Price Comparison and Savings Claims

(1) Declaration of Policy. Price comparison advertising is a form of advertising used in the sale of products whereby current prices are compared with the seller's former or future prices, the prices of other sellers, or other stated values to demonstrate price reductions or cost savings. While price comparisons which accurately reflect market values in the trade area provide consumers with useful information in making buying decisions, price comparisons based on false, arbitrary or inflated prices or values deceive or mislead the public. Abuse also occurs when sellers fail to disclose material information which is important to enable consumers to understand the price comparison. It is the intent of 940 CMR 6.00 to ensure that the comparative price used in any price comparison advertisement provides accurate information and meaningful guidance to the consumer, and to this end 940 CMR 6.05(1) through (17) are to be liberally construed. (2) Unidentified Price Comparisons. (a) It is an unfair or deceptive act for a seller to state or imply that it is offering any savings as to any product by making a direct or indirect price comparison, unless the seller clearly and conspicuously describes the basis for the price comparison. Notwithstanding the foregoing, a seller may claim a savings or compare a higher and a lower price without disclosing the basis for the comparison if the seller is comparing to its own former price. In such a case, the provisions of 940 CMR 6.05(3) will be applied for the purpose of determining the seller's former price. (b) Terms such as formerly, regularly, originally, or terms of similar meaning shall mean the seller's own former price, as determined in accordance with 940 CMR 6.05(3). Advertisements containing such language shall be construed under such 940 CMR 6.05(3). (3) Comparison to Seller's Own Former Prices. (a) It is an unfair or deceptive act for a seller to compare its current price with its former price for any product, unless such former price is a bona fide, actual price at which the seller offered the product to the public, openly and in good faith for a reasonably substantial period of time in the recent past. The burden shall be on the seller to show that its former price is not an inflated or exaggerated price, and that the seller offered the product to the public at the former price openly and in good faith. The following factors may be considered in determining whether the seller has met its burden of demonstrating that its former price is a bona fide, actual price: 1. whether the former price exceeds the seller's usual and customary retail mark-up for similar merchandise; 2. whether the seller compares its current price to its former price when the seller knows at the time it sets the former price that no sales, or very few sales, will be made at such former price; 3. whether the former price substantially exceeds the price at which a reasonable number of non-discount sellers offer the product in the seller's trade area; 4. where a manufacturer's suggested retail price or a list price exists for the product, whether the former price exceeds such price; 5. whether the product was openly and actively offered in the recent, regular course of business, such as by devoting reasonable display space to the product during the period(s) in which it was at the former price, maintaining reasonable inventory during former price periods, or advertising the product at the former price; and 6. the duration of any sales offering the current price or a different discounted price for the product, as compared to the duration of the offer at the former, non-sale price. (4) Safe Harbor for Comparison Prices. (a) Without limiting the general requirements described in 940 CMR 6.05(3), a former price shall qualify as a bona fide, actual former price if: 1. during the six months preceding the dissemination date of an advertisement of a price comparison, the former price was charged with respect to 40% of sales of the item; 2. the former price was offered openly and in good faith for the 14 days immediately preceding the dissemination date of an advertisement of a comparison price; or 3. the former price was offered openly and in good faith for at least 28 days during the 90 days immediately preceding the dissemination date of an advertisement of a price comparison, or during any other 90 day period within the 12 months preceding the dissemination date of an advertisement of a price comparison, provided the advertisement clearly discloses the date, time or seasonal period of such offer (e.g.: last season). (b) Notwithstanding 940 CMR 6.05(3)(a), it shall not be an unfair or deceptive act for a seller to advertise a sale that involves a substantial portion of the products in a store or department, even if the sale covers some products with respect to which a general price comparison made in the advertisement fails to meet the requirements of 940 CMR 6.05(3)(a), provided that such products do not constitute a substantial portion of all products involved in the sale. (c) Notwithstanding 940 CMR 6.05(3)(a), it shall not be an unfair or deceptive act for a seller to offer a product in accordance with an