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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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