NAD Scrutinizes Price Savings Comparisons

The National Advertising Division of the Council of Better Business Bureaus recommended that a retailer discontinue its pricing comparison claims as they relate to suggested retail pricing.

HH Gregg, the Indianapolis-based appliance and electronics seller, like many retailers, compared its own prices to manufacturers' suggested retail prices, as opposed to the actual price in which the product was being sold. For example, if Sony listed a television's standard retail price as $1000 and HH Gregg sold it for $799, HH Gregg's advertisements would read "SRP $1000, save $201, final price $799."

Home Depot was unhappy with HH Gregg's practice and filed a challenge with the self-regulatory body NAD. Home Depot complained that SRPs are typically inflated by manufacturers and when a particular product is routinely sold for less than the suggested retail price, HH Gregg's advertisements were misleading because they promised savings to consumers that were not bona fide.

Before ruling on Home Depot's challenge, NAD asked HH Gregg to substantiate its claims concerning the amount of savings. Although it denied any wrongdoing, HH Gregg responded by discontinuing its advertising policies and instituting new procedures. Going forward, HH Gregg says it will not compare its prices to the manufacturer's suggested retail price unless it has validated that substantial sales of the product are actually being made at the higher price. NAD accepted HH Gregg's new policy as proper.

TAKE AWAY: When making price comparisons, retailers should not automatically accept a manufacturer's suggested retail price as a valid basis for comparison. A retailer wishing to make price comparisons should investigate the price at which a particular item is currently being sold before advertising a specific dollar amount of savings.

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