January 31, 2013

Wal-Mart's Holiday Price Comparison Advertisements Irk Competitors

Consumer Advertising Law Blog

Retailers, including Best Buy, Toys 'R' Us, and several regional supermarket chains, have filed complaint with at least six state attorneys general regarding Wal-Mart's price comparison advertisements, which ran during the 2012 holiday season. Wal-Mart's ad campaign purported to compare its prices on specific items to those of competitors. The retailers who have complained maintain that the advertisements were misleading in several ways, including comparing different models of the same product, citing incorrect competitor prices, and advertising products that were in low stock at Wal-Mart Stores.

The retailers' complaints were filed in Michigan, Illinois, Pennsylvania, Missouri, Florida and New Jersey pursuant to those states' various false advertising or anti-deceptive advertising statutes. Although laws can vary significantly by state, most state false advertising laws have a few main elements in common: all statements in an advertisement, whether express or implied must be truthful, and must not reflect an effort to deceive the consumer. The complaints are apparently in various stages of review and investigation and it remains unclear how the attorneys general will proceed.

Best Buy claims that Wal-Mart's advertisement offering a Dell laptop computer for $251 less than Best Buy was misleading because it did not compare the two retailers' prices for the same product. According to Best Buy, the Dell laptop Best Buy offered for the price cited in Wal-Mart's advertisement had different specifications and longer battery life than the one offered at Wal-Mart. Best Buy also alleged that Wal-Mart advertised the iPhone 5 for $150 even though it had an insufficient stock of the iPhones. Best Buy states that it lost several thousands of dollars because it was forced to sell the iPhone 5 for $150 due to its price matching policy.

Toys 'R' Us similarly claims that Wal-Mart heavily advertised one of the season's hottest toys, the Fijit, even though the toy was not available through Wal-Mart's website and was out of stock at several of its stores. Other retailers dropped their prices in response to the advertisements. Toys 'R' Us also claims that Wal-Mart's advertisements for the Fisher-Price Surprise Kitchen and Table Set and the Holiday Barbie incorrectly stated the price of the toys at Toys 'R' Us.

In 1994, Wal-Mart settled a dispute involving similar claims with Michigan's attorney general. Following complaints by Target Corp., Meijer Inc., and Kmart Corp., Wal-Mart agreed to make changes to its price comparison advertisements, including no longer comparing dissimilar products.

The FTC has guidance in this area. The Guides Against Deceptive Pricing permit retail price comparisons where the comparison is "based upon fact" and is not "fictitious or misleading." This means, among other things, that the products being compared must be comparable or competing -- i.e., of like grade and quality. The Guides Against Bait Advertising prohibit a retailer from advertising merchandise unless it has sufficient inventory to satisfy reasonably anticipated demand, or clearly disclose that supplies are limited or that the merchandise is available only atcertain locations.

Wal-Mart stands by its price comparison advertising campaign, and the company has responded to attorneys general in four states, addressing complaints by Toys "R" Us and regional supermarkets. The flurry of complaints by Wal-Mart's competitors serve as a reminder that businesses should exercise caution in verifying not only express price comparisons but also those that are implied.

© Arnold & Porter Kaye Scholer LLP 2013 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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