Will Consumers Pay Higher Prices Due to NY AG Settlement?

Above all "do not harm" should be the mantra of all lawyers, particularly enforcers charged with protecting the public interest. Enforcement over practices of companies offering a sale is an area where there is real potential to raise consumer prices. A new settlement entered by the NY Attorney General with a craft retailer alleges the company offered custom framing services on a permanent sale, using ads or coupons or other means to offer 50% off of framing when this offer ran consistently in one form or another dating back to 2008. Some of the ads specifically called out the price was for a limited time and encouraging consumers to act fast instigating a false sense of urgency in customers when the price was not going to change. NY alleges this violates NY General Business Law 22-A Sections 349 (prohibiting deceptive acts and practices) and 350 (prohibiting false advertising). These provisions are general, and the NY AG borrows from the FTC's Guides Against Deceptive Pricing and the Guide Concerning the Use of the Word Free, business guides that have been on the FTC's books for a number of years but not actively enforced. Why? Because low prices are good for consumers. (And I have not been shy about admitting my love of a bargain before in this blog, see here and here) Some states and local law enforcement continue to bring these cases regarding sales claims, and we do not believe in many cases that they are in the public interest. The current NY settlement includes an $800,000 cash payment to NY for the investigation costs and donation of $1 million in art supplies to schools. We can certainly get behind the latter as a win/win way to settle this matter, but we question the propriety of the injunctive relief provided in the Assurance of Discontinuence. The Company is prohibited from using a fictitious or inflated regular price for the purposes of offering a subsequent price reduction. But the regular price is "deemed presumptively bona fide when the item was offered for sale at the regular price more than 55% of the time during the prior business year, and 30% of sales were made at the regular price during that time period." So 30% of customers need to pay full price before a company can offer a sale for others? That does not sound like consumer protection to us. – Amy Mudge

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