A decision by the National Advertising Division (NAD) on a
challenge by Costco Wholesale Corporation to in-store point of sale
display advertising by Wegmans Food Markets, Inc. offers important
lessons for grocery stores and other retailers interested in making
comparative pricing claims.
Costco challenged Wegmans' in-store point of sale displays,
which compared Wegmans' prices for certain food products to
Costco's prices for the same or similar products.
Every Monday, Wegmans sent "pricing coordinators" to
Costco stores to collect pricing information on various items for
sale at Costco. Wegmans would then add certain of those prices to
its "pricing boards," which showed that Wegmans offered
lower prices than Costco on the specified items. Costco argued that
because it conducted its own competitor price comparisons on
Wednesdays and Thursdays, and frequently lowered its prices on
Fridays to remain competitive with prices being offered at Wegmans,
Wegmans' pricing boards were only correct, if at all, for a few
days and not for a full week. Because of the means at Wegmans'
disposal to monitor those prices and change its signage
accordingly, Costco asserted that Wegmans should be responsible for
more frequently monitoring and changing its pricing comparisons to
ensure they are accurate.
Costco also asserted that Wegmans occasionally compared prices
for dissimilar products sold by the two retailers. For example,
Costco said, Wegmans' price comparison boards compared the
price of its bone-in pork shoulder to Costco's boneless pork
shoulder. Because the two products are typically priced and used
differently, Costco argued that Wegmans was making an
apples-to-oranges comparison, and was not adequately disclosing the
difference between the items being compared.
The NAD first upheld NAD and Federal Trade Commission guidance
allowing grocery stores to update and post pricing on a weekly
basis. Although Costco argued that technology allowed retailers to
compare prices on a daily basis, the NAD refused to disrupt prior
decisions, noting that Costco had not provided evidence that
retailers collected price comparison data by means other than
weekly in-store visits or that they feasibly could do so. The NAD
also acknowledged that Wegmans' price comparison boards
disclosed that the listed prices had been determined on a specific
date, but nevertheless recommended that Wegmans also clearly,
conspicuously, and prominently disclose that prices were subject to
Regarding Wegmans' comparison of dissimilar items, the NAD
first reaffirmed the "well-settled" principle that
marketers are permitted to compare prices for dissimilar products
in advertising. The NAD recommended, however, that companies
advertising food products should compare prices of "like"
products "when possible." When there is no identical
product, the NAD said, an advertiser should either indicate that
there is no applicable price for the competitor's product or
adequately disclose the different products being compared.
Against this backdrop, the NAD found that the price comparison
charts at issue were labeled with the name of only one product
each, and, therefore, conveyed the "main message" that
they compared identical products. The NAD accordingly determined
that regardless of the adequacy of the size and placement of
accompanying disclosures, such disclosures contradicted the main
message being conveyed by the charts, and at best conveyed a
confusing message to consumers.
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