You receive a phone call or letter from the Attorney General’s office in your state indicating an interest in your sales and marketing practices. Are you positive that what you are doing passes the test for acceptable practices in your state?
In one state, the Attorney General sent a letter to 30 companies, indicating their alleged use of improper practices. Eight of these companies have already signed consent decrees. A manufacturer providing products to one of the eight also signed a consent decree. Three of the retail companies are no longer in business. Fines and reimbursement of the state’s legal fees total as high as $120,000 per case.
On Wednesday, November 24th, the most recent company signing a consent decree did business in Washington state and has offices in 17 other states. These consent decrees are being shared with the Attorney General’s office in the other states. Review the alleged infractions (how would your company react?):
1. Materially misrepresenting, directing or by implication, the price, cost, quality or comparative value of its products and services
- Quoting an unsupported list price (without proof that sales were made at this price) – misrepresenting that a product or service ordinarily sells for an inflated price but is offered at a discounted price
- Creating bogus justifications for taking steep (or multiple) discounts on artificially inflated prices utilizing similar price or product in rehash
2. Using unfair or deceptive sales or advertising tactics that have the capacity to create in customers a false sense of urgency to purchase defendant’s products or services
- Creating a false sense of urgency by misrepresenting the scarcity of a product or a limited time offer
- Misrepresenting directly or by implication a special sales price which, by continued use, implies the “actual” price
- Representing that customers are specially selected recipients of limited introductory offers, when, in fact, that is not true
3. Failing to clearly and conspicuously disclose or misrepresenting, directly or by implication, any material term, condition, or limitation of any offer, pledge, guarantee, rebate, refund or discount offered to customers
- This “catch-all” can be related to “type size”, positioning or the specific language contained in any advertisement, brochure, presentation book, retail sales contract or contact information provided to the customer
What are the implications or possible outcomes?
- This information can/will be shared as an implication of unlawful marketing and sales practices with the Attorney General in your state.
- The use of “energy saving” pledges and the use of testimonials and other support information was a major issue in most of the consent decrees
- Look for more citations of both retailers and manufacturers
- The home improvement industry has become a target. No consideration is given to purposeful intent, knowledge (or the lack of it) in response to enforcing laws; many with broad interpretations, some while intended as consumer protective, become a base for overzealous prosecution
What are your options?
- Curse overzealous prosecution
- Deny the validity of the law/rule
- Excuse yourself by comparison to other industries (i.e. real estate, automobile or mass retailing)
- Or – – start to review what you are doing
Make sure you register for our complimentary tele-seminar on December 16th which will respond to your Q&A and give opinions on how you might protect your interests and your business.
Don’t forget to e-mail your questions in advance to firstname.lastname@example.org.