Deceptive Pricing – Definition, Legal Provisions and Examples

What is Deceptive Pricing?

Deceptive pricing is a pricing strategy used by retailers to deceive consumers into believing they are paying a lower price for goods than they actually should. Deceptive pricing is the use of unfair or unethical pricing practices to lure in customers.

Deceptive pricing can take many forms, such as false advertising, bait and switch tactics, and hidden fees. Deceptive pricing is illegal in many jurisdictions and can result in severe penalties for businesses that engage in this type of activity.

If you believe you have been the victim of deceptive pricing, you should contact your local consumer protection agency or the Better Business Bureau to file a complaint. You may also want to consult with an attorney to discuss your legal options. Deceptive pricing is a serious issue, and businesses that engage in this type of activity can face severe penalties.

The sorts of deceptive pricing tactics used by corporations/traders/sellers include stating prices in a different way, such as half-price sale, “original price” or “former price” or “regular price” sorts of deceptive tactics. To deceive prospective consumers and make them believe they’re paying less money for items they purchase, the sellers provide these pricing quotations for many shopping seasons.

The Federal Trade Commission of the United States strictly forbids businesses from employing such deceptive pricing strategies to entice customers and create a negative shopping environment.

Common Deceptive Pricing Practices to Avoid

When you go out shopping, be aware of the common deceptive pricing practices that businesses may use to trick you into spending more money than you should. This will help you avoid being a victim of such tactics and save you money in the long run.

Here are some of the most common deceptive pricing practices to watch out for

1. False advertising

This is when a business makes false claims about its products or services in order to lure customers in. This can be done through print, television, or online advertisements.

2. Bait and switch

This is when a business advertises a product or service at an unbeatably low price in order to get customers in the door, only to try to sell them a more expensive option once they’re there.

3. Hidden fees

This is when a business fails to disclose all of the fees associated with their product or service, leading the customer to believe they’re getting a better deal than they actually are.

4. Former price comparison

This is when a business compares the sale price of their product or service to a higher “former” price in order to make the sale seem like a better deal.

5. Drip Pricing

This is when a business slowly adds on hidden fees as the customer goes through the checkout process, leading to a higher total price than they were expecting.

6. Strikethrough Pricing

This is when a business shows the original, full price of their product or service with a line through it, and then advertises a lower sale price next to it. This makes the sale seem like a better deal than it actually is.

7. Pressure Selling

This is when a business uses high-pressure sales tactics to get customers to buy products or services they may not need or want. This can be done in person, over the phone, or online. To persuade people to buy goods, certain businesses employ emotional manipulation, limited-time offers, and long speeches from salespeople.

What to Do If You Believe You’ve Been Deceived

If you believe you have been the victim of deceptive pricing, there are a few things you can do.

First, contact your local consumer protection agency or the Better Business Bureau to file a complaint. This will help raise awareness about the issue and may lead to investigations or penalties for the business involved.

You can also consult with an attorney to discuss your legal options. Deceptive pricing is a serious issue, and businesses that engage in this type of activity can face severe penalties. If you have been harmed by such practices, you may

If you come across any of these deceptive pricing practices, be sure to report it to the appropriate authorities so that action can be taken against the business in question. Deceptive pricing is a serious issue and businesses that engage in this type of activity can face severe penalties.

How to Avoid Deceptive Pricing Tactics

The best way to avoid being deceived by deceptive pricing tactics is to be an informed consumer. Pay attention to the prices of the items you’re interested in and how they compare to similar products. Be sure to read all the fine print before making a purchase, and don’t hesitate to ask questions if something doesn’t seem right.

You should also research businesses before making a purchase from them. Check their website, social media, and customer reviews to see what others have to say about their experience. This will give you a good idea of what to expect and help you avoid being scammed.

By following these tips, you can protect yourself from deceptive pricing tactics and save yourself time and money.

Consequences for Businesses using Deceptive Pricing

Deceptive pricing practices can have serious consequences for businesses, including fines, legal action, and damage to their reputation. Businesses that engage in these practices can be prosecuted under consumer protection laws. They may also be subject to civil lawsuits from customers who have been harmed by their deceptive pricing tactics.

Fines and legal action are not the only consequences businesses face when they engage in deceptive pricing. Their reputation can also be damaged, leading to a loss of business. When customers feel they have been deceived, they may spread the word to others, resulting in negative publicity for the business. Deceptive pricing is a serious issue, and businesses that engage in this type of activity can face severe penalties. If you have been harmed by such practices, you may be able to take legal action against the business involved. Consult with an attorney to discuss your options. Businesses should also avoid such tactics and improve price transparency.

Legal provisions on deceptive pricing

Part 233 of the Federal Regulations of the USA prohibits the use of any unfair or deceptive practices in the sale or lease of consumer products. Deceptive pricing is included in this section.

233.1 Former price comparisons

(a) A former price comparison is deceptive if the seller does not sell the product at the former price regularly for a substantial period of time. For example, an advertisement that states “40% off!” without disclosing how long the product was actually sold at the higher price would be deceptive because it would lead consumers to believe they were getting a bigger discount than they actually were.

