spend, but it was such a great deal that I could not pass it up!”

  43. SaraAB87 says:

    @socalrob:

    Most people are CLUELESS when shopping for video games. They are looking for any guidance they can get and will believe the sales people at all costs. Some even believe the sales people are right. Especially the shoppers who go to TRU, they just want video games for their kids. All you were doing here was giving them their options, they ultimately made the decision to buy the gamegear over the gameboy color. There is nothing dirty about that. You don’t know if the shopper wants the video games cheaply or if they want exactly what the kid requested, there is no way for an employee to know what each customer wants (who knows, they may have wanted the gamegear), especially with an item like video games where people can be easily swayed into another choice just so they can have video games under the christmas tree when santa gets there.

    If you don’t know what you are buying educate yourself before you go into the store, that goes for kids toys or anything, if you don’t take the time to educate yourself, then consider yourself at the mercy of the salespeople.

  44. harrie says:

    What they’re doing may not be considered illegal… Depending on the item. For instance. In the TV world, in which I work, Everything has three prices. MSRP – What the manufacture WANTS you to sell it at. With the Zune, for instance, It is possible that MSRP is still officially $249. There may also be a Minimum Advertised Price (MAP or List). The Zune’s List price is $199. There is also a street price – what you’ll actually pay for it on the street. In the zune’s case, probably still $199. But on a TV or other merchandise, a Sony 46″ TV is going to list for $2100, have a MAP of $1900 but have a street price of about $1700 lately. There are many ways retailers and manufacturers can make this all confusing. Just because there are some scratched out prices somewhere doesn’t mean you’re making a good buy. It just depends on what they’re scratching out. If they’re scratching out MSRP and ‘discounting’ it MAP pricing, not a great deal. If they’re scratching out MSRP or MAP and discounting to anything below MAP, THEN it is a good deal. Only if they are listing above MSRP or at an old MSRP (MAP will often change, but MSRP usually doesn’t) should it be considrered illegal

  45. alaris says:

    My company (roughly ~400 stores) does this all the time. I am so used to it that this did not surprise me; it sort of seemed odd that this was worth a post on consumerist.

    I’ve seen this at so many retailers that I don’t trust them at all. I don’t care what the “original price” is based on their ads. I will cross-shop them with other vendors and use that as the comparison. What the hell do I care what it used to cost? I care what it _should_ cost me, NOW.

  46. Onouris says:

    @mac-phisto: Good argument for having the same laws throughout the country. Does having different laws state by state serve any kind of purpose other than to confuse the hell out of people when they’re talking about anything outside their home?

  47. mac-phisto says:

    @Onouris: well, i’m a “local control” advocate, so yes, i do think it serves a purpose. the problem you run into when something becomes federalized is that everything is reduced to the common denominator. feds don’t take the most stringent laws & apply them across the board – they implement the most basic of laws & then disallow deviance from them.

    if states work together (perhaps thru indirect governmental agencies such as the national governors association) to push thru legislation in each state, i have no problem with that, but i have a huge problem with feds overstepping their bounds.

  48. Red_Eye says:

    Like anything in todays world listed pricing is subject to the all mighty asterisk. In 2004 I posted a complaint about Macy’s “Regular” prices. Here is the quote

    ”Regular” and ”Original” prices are offering prices that may not have resulted in actual sales, and some ”Original” prices may not have been in effect during the past 90 days.

    Since Macy’s is “disclosing” the fact, even under the New York statute it would be legal.

    Only with a concerted effort will consumers ever defeat the all mighty asterisk and the legion of lawyers who make their money fighting around it.

  49. Curiosity says:

    @walterny:
    Er I did credit Wikipedia, in fact I cited to it hoping people would look at the article ?!?!?!?

  50. Beerad says:

    @mac-phisto: “feds don’t take the most stringent laws & apply them across the board — they implement the most basic of laws & then disallow deviance from them.”

    Well, that’s not exactly true. A lot of times, federal law will mandate the minimum protection that people are entitled to, but states are free to go beyond that (the popular phrase is that it’s a floor, not a ceiling). Take the minimum wage. No employer is allowed to pay less than the federal minimum wage (yes, yes, with exceptions for service workers) but states are free to enact higher minimum wage laws that apply in that state. I believe consumer protections tend to work that way as well.

    While I appreciate the states’ rights view, it just breaks down in a lot of places. Why should I get a miserable public school eduction just because I happened to grow up in a state with little education funding compared to a state with ample funding?

    Yes, it would be nice if states would work together, but it just ain’t happening.([en.wikipedia.org])

  51. Curiosity says:

    @Beerad:

    You may end up with a miserable public education, but there may be other factors that the state has done that makes up for this (superior job market/standard of living).

    An interesting background on this as it concerns corporations can be found at [www.google.com]

    Moreover the debate between states rights and federalism is far from over since it has to do with local people making choices about their local property. [www.google.com]

    States rights also mitigates the problematic effect of the popular vote being clustered.

    If you live in Hawaii, do you really want your laws decided by the people not in Hawaii? You would have the laws decided by the majority of the population[www.census.gov], rather than the people who have vested interests in resolving problems. This is essentially the (though currently unpopular) problem with a direct democracy and why we have the electoral college [en.wikipedia.org], the house v. the senate, and limitations on states rights and federal rights.

    Just food for thought that this is another US check and balance system that mitigates the narrow sighted nature of people (who are wealth maximizers for themselves).

  52. Beerad says:

    @Curiosity: Oh, I hear ya, don’t get me wrong. However, the states that tend to rank worst in education are places like Alabama, Mississippi, West Virginia and Arkansas — they don’t correlate to the list of best job market/highest quality-of-life states. Yes, I’m generalizing and I have nothing “against” those places and I don’t have a list handy so everyone put down your flamethrowers.

    Perhaps not surprisingly, the Hawaii example illustrates another facet of the argument — why shouldn’t the majority of the population be making the rules? Why is it that the four least populous states have equal power in the Senate (which everyone recognizes as more powerful than the House) as the four most populous states, even though the laws will affect far far more people in those populous states?

    This probably isn’t (in fact, I’m pretty certain it isn’t!) the right forum to hash out all of these issues, and we’re likely putting other readers to sleep. Suffice it to say I’m a strong federalist, although I do appreciate the value and importance of local controls in many areas. I think the checks and balances model works, albeit imperfectly.

    And don’t get me started on the electoral college! : )