[Code of Federal Regulations]
[Title 16, Volume 1]
[Revised as of January 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 16CFR233.2]

[Page 157]
 
                     TITLE 16--COMMERCIAL PRACTICES
 
                   CHAPTER I--FEDERAL TRADE COMMISSION
 
PART 233_GUIDES AGAINST DECEPTIVE PRICING--Table of Contents
 
Sec. 233.2  Retail price comparisons; comparable value comparisons.

    (a) Another commonly used form of bargain advertising is to offer 
goods at prices lower than those being charged by others for the same 
merchandise in the advertiser's trade area (the area in which he does 
business). This may be done either on a temporary or a permanent basis, 
but in either case the advertised higher price must be based upon fact, 
and not be fictitious or misleading. Whenever an advertiser represents 
that he is selling below the prices being charged in his area for a 
particular article, he should be reasonably certain that the higher 
price he advertises does not appreciably exceed the price at which 
substantial sales of the article are being made in the area--that is, a 
sufficient number of sales so that a consumer would consider a reduction 
from the price to represent a genuine bargain or saving. Expressed 
another way, if a number of the principal retail outlets in the area are 
regularly selling Brand X fountain pens at $10, it is not dishonest for 
retailer Doe to advertise: ``Brand X Pens, Price Elsewhere $10, Our 
Price $7.50''.
    (b) The following example, however, illustrates a misleading use of 
this advertising technique. Retailer Doe advertises Brand X pens as 
having a ``Retail Value $15.00, My Price $7.50,'' when the fact is that 
only a few small suburban outlets in the area charge $15. All of the 
larger outlets located in and around the main shopping areas charge 
$7.50, or slightly more or less. The advertisement here would be 
deceptive, since the price charged by the small suburban outlets would 
have no real significance to Doe's customers, to whom the advertisement 
of ``Retail Value $15.00'' would suggest a prevailing, and not merely an 
isolated and unrepresentative, price in the area in which they shop.
    (c) A closely related form of bargain advertising is to offer a 
reduction from the prices being charged either by the advertiser or by 
others in the advertiser's trade area for other merchandise of like 
grade and quality--in other words, comparable or competing merchandise--
to that being advertised. Such advertising can serve a useful and 
legitimate purpose when it is made clear to the consumer that a 
comparison is being made with other merchandise and the other 
merchandise is, in fact, of essentially similar quality and obtainable 
in the area. The advertiser should, however, be reasonably certain, just 
as in the case of comparisons involving the same merchandise, that the 
price advertised as being the price of comparable merchandise does not 
exceed the price at which such merchandise is being offered by 
representative retail outlets in the area. For example, retailer Doe 
advertises Brand X pen as having ``Comparable Value $15.00''. Unless a 
reasonable number of the principal outlets in the area are offering 
Brand Y, an essentially similar pen, for that price, this advertisement 
would be deceptive. [Guide II]