Reference Prices, Sales and Was-Now Claims
A crossed-out price is a factual claim about what the item used to sell for. The Guides at 16 CFR Part 233 require that the former price be genuine, offered openly and in good faith for a reasonably substantial period, and not set up merely to be struck through.
The rule in short
Under 16 CFR Part 233 a former price comparison is truthful only where the higher price was the price at which the article was openly and actively offered for a reasonably substantial period, in good faith and not to establish a fictitious comparison. Comparisons to competitors' prices must reflect prices actually charged in the trade area for comparable goods. A list price comparison requires that substantial sales occur at the list figure.
A struck-through price is not decoration. It asserts that the item previously sold at that figure, and the assertion has to be true. The Guides Against Deceptive Pricing at 16 CFR Part 233 set out three families of comparison and the condition attached to each.
Comparison against the seller's own former price
The rule is that the higher price must be one at which the article was openly and actively offered for sale, for a reasonably substantial period of time, in the regular course of business, honestly and in good faith, and not for the purpose of establishing a fictitious higher price on which a deceptive comparison could be based.
Each clause does work. Openly and actively offered rules out a price posted in a back room or listed on a page no customer reached. A reasonably substantial period rules out a weekend at the higher figure before a month at the lower one. Good faith rules out a price set with the comparison already planned. The Guides give no day count, which means the seller carries the burden of showing the price was real.
The practical test the Commission applies is whether the higher price was the price at which the article was actually sold in substantial quantities. A price at which nothing sold, maintained only to support the markdown, fails even where it was displayed for months. Record the effective dates and the units sold at each price; without that record there is nothing to answer with.
Comparisons to prices charged by others
A seller may advertise that its price is lower than prices charged elsewhere, but the comparison must rest on prices actually being charged in the trade area for the same article, or for goods of like grade and quality. Two conditions follow. The comparison price must be one at which a substantial number of sellers in the area are actually selling, not an outlier. And where the comparison is to similar rather than identical goods, the goods must genuinely be comparable in grade and quality.
Trade area is a real limit. A national comparison built from the highest regional prices misstates what the shopper reading it would pay locally. Sellers who cannot verify local prices should either survey them or drop the comparison. The same substantiation discipline that governs a performance comparison applies here, as set out under what a comparison must support.
| Comparison type | What is claimed | Condition for truth | Record to keep |
|---|---|---|---|
| Former price | The seller previously charged the higher figure | Openly offered in good faith for a reasonably substantial period | Price effective periods and units sold at each |
| Competitor price | Others in the area charge more | The figure reflects prices actually charged in the trade area | Dated price survey covering the area |
| Manufacturer list price | The article generally sells at the list figure | Substantial sales occur at that price in the area | Channel sales data or supplier certification with support |
| Comparable value | Similar goods sell elsewhere for more | The goods are of like grade and quality | Specification comparison of both items |
| Percentage off | The reduction is from a genuine base | The base satisfies the former price test | The same records as a former price claim |
Where a promotional price runs so often that it is effectively the regular price, the higher figure stops being the price at which the article is sold and the comparison becomes false. This is the most common pricing exposure for online sellers, because campaign calendars fill every week of the year. The fix is arithmetic: measure the proportion of days at each price, and stop showing a comparison when the promotional price dominates.
Suggested retail and list price comparisons
A manufacturer's suggested price supports a comparison only where it corresponds to a price at which substantial sales of the article are made in the area. A figure printed on packaging or supplied in a data feed is not self-proving. Where the suggested price is uniformly disregarded in the market, advertising a discount from it misrepresents the saving.
Retailers relying on supplier figures should obtain more than a number. Ask what sales the figure represents and in which channels, and keep the answer. A retailer that repeats a supplier's list price adopts it as its own claim, in the same way that a retailer adopts any other supplier representation it publishes. Data feed pricing changes without notice, so the check has to be systematic rather than occasional.
How the price is presented, not only what it says
The comparison is read in context. A headline price that omits a mandatory fee conveys that the headline is what the consumer pays, and the fee disclosed later does not correct the impression formed at the headline. Where a fee is unavoidable, the defensible presentation includes it in the advertised figure. The analysis is the net impression analysis described under express and implied claims and the net impression.
Conditions belong with the offer. A price available only with a trade-in, a subscription, or a minimum purchase is a conditional price, and the condition has to appear where the price appears, satisfying the clear and conspicuous placement factors. A price conditioned on enrolling in a recurring plan carries the additional obligations described under negative option disclosure and cancellation duties.
What enforcement looks like
Part 233 is a set of guides rather than a rule carrying its own penalties. A violation is charged as a deceptive act under Section 5 of the Federal Trade Commission Act, so the remedies are those available under that section: an order to stop, consumer redress where the authority supports it, and compliance reporting.