advertised price policy whereby prices are reduced by a set amount or percentage on a pre-set schedule. (d) Notwithstanding 940 CMR 6.05(3)(a), it shall not be an unfair or deceptive act for a seller, after offering a product at a discounted or reduced price, not to revert to a higher price when the item will remain at the reduced price or further discounted or reduced price until it is removed from inventory as part of a clearance, closeout, permanent markdown, or permanent price reduction. (5) Introductory Offers and Future Price Comparisons. (a) Except for a health club as defined in M.G.L. c. 93, § 78, it is an unfair or deceptive act for a seller to make an introductory offer or to compare its current price for a product with the price at which the product will be offered in the future, unless: 1. the future price takes effect immediately after the sale is over and not later than 60 calendar days after the dissemination date of the introductory offer or price comparison; and 2. following the date the future price takes effect the product is offered openly and in good faith in Massachusetts at the future price for a period of time that is at least equal to the period of time that it was offered at the introductory price, but not less than 14 days, except where compliance becomes impossible because of unforeseeable circumstances beyond the seller's control which the seller is able to document. (b) It is an unfair or deceptive act for a health club as defined in M.G.L. c. 93, § 78, to make an introductory offer or to compare its current price for a service with the price at which the service will be offered in the future unless: 1. the seller clearly and conspicuously discloses the type(s) of membership(s) or contract(s) to which the introductory offer or price comparison applies, if the introductory offer or price comparison does not apply to each type of membership or contract sold by the seller; 2. the future price takes effect immediately after the introductory offer or sale is over and not later than 150 calendar days after the dissemination date of the introductory offer or price comparison; 3. the future price is maintained for at least 90 days immediately after the introductory offer or sale is over, and, in the case of pre-opening sales, the future or a higher price is maintained continuously for at least 90 days following the opening of the facility; 4. the seller complies with all of the disclosure requirements of M.G.L. c. 93, § 84; and 5. in the case of pre-opening introductory offers or sales, the seller provides each purchaser with a written pre-opening price protection guarantee which states that: a. the price for which the contract for health club services is being offered or sold is the lowest price currently available for that type of membership or contract at that facility; b. the future price will take effect on or before a date certain specified in the contract regardless of whether the facility opens for business on that date; c. the price may or may not go up significantly between the date the consumer signs the contract and the date the future price takes effect; and d. if, on the date the future price is to take effect or at any time within 90 days thereafter, or in the case of pre-opening sales, within 90 days following the opening of the facility, the actual selling price is less than the advertised future price, the seller will refund in cash, or, if the purchaser has not paid for his or her membership in full, will credit to the purchaser's account, the difference between the lowest actual selling price and the advertised future price. (c) 940 CMR 6.00 does not apply to introductory offers which are limited to first-time purchasers of a service, if: 1. the introductory price represents at least a 10% savings from the price at which the seller is currently offering the service to non-first-time purchasers; 2. the seller has made at least 30% of its sales to non-first-time purchasers at the higher price; 3. the number of sales made to first time purchasers of the service at the reduced price does not exceed the number of sales made to non-first-time purchasers of the service at the higher price during any one month period that the offer is available to first time purchasers; and 4. in the case of a seller with multiple locations in Massachusetts or in any adjacent state, the higher price must be the price at which non-first-time buyers are purchasing the service at the location making the offer, not at another location in the trade area. For purposes of 940 CMR 6.05(4)(c), a first-time purchaser is any person who responds to an advertisement offering, a. a reduction in the regular price being paid or the future price to be paid by other users of the service, if such person purchases the service for the first time, or b. a promotion or price reduction to any person who purchases the service when they first visit the location offering the promotion or price reduction. (6) Use of Sale Terminology. (a) It is an unfair or deceptive act for a seller to use the words priced for sale, on sale, sale, selling out, clearance, reduced, liquidation, must sell, must be sacrificed, now only $X, or other words which state or imply a price