FTC Proposes Easing of Food Ad Regulation
Who likes running to supermarkets that advertise a really low price on some item just to be told there are none left? “At certain stores, I think it’s a scam,” says one consumer, “because the very first day it isn’t there, and the next week it still isn’t. But my regular store offers rain checks, and that seems very fair.”
“None left” will be a common aggravation, some consumer advocates warn, if the Federal Trade Commission changes its rule covering advertised specials. But maybe no one cares.
The existing rule on “retail food store advertising and marketing practices” dates back to 1971, a narrow product of the broad investigation of higher prices and lower quality in ghetto food stores that followed the 1960s riots. The rule said that a retail food store advertising certain items had to stock amounts “sufficient to meet reasonably anticipated demand.” Each violation could cost the store $10,000, unless it could prove it had carefully forecast demand and ordered accordingly; offering rain checks and substitutions was no defense.
Nevertheless, an estimated 90% of food stores today do offer rain checks and substitutes, and no wonder. The FTC issued only 10 complaints from 1973 to 1978, none since, and no penalties. It has also been reviewing this rule since 1977, produced a wandering and inconclusive summary memorandum in 1984 and has finally just proposed modifying the rule to permit rain checks and substitutions and allow warnings of limited quantities.
Rule Effective, Expensive
The rule, said the memo, did lower the incidence of overpricing and unavailable specials: “Unavailability rates,” for example, were about 10% before the rule, fell to about 5% in 1973 and “may have fallen” to 3% by 1978. But it was expensive: Extra inventories, spoilage and the laying of “paper trails” to document ordering practices cost food stores and thus consumers an industry-estimated $200 million a year for benefits maybe worth only $125 million. Thus, said the commission, the consumer spends about 3.5 cents a week to save 2 cents.
Public response to the FTC’s proposal seems equally mixed and no more decisive.
Some think changing the rule would have a big effect, making things worse for consumers, says Herschel Elkins, California’s senior assistant attorney general: “It would encourage stores to advertise items they have very little of. The fact that the rule is there prevents stores from doing it even though the FTC doesn’t enforce it.”
The food industry thinks things would be better. The rule “has tended to reduce the number of advertised specials,” says Karen Brown, spokesman for the industry-supported Food Marketing Institute in Washington. “Companies wouldn’t take advantage of a really good deal because they couldn’t count on getting unlimited quantities, or they wouldn’t advertise it.”
Others think it would make no difference. “We have procedures in place because it’s our ethical and moral responsibility, and good business sense, to give customers an advertised special, and we’re not going to change the way we operate because of a change in the law,” says Jan Charles Gray, vice president for Ralphs Grocery Co. in Southern California. “No reputable business would ever want to be out of an advertised product because you lose customers; when you give them a rain check, they might be irritated.”
Other Laws Protect Consumers
For the un reputable, the constant violators, there are other laws in place--prohibitions against bait-and-switch and other deceptive advertising and generally fraudulent business practices. And if they understock and simply add the phrase “limited quantities available,” consumers will at least know it’s a gamble. Indeed, consumers can protect themselves against this gambit, avoiding the call of retailers often found short on advertised specials.
Many consumers, in fact, feel no need for special protection. A roundup of the usual consumer advocacy groups elicits little comment or interest; they apparently receive few complaints. Any consumer “injury” suffered is small, measured more in dimes than dollars, and, says a suburban shopper, “I don’t go out of the way to a store advertising something on sale; they’re stores I go to anyway.” Indeed, food industry statistics show that 90% of consumers stick to one or two stores, and only 10% will go to a supermarket other than their principal one for an advertised special.
If no one cares, and if the FTC isn’t enforcing the rule anyway, why go through this long, drawn-out process of gutting it?
Again, comment is mixed. It could be an important statement, “indicative of a trend,” says Ken McEldowney, executive director of Consumer Action in San Francisco, “that the FTC is basically pulling out of any serious regulatory business.” It could also be unimportant, a non-issue, says another observer, raised so this increasingly inactive consumer protection agency can pretend it’s “saving everybody some money.”
Whatever’s behind it, shrugs an otherwise unconcerned housewife, “they’re just taking their time and our money to say that food stores can now do what they’ve been doing all along because the FTC won’t be watching them now either.”
