Promotional Pricing: E-commerce ‘Up To’

Introduction

Promotional pricing is a powerful tool for e-commerce businesses, but it comes with regulatory responsibilities. Understanding and complying with laws surrounding “up to” discount claims is essential to avoid misleading consumers and facing potential legal consequences. This blog post delves into the key aspects of e-commerce promotional pricing regulation, focusing on the “Up To” Discounting Law, and provides actionable insights to ensure your promotional strategies remain compliant and effective.

The Federal Trade Commission (FTC) Perspective

FTC Expectations

• Evidence of Savings: Advertisers must provide substantial evidence that all or nearly all consumers will achieve the maximum stated savings. If not, they must clearly disclose the specific conditions under which these savings are achievable.
• Consumer Perception: A 2012 FTC study found that consumers often expect to achieve the maximum savings despite the “up to” qualifier. This misunderstanding has led to FTC investigations and settlements with companies making unsubstantiated “up to” claims, particularly related to energy savings.

National Advertising Division (NAD) Recommendations

NAD Guidance

• Significant Consumer Benefit: “Up to” savings claims should be reserved for scenarios where a substantial percentage of consumers can realize the advertised benefit. While “appreciable number” can vary, it typically means a significant proportion of consumers should experience the stated maximum discount.

State Regulations on “Up To” Discount Claims

State-Specific Requirements

Several states have their own statutes and regulations governing “up to” discount claims. These regulations generally require:

• Price Range Disclosure: Advertisers must disclose both the highest and lowest prices or the greatest and least reductions.
• Reasonable Offerings: A reasonable number of items must be available at the maximum advertised discount. Typically, at least ten percent of items should be offered at the lowest advertised price or highest advertised discount.

Overview of State-by-State Requirements

Alaska

• Advertising: Must represent a substantial number of items with disclosed ranges of reductions.

Connecticut

• Clear Statements: Must clearly state the minimum percentage reduction and the basis for the advertised reduction.

Illinois and Louisiana

• Disclosure: The highest price or lowest discount must be disclosed, with a reasonable number of items offered at the maximum discount.

Massachusetts

• Conspicuous Disclosures: Must provide clear disclosures, ensuring at least ten percent of items are at the highest advertised discount.

Missouri

• Clarity: Advertisements must clearly disclose the highest price or lowest discount, with an appreciable number of items at maximum savings.

New Jersey

• Percentage Reductions: Must clearly state both the minimum and maximum percentage reductions and the basis for the former price.

North Dakota

• Minimum Offering: At least five percent of items should be offered at the maximum discount to comply with regulations.

Ohio

• Reasonable Number: For out-of-store advertising, a reasonable number of items must be priced at the maximum advertised reduction.

Key Points for Compliance

1. Substantiation Requirement: Advertisers must ensure that “up to” savings claims are realistic and achievable by a substantial proportion of consumers. If claiming “up to 60% off,” a significant percentage of items or consumers must actually achieve this discount.
2. Consumer Interpretation: The FTC emphasizes that many consumers interpret “up to” claims as an expectation to achieve the maximum discount. Failing to meet this expectation can be considered deceptive.
3. Avoiding Deceptive Practices: To avoid FTC enforcement actions, avoid making exaggerated “up to” claims that only a small fraction of consumers can achieve. Ensure that your promotional practices are truthful, providing genuine value to consumers.

Best Practices for E-commerce Promotional Pricing

• Evidence and Transparency: Always have evidence to support your “up to” claims and be transparent about the conditions under which the maximum savings can be achieved.
• Regular Audits: Conduct periodic audits of your promotional pricing strategies to ensure compliance with both federal and state regulations.
• Clear Disclosures: Ensure all advertisements and promotional materials clearly disclose the price range and conditions associated with your “up to” claims.
• Consumer Feedback: Pay attention to consumer feedback to understand how they interpret your promotional messages and make adjustments to clarify any misconceptions.

Conclusion

Complying with e-commerce promotional pricing regulations is not only a legal necessity but also a strategic advantage in building consumer trust and loyalty. By understanding and adhering to the “Up To” Discounting Law and related state-specific regulations, you can create promotional campaigns that are both effective and compliant, driving genuine value for your customers and enhancing your business’s reputation.

Enhance Your Promotional Strategy

• Monitor Compliance: Stay updated on changes to regulations and adjust your promotional strategies accordingly.
• Educate Your Team: Ensure your marketing and pricing teams are aware of regulatory requirements and the importance of compliance.
• Align with Best Practices: Implement industry best practices in your promotional strategies to maintain a competitive edge while ensuring compliance.