(b) A former price comparison is also deceptive if the difference between the former and current prices is not representative of the usual savings associated with the purchase of the product. For example, an advertisement for a car that states “Save $5,000!” when the usual savings associated with purchasing that particular car model is only $2,500 would be deceptive.

233.2 Retail price comparisons; comparable value comparisons

(a) A retail price comparison is deceptive if the seller does not regularly sell the product at the advertised price for a substantial period of time. For example, an advertisement that states “40% off!” without disclosing how long the product was actually sold at the higher price would be deceptive because it would lead consumers to believe they were getting a bigger discount than they actually were.

(b) A comparable value comparison is also deceptive if the difference between the advertised price and the actual price of the product is not representative of the usual savings associated with the purchase of the product. For example, an advertisement for a car that states “Save $5,000!” when the usual savings associated with purchasing that particular car model is only $2,500 would be deceptive.

233.3 Advertising retail prices which have been established or suggested by manufacturers (or other non-retail distributors)

(a) It is deceptive to advertise a retail price for a product that has been established or suggested by the manufacturer (or other non-retail distributor) of the product unless:

(1) The advertisement clearly and conspicuously discloses that the advertised price has been established or suggested by the manufacturer (or other non-retail distributor); and

(2) The advertiser actually sells the product at that price for a substantial period of time.

(b) For example, an advertisement that states “40% off!” without disclosing how long the product was actually sold at the higher price would be deceptive because it would lead consumers to believe they were getting a bigger discount than they actually were.

These are just a few examples of the types of pricing tactics that can be considered deceptive. If you believe you have been the victim of such practices, you should contact an attorney to discuss your legal options.

Famous Examples of deceptive pricing

1. J.C. Penney

In 2012, department store chain J.C. Penney was accused of deceptive pricing when it was revealed that the store was regularly marking up prices on items and then offering “sales” and discounts that brought the prices back down to what they should have originally been. After an investigation by the Federal Trade Commission, J.C. Penney agreed to change its pricing practices and pay a fine of $50 million.

2. Micheal Kors

In 2014, designer Michael Kors was accused of deceptive pricing when it was revealed that the company was selling “factory outlet” items at full price. It was charged with creating the appearance of substantial discounts by utilizing “made-up” “manufacturer’s suggested retail price,” or manufacturer’s suggested price, and “our price” offers to sell items at lower rates. In 2014, a class-action lawsuit was filed against this deceptive pricing strategy and the company has agreed to a settlement of $4.88 million to compensate all those who were taken advantage of by it.

3. Kohl’s Departmental Stores

In 2015, Kohl’s was hit with two lawsuits alleging the company engaged in deceptive pricing. The products are accused of being priced misleadingly, with two prices: one is a selling price and the other is a significantly higher price that is misrepresented as the product’s “regular” or “original” price. Kohl’s misled consumers into believing that they were receiving a significant discount by displaying the two prices at the same time, according to the claim.

4. Neimen Marcus

Neiman Marcus is a department store located in Dallas, Texas, that sells luxury goods. It’s claimed that the company has defrauded numerous customers by attaching fake higher prices to price tags with the intention of making customers believe they were getting a deal at Last Call outlet stores. The firm has consented to settle the class-action lawsuit filed against it in 2018. All of the affected clients will receive $2.9 million as compensation.

FTC Guides Against Deceptive Pricing

The FTC’s Deceptive Pricing Rule of 1980 prohibits advertisers from misrepresenting the price of their goods or services. The rule covers all types of pricing, including “bait and switch” ads, “loss leader” ads, and “reference price” claims.

The Deceptive Pricing Rule applies to all businesses that advertise prices, including retailers, manufacturers, and service providers. It prohibits advertisers from misrepresenting the price of their goods or services in any way that would mislead consumers.

For example, an advertiser cannot say that a product is “on-sale” when the advertised price is the same as the product’s regular price. Nor can an advertiser advertise a “bait and switch” sale, in which the advertised product is not available and the consumer is instead offered a different, usually more expensive product.

The Deceptive Pricing Rule also prohibits advertisers from making false or misleading “reference price” claims. A reference price claim is any claim about the prices at which similar products are sold by other businesses. For example, an advertiser cannot say that its product is “50% off” when similar products are not actually selling for the reference price.

Violations of the Deceptive Pricing Rule can result in civil penalties of up to $16,000 per violation. The FTC can also file suit to stop the deceptive pricing and obtain restitution for consumers who have been harmed.

The Deceptive Pricing Rule is just one of the many ways that the FTC protects consumers from fraudulent and deceptive advertising practices. If you think you’ve seen a deceptive ad, you can report it to the FTC.

Conclusion!

On the concluding note, it is clear that Deceptive Pricing is a major concern for any customer willing to make a purchase. It is important that you as a customer should be vigilant and not fall prey to such pricing strategies.

You should always do thorough research about the product as well as the company before making a purchase. You can also report any cases of Deceptive Pricing to the FTC so that they can take appropriate action against such companies.

What do you think about Deceptive Pricing? Do you have any suggestions to avoid such pricing strategies? Let us know in the comments section below.