Deceptive Pricing: Part II

August 1998

Managing:Legal Issues

Deceptive Pricing: Part II

Jewelers can fight deceptive pricing. Model truth-in-pricing policies and working with Better Business Bureaus can help

by William H. Donahue Jr.

Last month, we talked about the legal concepts that define truth in pricing and the efforts of one state association to fight deceptive pricing through educating consumers and government agencies. Here are some other efforts that are working.

The Minnesota Jewelers Association, through its Truth in Pricing (TIP) Committee Chairman Eric Phillips, worked in conjunction with Ronald Graham, head of the Minnesota Better Business Bureau, and Jane O'Brien, BBB's director of operations, to set policies for the state.

Say you are a Minnesota jeweler complaining about the pricing practices of a competitor. The process they have developed works like this:

  • A jeweler complains to BBB, which serves as a mediator between the two retailers and discusses the problem with the offending retailer. Having a mediator is important – if the two retailers discuss pricing problems between themselves, they are left open to allegations of collusion or price-fixing, says Phillips. The complainant also can send BBB a formal letter with a copy of the ad or pricing policy he or she believes to be illegal.
  • BBB sends a copy of the letter and the ad to the other retailer and requests a response within 10 days. Phillips says most cases are resolved at this point. There are good reasons why it's in an offending retailer's best interests to respond and cooperate. At this stage, BBB tries to work with the retailer to correct what is often an unintentional violation of the law. BBB helps the retailer fashion advertising that doesn't violate the law. The goal of the process is to help both parties rather than assess fault or liability. If the retailer ignores the letter from BBB, he or she is advised the unresolved complaint will be of public record. In most cases, this is strong enough incentive to respond.
  • If the matter isn't resolved at this point, the offending retailer has an opportunity to explain fully why the ad is not deceptive and should not be changed. Once he or she has done that, BBB renders a decision, which also tries to find a workable solution. Either party can appeal the decision to an advertising review board made up of members of advertising agencies, advertisers and the public. The board will render a decision, which in Minnesota is accepted by the courts as a judgment. The process, which is conducted by the agreement of both parties, is confidential, but the outcome is made public.

There are similar programs in Nashville, TN; Lincoln, NE; and Yakima, WA, says Phillips. In April, Minnesota BBB CEO Graham met with BBB CEOs from Illinois, Indiana, Nebraska, Wisconsin, Kansas and Missouri to tell them about the program so they could go back to their own states and meet with jewelers. O'Brien of the Minnesota BBB stresses this process works only if state and local BBBs see that jewelers in their areas are interested. Many jewelers around the country are already members of a BBB, which are non-profit, non-government associations funded by their members. As members, jewelers are required to meet ethical advertising standards. O'Brien says the advertising review boards of BBBs not only take complaints from retailers, but also look through newspapers on a regular basis and contact retailers when they feel advertising is deceptive. But unless the board members are familiar with the jewelry industry, they are less able to detect problems in jewelry ad pricing.

JA's Role
Laws vary from state to state, and most policing of pricing and advertising is done by state agencies or bureaus rather than the Federal Trade Commission. For these reasons, Jewelers of America believes the problem can be dealt with more effectively on the state or regional level, says David Rocha, deputy executive director of JA. To that end, JA established the Venture Fund, which provides no-interest loans and grants to the 42 state affiliates of JA.

Each affiliate is eligible to apply to the fund for loans or grants to finance TIP programs like the one initiated by the Massachusetts/Rhode Island JA affiliate, described in last month's column (see Professional Jeweler,July 1998, pp. 106-107) and the program in Minnesota. The first TIP task force was started three years ago, says Rocha. Twelve state affiliates now have active programs, he adds. If you need help with a deceptive pricing problem, contact JA to find out what TIP programs your state affiliate can offer.

JVC Advice
A joint TIP committee of JA and Jewelers Vigilance Committee members created model legislation to serve as a basis for national standards and worked toward national enforcement of those standards, says Michael Roman, who was acting executive director of JVC in New York City until Cecilia L. Gardner took office in July (see p. 145). The committee found national enforcement of TIP is not high on the FTC's priority list. Local measures have been much more effective and are the only recourse many jewelers have. JVC suggests combating deceptive pricing by:

  • Using your own advertising to warn customers against the inflated or unrealistic claims of your competitors. Stress the importance of comparison-shopping, not only for price, but for the combination of quality, price and service your store offers. These components of value are meaningful to consumers. For jewelers who already advertise, this is not an added expense, just a different focus.
  • Filing complaints with your state attorney general's office and department of consumer affairs. Even though you may not get the result you want from a single complaint, it's important that records of complaints be made. Two reasons government offices give for not aggressively fighting deceptive ads in the jewelry industry are too few complaints and insufficiently serious complaints. Consistent reporting of offending practices will help change this perception. Also notify your local or regional Chamber of Commerce and your local BBB.

Roman also stresses the importance of educating your sales force. A trained and knowledgeable salesperson can do a great deal to teach a customer what to look for in pricing and how to avoid being fooled by deceptively priced items. Research has shown consumers have a natural suspicion of sale prices after discounts exceed 20% of a referenced price.

The suspicion level increases with the level of the discount. Literature offered in your store carefully coordinated with the presentations of your salespeople can play on that natural suspicion. He points out that internationally known jewelers such as Tiffany & Co. and Cartier have achieved enduring success by offering quality items without ever putting them on sale.

 Jeweler's Advisory Group

The Jeweler's Advisory Group is a non-profit charitable service organization founded in 1995 in the belief that self-policing is a better way to attack deceptive practices than government or court involvement. The group has about 100 members who work as retail or wholesale jewelers.

Anthony Kelson, a Richmond, VA, jeweler and chairman of JAG, says the group was founded because of a belief that deceptive advertising is damaging the reputation and integrity of the industry in the minds of the public. To address the problem, the group offers free assistance to any jeweler accused of or who accuses another jeweler of deceptive advertising.

JAG's media review division was set up to stop deceptive advertising. It works with the offending jeweler to create advertising that is not deceptive. JAG has 14 trained mediators who mediate pricing and advertising disputes between jewelers and between jewelers and customers. JAG's Web site can be found on the Polygon network at http://jag-.polygon.net. It gives an in-depth explanation of the association's philosophy and service and has membership application information.

William H. Donahue Jr. is an attorney practicing in New Jersey.



Copyright © 1998 by Bond Communications.


 

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