Retailers who weren't too cautious last week about advertising their sale prices or comparing their prices to a competitor had better be careful this week and in the future.
Utah's Truth in Advertising Act took effect Monday, allowing retailers and consumers to sue a business for deceptive advertising practices.Under the act, deceptive advertising includes price comparison audits that don't meet strict timing and disclosure requirements; a retailer comparing its price with an inaccurate price of a competitor; comparing a discounted price to a competitor's regular price without disclosing the difference; comparing prices of products made of different materials without disclosing that fact; comparing an inflated regular price with a discount price; or failing to disclose that the sale price is not good for at least seven days.
Before a suit is filed, the accused violator must receive a 10-day notice. The law provides for legal fees and actual damages, but proponents of the measure say the likely remedy will be a court injunction stopping the deceptive marketing.
"This is something positive in the sense that it will strengthen business and protect consumers," said Mike Miller, spokesman for American Stores Co., which was the driving force behind the bill.
But, surprisingly, something as nobel as "Truth in Advertising" turned out to be one of the most controversial and hotly contested issues of the 1989 Legislative session.
Lawmakers nicknamed the bill the "Smith's Act," because it was generally believed the law specifically targeted price comparison advertising by Smith's Food & Drug, which touted the regional chain as the "Everyday Low Price Leader." Smith's complained that the proposed law was a competitive move by Skaggs Alpha Beta supermarkets, owned by American Stores, against Smith's.
The battle created additional contention as unusual alliances were formed between lawmakers and lobbyists crossing party lines to support or oppose the bill. Meanwhile, consumer groups were skeptical of a battle between two corporate giants benefiting the consumer, and advertising agencies were unhappy about law evolving from a fight among retailers.
The dynamics of the bill resulted in marathon negotiating sessions between attorneys from Smith's and American Stores, successfully coming up with a compromise that both sides could support.
The issue apparently wasn't unique to Utah. A similar law is winding its way through the Nevada Legislature. Although that bill has been pushed by Las Vegas jewelers, news reports of committee hearings had Nevada grocers also complaining about Smith's price comparison advertising tactics in that state.
Miller praises the new Utah law as a way for businesses and consumers to take matters into their own hands when confronted with deceptive advertising. "They have the ability to bring a complaint themselves, when before they had to go through a bureaucracy that had no manpower or incentive to enforce existing state law, which was vague in the first place."
He said American Stores has no plans to use the law anytime soon. But, "clearly advertisers will be much more cautious this week than they were last Friday."
Contacted last week, Smith's executive vice president and legal counsel Tom Welch reiterated his feelings when the bill passed committee, "It won't change a thing."
He said Smith's is planning another price comparison audit and advertising campaign for the near future.