savings unless: 1. The actual former price, or the actual reduction stated as a fraction or percentage of the former price, is clearly and conspicuously disclosed; or 2. The product offered for sale is being offered at a price at least 10% below the former price of the same product if the former price was $200 or less, or 5% below the former price if the former price was more than $200. (b) For purposes of 940 CMR 6.05 a seller's former price shall be determined in accordance with 940 CMR 6.05(3). (c) If a seller states a particular purpose or reason for a sale (for example, clearance, liquidation, must be sacrificed), then the seller must be able to substantiate that purpose or reason. (7) Use of List Price or Similar Comparisons. (a) Seller's responsibility. It is an unfair or deceptive act for a seller to compare its current price for a product with a list price, manufacturer's suggested retail price or term of similar meaning, unless the list or manufacturer's suggested retail price is the price charged for the advertised product by a reasonable number of sellers in the seller's trade area as of the Measurement Date. However, a seller may offer pre-ticketed merchandise containing comparisons to a list price or a manufacturer's retail price as long as such comparisons comply with the provisions of 940 CMR 6.05(10)(b)2. (b) Manufacturer's or franchisor's responsibility. It is an unfair or deceptive act for any manufacturer, franchisor or distributor to compare in an advertisement the current price of any seller(s) with a list price or suggested retail price or term of similar meaning, unless such comparisons complies with the provisions of 940 CMR 6.05(10)(c). (8) Comparison to Other Seller's Price for Identical Product. It is an unfair or deceptive act for a seller to compare the seller's price with a price being offered by any other seller for an identical product, unless the stated higher comparative price is at or below the price at which the identical product is being offered in the seller's trade area as of the Measurement Date, or has been offered during another period which is specifically identified, by either: (a) a reasonable number of other sellers; or (b) other seller(s), the identity of which is documented in the seller's records. (9) Comparison to Seller's Own or Other Seller's Price for Comparable Product. It is an unfair or deceptive act for a seller to compare the seller's price with the price at which it or any other seller is offering a comparable product unless: (a) The comparable product is being offered for sale as of the Measurement Date, or has previously been offered for sale during another period which is specifically identified, at the stated higher comparative price by: 1. the seller; 2. a reasonable number of other sellers in the seller's trade area; or 3. other seller(s) who are specifically identified in the advertisement; and (b) There are no substantial differences in quality, grade, materials, or craftsmanship between the comparable product and the product being offered for sale; and (c) If the comparison is made to a comparable product sold by the seller, the comparative price is determined in the same manner as a former price in accordance with 940 CMR 6.05(3). (10) Price Comparisons on Price Tickets or Labels. (a) General. It is an unfair or deceptive act for a manufacturer to imprint or attach to a product any ticket or label (pre-ticket) containing a fictitious or inflated price which is capable of being used by sellers as a basis for offering fictitious price reductions. It is also an unfair or deceptive act for a seller to order or request such a ticket or label. (b) Seller's Practices. 1. 940 CMR 6.05 governing price comparisons and savings claims apply to a seller's use of price comparisons on price tickets or labels. 2. A seller may offer a product for sale which has been pre-ticketed with a price by either a manufacturer who uses a list price or suggested retail price or another seller who refers to its own former price, when the seller does not know and could not reasonably determine whether such price comparisons are in compliance with 940 CMR 6.05(7), (8), or (9), provided that: a. The seller has not requested, ordered or in any way induced the manufacturer or other seller to pre-ticket the product; and b. The seller does not advertise such price comparisons outside the store unless it can substantiate that the price comparisons comply with 940 CMR 6.05(7), (8), or (9), as applicable. (c) Manufacturer's Practices. It is an unfair or deceptive practice for a manufacturer, franchisor or distributor to pre-ticket a product with a list price or suggested retail price or term of similar meaning unless the manufacturer or non-retail distributor independently sets such price and the list price or suggested retail price is the price at which the manufacturer has the good faith intention that the product be sold. (11) Range of Savings or Price Reduction Claims. (a) It is an unfair or deceptive act to state or imply that any products are being offered for sale at a range of prices or at a range of percentage or fractional discounts unless: 1. The highest price or lowest discount in the range is clearly and conspicuously