By Gemma Alexander
We’ve all seen eye-popping discounts touted on online
shopping sites from Amazon to Overstock. But are those deep discounts real?
Checking around at other sites often
reveals the exact same item offered for the same price—with no one, not even
the manufacturer, charging the “list price” or “suggested retail price” used as
the basis for calculating those enormous price drops.
What is a list price, anyway?
The list price was originally
introduced as a way to protect consumers back in the days when comparison shopping meant
driving around town—or to the next town over—to find out if a different store
had a better price. The idea was that printing a price on the box would deter
unscrupulous shop owners from grossly overcharging for a product. Over time,
people came to count on that listed price not only for establishing a sense of
what a product should cost, but also as a basis for determining the value of
any discounts.
Today’s online world makes
comparison shopping a lot easier, yet the list price has taken on even greater
importance as people look for bargains online.
Merriam Webster defines “list price”
as:
“the basic price of an item as
published in a catalog, price list, or advertisement before any discounts are
taken,” and offers this sample sentence: “The car’s list price was
$30,000, but the actual selling price was less.”
It’s a telling example, because as
any savvy car shopper knows, the list, or sticker, price on a new car is a
fiction. It turns out that for many products sold online, the list price is
equally fictitious. Reporter David Streitfield priced one item (a high-end skillet) at nearly 20 different online
retailers, including Amazon, Williams-Sonoma, and the manufacturer’s own
website. Every one of them offered the item at around $200 while showing a list
price closer to $300. Not a single website was actually charging the list
price. It seems that nowadays the list price is an imaginary number.
It’s sneaky, but is it illegal?
Just because everybody is doing it
doesn’t make it right. “If you’re selling $15 pens for $7.50, but just about
everybody else is also selling the pens for $7.50, then saying the list price
is $15 is a lie,” David Vladeck, former director of the Federal Trade
Commission’s Bureau of Consumer Protection told Streitfield.
So far, the biggest legal precedent
is a California case against Overstock.com. Eight district attorneys filed
suit in 2010, claiming that the Internet retailer posted an inflated list price
next to the sale price. Early this year, California Judge Wynne Carvill
found that Overstock had violated state false advertising and unfair business
practices laws since 2006. Overstock was fined $6.8 million in civil penalties
and ordered to bring its advertising practices into compliance with the law
within 60 days. Overstock has filed an appeal claiming it only follows
“standard industry practices.”
There is truth in Overstock’s claim
that it was just going with the flow (so to speak). But a slew of lawsuits are challenging the practice, which is widespread not just
online but at brick-and-mortar outlet stores, too. J. Crew is currently accused of labeling its regular online
prices as discounted and publishing “valued at” prices that were never charged.
Michael Kors and J.C. Penny have both already spent millions to settle class
action suits.
In a letter asking the Federal Trade Commission (FTC) to take a
look at outlet advertising practices, Senators Sheldon Whitehouse (D-RI),
Richard Blumenthal (D-CT), and Ed Markey (D-MA), joined by Rep. Anna G. Eshoo
(D-CA), claim that 85 percent of goods sold at outlet stores are not excess
inventory as implied but are actually manufactured specifically for the
outlets. The listed retail price for goods that are not even offered at the
brand’s regular retail stores would then be completely made up, in violation of
the FTC’s Guides Against Deceptive Pricing.
Consumer beware
Today list prices are more useful as
a tool for retailers to mislead consumers than for consumers to gauge cost
savings. Between lawsuit settlements and congressional requests for legal
definitions for terms like “outlet,” there’s a good chance that the FTC will
get involved. But in the meantime, the old advice still holds true – you better
shop around.
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