Price Anchoring: What Is It and Why Sellers Shouldn’t Do It
Online clothing store Zulily caught a class action, courtesy of New York Attorney General Eric Schneiderman. The alleged offense? Price anchoring.
What Is Price Anchoring?
What’s a sly way to make consumers think they’ve stumbled upon a once-in-a-lifetime, can’t-pass-up, incredible steal of a deal? Easy: advertise an inflated original price and promote the MSRP (manufacturer’s suggested retail price) as a sale price.
The practice is called price anchoring, but it’s against regulations.
Online Retailer Hit With Price Anchoring Charge
Excerpt from class action filing against Zulily: “In some instances, they represented that the listed or original price was two or more times the manufacturer’s suggested retail price (‘MSRP’), and then offered the item at a purported 50 percent or more discount price, which was in fact the original MSRP.”
Sound byte from New York Attorney General about case: “This case sends a clear message that our office will hold businesses accountable when they use false or misleading advertising practices to deceive consumers.”
Price Anchoring Has Been Around Forever
Price anchoring is as old as marketing itself. Shop owners learned early that the mere illusions of massive sales were enough to entice customers. And back in the day, few laws prohibited the practice; but regulators eventually caught on and disavowed the practice.
It’s Fine To Compare Prices; It’s Not Fine To Lie About Prices
Comparing prices is fine. But lying about an MSRP amounts to false advertising (some people call it price scheming). According to the FTC, lying about costs is an unfair business practice.
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Top-rated — yet affordable — Kelly / Warner works with e-commerce entrepreneurs.
Our team assists with:
- Price anchoring legalities;
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A Little About Our Internet Law Practice
Want to know a little more about us? We’re a lean, but successful, boutique law firm that concentrates on Internet business issues.
Aaron Kelly, Esq.: Founding partner — and self-described gearhead — with a 10-out-of-10 on AVVO.com and a preeminent AV rating, Aaron love to help entrepreneurs and startups with everything from business formation to fighting against unfair competition tactics.
Daniel Warner, Esq.: Founding partner and certified egghead (he did receive one of the highest multi-state bar exam scores), Daniel Warner is the guy businesses want on their side. Exceptionally disciplined with a photographic memory, Dan is an incredible litigator who’s won his share of David v. Goliath cases.
Raees Mohammad, Esq.: Partner and academically recognized scholar, Raees is the firm’s online privacy aficionado. He’s also a corporate governance maestro and deft at crafting emerging business strategies. (Oh, and, we’re pretty sure he’s a graduate of James Bond’s little-known — but highly elite — School of Smooth.)
“Zulily Not the First Retailer Sued for Alleged Price Anchoring.” Legal Newsline. 25 Mar. 2016. Web. 25 Apr. 2016. <http://legalnewsline.com/stories/510701888-zulily-not-the-first-retailer-sued-for-alleged-price-anchoring>.