Discount pricing, such as “Was $100, now $59.99,” has become a standard marketing tactic across e-commerce and retail. However, behind these eye-catching price tags, there are strict legal rules businesses cannot afford to ignore. Federal regulators and states like California closely monitor how discounts are advertised, especially strike-through pricing. If your pricing creates a misleading impression of savings, you could face investigations, high penalties, and even lawsuits. So, what should you do to stay compliant?

Understanding the FTC’s Rules on Pricing

The Federal Trade Commission (FTC) has rules governing pricing practices through its Guides Against Deceptive Pricing. The main idea behind this is that a business should not mislead consumers about a discount.

If you advertise a product as having its price reduced from a former price, the price must be genuine. The item you are selling must have been offered at a higher price for a meaningful period, and you cannot inflate a price with the intent to claim a discount later. For example, raising a product’s price for a few days, without real sales at that price, then advertising a “sale” based on that inflated price may be considered deceptive. Additionally, the FTC also scrutinizes comparisons to competitors’ prices. Therefore, if you claim your price is lower than the market, you must have a reasonable basis for that claim.

It is also worth noting that promotions like “buy one, get one free” are also regulated. If the base price is increased or the offer comes with hidden conditions, it may still be considered misleading.

California’s Approach to Strike-Through Pricing

California’s Business and Professions Code Section 17501 addresses the concept of prevailing market price. If you advertise a former price, it must reflect the actual price at which the product was commonly sold in the market within the last 90 days. If this isn’t the case, you must clearly disclose when that higher price was last in effect. These laws prevent businesses from creating artificial discounts. If a product is almost always sold at the “sale price,” advertising it as discounted from a higher price can be seen as false advertising under ecommerce law.

How to Stay Compliant

Compliance starts with honesty and documentation. If you advertise a discount on your e-commerce website, be ready to show that the higher price was real and recent. Keep records of your pricing history and ensure your marketing reflects actual business practices.

Another tip is to ensure clear disclosures. If there are any conditions for the discounts, such as limited quantities or bundle purchases, present them clearly near the offer. Avoid fine print that contradicts the main message.

Additionally, stay up to date with the law. Pricing laws vary by state, and what applies in one state may create liability in another. It’s wise to consult with an experienced internet law and compliance attorney to help catch issues before they become a liability.

Finally, train your marketing and sales teams. Many violations occur because teams do not fully understand the legal standards governing promotional pricing.

Contact the Internet Law and Compliance Attorneys at Revision Legal

For more information, contact the experienced Internet Law and Compliance Lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.