When a Sale Price Isn’t a Discount: How Deceptive Pricing Tricks Shoppers
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What is the main topic discussed in this episode?
and how they may affect your finances and portfolio. Listen at schwab.com slash Washington Wise.
What deceptive pricing examples open the episode and why does it matter?
Here's your Money Briefing for Tuesday, September 19th. I'm J.R. Whelan for The Wall Street Journal. Ask someone why they bought something at the store and they might say because it was on sale. Or was it? more retailers are being sued for deceptive pricing.
If you have a shirt or a vest that regularly sells for $19.99 at a given store, the retailer will briefly raise that price to, let's say, $40, and then bring the price back down and advertise the item as being 50% off for a limited time.
We'll talk to Wall Street Journal reporter Patrick Coffey about how eagle-eyed consumers can spot deceptive pricing. That's after the break.
How do retailers create fake 'sale' prices by inflating regular prices?
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Which retailers and Amazon sellers were cited as examples of deceptive pricing?
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Several large retailers are facing litigation for deceiving consumers with sale prices that weren't actually discounts.
Why has deceptive pricing resurfaced since the pandemic and what fuels it?
Wall Street Journal reporter Patrick Coffey looked into this and joins me. So Patrick, walk us through how this deceptive pricing is done.
Well, it's one of the oldest practices in the retail industry, and it's relatively simple. For example, if you have a shirt or a vest that regularly sells for $19.99 at a given store, the retailer will briefly raise that price to, let's say, $40 and then bring the price back down and advertise the item as being 50% off for a limited time. And in some cases, allegedly, the retailers don't even bother to actually raise the price. So they give the illusion of the item being on sale when in fact that's just not accurate.
How are states and the FTC responding with lawsuits and fines?
Can you give us an example of where this was done?
It's almost every retail chain and also big e-commerce companies like Amazon. For example, in our story, we cited a research paper that went over the sales of vacuum cleaners on Amazon over a given amount of time in 2017. It found that one seller in particular had listed this specific vacuum cleaner for $114.99 and then over about 48 hours raised the price. So it was disguising a price increase as a discount. And if consumers haven't been closely tracking the changes in that price, they wouldn't know it.
What did Amazon have to say about that?
They said that they have now enacted ways for consumers to report sellers if they see this going on.
What practical tips can consumers use to spot and track fake discounts online?
It's not clear that it has stopped. It really seems like a bit of an extended game of whack-a-mole where you can take down one seller and another one will pop up.
Now, why are some retailers doing this more often now?
Well, what analysts told me was that the practice all but disappeared during the pandemic because people weren't going out shopping and retailers didn't have this glut of inventory that they needed to get rid of. Now, however, their sales are beginning to drop after the post-pandemic boom, so they really need to unload all this inventory and they're desperate to beat out their competitors in terms of sales volume. So they're going back to what has worked for them in years past.
Do penalties deter retailers or is deceptive pricing likely to continue?
Do consumers know this is going on?
In most cases, I would say no. I mean, speaking for myself as a consumer, I really had no idea. And that's one of the reasons that I found this story so interesting. On the one hand, you see these sale promotions all the time and they start to blend together and you wonder how accurate they are. But I really didn't know exactly how this goes down. And it was surprising to me.
So what happened to companies that have gotten caught doing this?
An increasing number are getting sued. And this is on a state-by-state basis because the FTC does have guidelines for deceptive pricing.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:01–0:28
2
What deceptive pricing examples open the episode and why does it matter?
0:28–1:21
3
How do retailers create fake 'sale' prices by inflating regular prices?
1:21–1:29
4
Which retailers and Amazon sellers were cited as examples of deceptive pricing?
1:29–2:03
5
Why has deceptive pricing resurfaced since the pandemic and what fuels it?
2:03–2:43
6
How are states and the FTC responding with lawsuits and fines?
2:43–3:33
7
What practical tips can consumers use to spot and track fake discounts online?
3:33–4:15
8
Do penalties deter retailers or is deceptive pricing likely to continue?
4:15–7:36
Speakers
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