In a challenge brought by Home Depot, the National Advertising Division said that home improvement chain Lowe’s correctly halted indefinite promotional “10% Off” claims.
Home Depot complained that Lowe’s promoted an indefinite “10% Off Major Appliances” campaign, while representing to consumers that the offer was available only for a limited time. The online and in-store materials listed a defined period of time for the promotion, but appeared nearly identical from each week with a different “offer ends” date. Personnel from the appliance department also confirmed that the campaign was “ongoing,” “permanent,” “indefinite,” and had “no expiration date at this time,” Home Depot said.
The promotion – which continued for at least two months – was a misleading attempt to drive sales and damage the goodwill of competing retailers, Home Depot argued.
Although Lowe’s responded that the 10% was a true discount from existing prices and that the sale was extended because of popularity with consumers, it halted the campaign for “various business reasons.”
Analyzing the claims, the NAD looked to the Federal Trade Commission Guides Against Deceptive Pricing, which provides that retailers “should not offer an advance sale under circumstances where they do not in good faith expect to increase the price at a later date, or make a ‘limited’ offer which, in fact, is not limited. In all of these situations. . . advertisers should make certain that the bargain offer is genuine and truthful. Doing so will serve their own interest as well as that of the public.”
The discontinuance of the campaign was “necessary and appropriate,” the NAD determined. “NAD recognizes that aggressive price competition serves to benefit consumers, but such benefits are only realized when savings claims are accurate and enable consumers to assess the value of a bargain or sale. In order to clearly communicate the price of a sale item not only do promotions need to be accurate in relation to the sale items’ bona fide prices, but also to the availability of the discounted price.”
Further, “any future sales promotions [should] properly observe any stated time limits or end dates,” the NAD advised.
To read the NAD’s press release about the decision, click here.
Why it matters: The NAD noted that the decision should remind advertisers that they are “responsible for all reasonable interpretations of [their] claims, not simply the message [they] intended to convey.” Companies that engage in promotional pricing should review their advertising to ensure that sales and discount offers do not violate state law or federal regulations.