disclosed and, if in print, the type is at least the same size as the type size of the lowest price or highest discount in the range; 2. The number of items available at the lowest price or highest discount comprises a significant number of the items in the offering at the Measurement Date, which shall not be less than 10% of the items in the offering in the case of a sale that is not a department-wide or store-wide sale; 3. The seller clearly and conspicuously discloses in the advertisement any material facts about the lowest priced or highest discounted products offered, the omission of which would have the tendency or capacity to mislead or deceive reasonable buyers or reasonable prospective buyers with respect to the description, size, grade or quality of such products; 4. If a range of discounts or price reductions is stated, the seller discloses the basis for the price comparison in accordance with 940 CMR 6.05(2) and (3); and 5. If the price of a product is being compared to a range of prices for an identical or comparable product in accordance with 940 CMR 6.05(8) or (9), the lowest price in the range of prices of the identical or comparable product is clearly and conspicuously disclosed and, if in print, the type is at least the same size as the highest price in the range. (12) Use of Terms Wholesale or At Cost. (a) It is an unfair or deceptive act for a seller to state or imply that any product is being offered at or near the seller's wholesale price or at cost or to use a term of similar meaning unless the price is, in fact, either at or below the price paid by the seller at wholesale, or, in the case of a service, the seller's cost for the service excluding overhead and profit. (b) The following constitute violations of 940 CMR 6.05(12)(a): 1. A seller advertising a retail price as a wholesale price; or 2. A seller advertising a price as a factory or wholesale price where the price is not the price paid by a seller purchasing directly from the manufacturer. (13) Use of Terms Two for the Price of One, Buy One - Get One Free. It is an unfair or deceptive act for a seller to state or imply that products are being offered at the usual price of a smaller number of the same or a different product (for example, Four gallons of paint for the price of three or Buy two pairs of shoes and pay only the price for the higher priced pair) unless: (a) The seller clearly and conspicuously discloses all material conditions which are imposed on the sale; and (b) The price advertised as the usual price for the smaller number of products is the seller's own former price as determined by 940 CMR 6.05(3); and (c) The products are of substantially the same quality, grade, material and craftsmanship as the seller offered prior to the advertisement. (14) Use of Term if Purchased Separately. (a) It is an unfair or deceptive act for a seller to make any price comparison based on the difference between the price of a system, set or group of products and the price of the products if purchased separately (or words of similar meaning) unless: 1. A reasonable number of sellers in the seller's trade area are currently offering the products as separate items at or above the stated separate purchase price as of the Measurement Date; or 2. The seller has actually sold or offered the products for sale as separate items at the stated separate purchase price in accordance with 940 CMR 6.05(3). (15) Prices for Parts or Units of Sets or Systems. It is an unfair or deceptive act for a seller to advertise a price for any product which normally sells as part of a pair, system, or set without clearly and conspicuously disclosing that the price stated is the price per item or unit only, and not the price for the pair, system or set. (16) Gifts. It is an unfair or deceptive act for a seller to state or imply that any product is being offered for free or at a reduced price (a gift) in conjunction with the purchase of another product (primary product), unless: (a) The seller clearly and conspicuously identifies the gift in the advertisement; (b) The stated price of the primary product does not exceed the seller's former price, as defined in 940 CMR 6.05(3); (c) The seller clearly and conspicuously discloses in the advertisement the value of the gift, with such value being determined according to: 1. 940 CMR 6.05(3) if the gift has been sold or offered for sale by the seller; or 2. 940 CMR 6.05(8) or (9) in all other instances, unless the gift is not commercially available; (d) The seller clearly and conspicuously discloses in the advertisement all material conditions or limitations imposed by the seller as a prerequisite to receipt of or on the use of the gift; and (e) The gift is provided to the buyer at the time the conditions are met, unless: 1. The advertisement clearly and conspicuously discloses a specific later delivery date (for example, 20 days after the consumer satisfies the advertised conditions); or 2. The consumer agrees in writing to a specific later delivery date. (17) Use of Disclaimers. The use in an advertisement of a price comparison prohibited by 940 CMR 6.00 is an unfair or deceptive act even if the advertisement also contains disclaimers or explanatory language.