The more active pressure is at state level. Several states regulate former price advertising by statute or regulation, some with specific look-back periods defining how long the higher price must have been in effect and how recently. Those provisions are prescriptive where the federal guides are qualitative, and a national campaign has to satisfy the strictest applicable rule. Private class litigation over reference pricing has been substantial in states whose consumer statutes permit it.
The compliance posture that survives both is unglamorous: keep dated price histories at the item level, keep the sales volume at each price, define the trade area for any competitor comparison, and stop any comparison whose base has become nominal. None of that is difficult. It is only difficult to reconstruct after the demand arrives.
Points to carry away
- The former price must have been offered openly and in good faith, not set to create a comparison.
- A reasonably substantial period is required; a single day at the higher price will not support the claim.
- A comparison to competitors' prices must reflect prices actually charged in the trade area.
- A list or suggested retail price supports a comparison only if substantial sales occur at it.
- A comparable value claim requires goods of like grade and quality, described accurately.
- Bargain offers conditioned on another purchase must state the condition with the offer.
Questions readers ask
How long must the higher price have been in effect?
The Guides do not give a number of days. The requirement is that the article was openly and actively offered at the higher price, in the ordinary course of business, for a reasonably substantial period of time. What is reasonable varies with the trade, the product and the ordinary selling cycle. Retailers operating in categories with short seasons face a shorter period than those with year-round assortments. Because the standard is qualitative, the defensible practice is to record the dates at which each price was in effect and the volume sold.
Does an outlet or clearance channel change the analysis?
Yes, in an important way. Where merchandise is manufactured for a discount channel and never offered at the higher figure, a comparison to that figure is fictitious no matter how it is labeled. Some sellers use a compared-at figure to reference prices charged elsewhere for similar goods, which is permitted only where those prices are actually charged in the trade area for goods of like grade and quality. The label alone does not rescue a number that corresponds to nothing.
May a seller advertise a price good for a limited time and then extend it?
Extending a promotion is not deceptive in itself, but a stated deadline that the seller never intends to honor is. Where an offer recurs so regularly that the promotional price is in effect the ordinary price, the comparison to the higher figure becomes false, because the higher figure is no longer the price at which the article is actually sold. Continuous countdowns and perpetual closing sales are the practices most often challenged under state statutes as well as federally.
Sources
- eCFR — 16 CFR Part 233, Guides Against Deceptive PricingThe conditions on former price comparisons, competitor comparisons and list price claims.
- Cornell Legal Information Institute — 15 U.S.C. 45, Unfair or Deceptive Acts or PracticesThe statutory prohibition a deceptive price comparison violates.
- eCFR — 16 CFR Part 251, Guide Concerning Use of the Word FreeThe companion guide governing free and bonus offers tied to a regular price.
- Federal Trade Commission — Policy Statement on DeceptionThe net impression analysis applied to a price presentation as a whole.
- Federal Trade Commission — Advertising FAQ's: A Guide for Small BusinessApplied guidance on sale pricing and comparison claims for smaller sellers.
- Federal Trade Commission — Advertising and Marketing Business GuidanceThe index of the Commission's guidance on pricing and offer presentation.
Lawwise is a publication, not a law firm. This article states general rules and cites its sources; it is not advice about any particular case, and the law differs by state and changes over time.
More in Advertising Law
Comparative Claims and Challenges by Competitors
A comparative claim must be supported by testing of the advertised product and the named comparison product, performed under identical conditions on the versions currently sold. Where the comparison names its evidence, the evidence must exist in that form. Beyond agency enforcement, a rival may sue under Section 43(a) of the Lanham Act for false advertising, seeking an injunction and monetary relief, or bring the claim before a self-regulatory advertising body.
Endorsements, Reviews and Material Connections
The Endorsement Guides at 16 CFR Part 255 treat an endorsement as an advertising message reflecting the opinions or experience of someone other than the sponsoring advertiser. A material connection is any relationship between endorser and advertiser that the audience would not expect and that might affect how the endorsement is weighed. Disclosure must be clear and conspicuous and must appear with the endorsement itself. The advertiser, the endorser and an intermediary agency can each be liable.
Made in USA and Other Origin Claims
An unqualified Made in USA claim requires that the product be all or virtually all made in the United States: final assembly or processing here, and all significant processing and virtually all ingredients or components of domestic origin. The Made in USA Labeling Rule at 16 CFR Part 323 applies the standard to labels and to online descriptions, and 15 U.S.C. 45a authorizes penalties. A qualified claim may describe the domestic content accurately without asserting complete domestic origin.