Free Enterprise - The FindLaw Small Business Law Blog

Types of Illegal Price Advertising

After it came out this week that Amazon, like airlines and Uber before it, employs surge pricing on its products, consumers were rightfully peeved -- why should the same product cost more just because more people want it, especially when that price hike isn't being passed on to the product's manufacturer?

Surge pricing, while not customers' favorite, isn't illegal in and of itself. But there are plenty of other pricing practices that will get a small business in trouble with the law. Here are a few.

Dynamic Pricing

Dynamic pricing, which like surge pricing can fluctuate based on demand, is likewise not per se illegal. But price discrimination can cross the line if it's based on impermissible factors like race, gender, religion, or nationality, or if it violates federal antitrust statutes by injuring a consumer's ability to compete for fair prices.

Bait and Switch

Businesses are also barred from advertising an offer or a product with no intention of honoring the offer or selling the product at that price. This can be especially prevalent in online marketplaces where companies can purchase ads or adwords without proof that they offer a product. Groupon was sued for this practice after a San Francisco-based tour company claimed the coupon service purchased tour-related keywords in Google's AdWords service, but didn't back those with actual tour-related coupons.

Fake Sale Pricing

We all love to get a good deal, but how do we know how good the deal is? Normally, by comparing the sale price and the original price. A good practice, so long as retailers aren't lying about the original price. A recent lawsuit targeted Macy's, Kohl's, JCPenny, and Sears, for doing just that. Some consumer protection laws prohibit retailers from claiming an item is on sale from an original, non-sale, price if they haven't actually offered the item at that price within the last three months.

Pricing is generally up to the seller, but sellers need to beware these illegal pricing laws.

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