Everyone loves a sale. Americans have become so used to discount houses and the lower prices resulting from competition that many people are reluctant to pay the full price for any item. As a result, sales have become more common. But the notion of a "sale" implies that the item originally sold at a higher price. For how long must it have been sold at that price, and must a store actually have sold any of the items at that price for the item to be legitimately labeled as being "on sale"? These are not easy questions to answer. The Federal Trade Commission 1964 Guides Against Deceptive Pricing states that before a store can claim that an item is on sale at a reduced price it must have been for sale at its regular price "for a reasonably substantial period of time...honestly and in good faith and not for the purpose of establishing a fictitious higher price."
May D&F is owned by the May Department Stores, Inc., which operates fourteen department store chains. May D&F is not the only store that has been cited for the practices involved in the case, but whereas most stores settle out of court, May D&F defended its case in court. Before being officially charged, it had discussed its policies and its disagreement with the state law department for about a year. The store was officially charged in June 1989. Three counts involved printing inflated prices on its tags, inflating its prices to make its markdowns look larger than they were, and keeping merchandise on continuous sale. As examples, one set of cutlery had been on sale for two years; luggage was continuously sold at a "special introductory price"; and bedding was kept on sale for eight months.
May D&F claimed that its policy was to offer an item for sale for at least ten days at the beginning of each six-month period. That would establish the original price. Few items sold at that price, which was usually not competitive. The store would then place the item on sale for the remaining 170 days, sometimes offering special short-term reductions from that price. At the end of the 180-day cycle, it would raise the price to the original price for ten days and then repeat the cycle. In August 1989, two months after the court case began, it revised its policy so as to charge the original price for 28 out of every 90 days. It further claimed that in a survey 90 percent of its customers did not care whether the item had actually been sold at the original price.
On June 28, 1990, Judge Larry J. Naves of the Colorado State Court decided the case against May D&F, stating that "The clear expectation of May D&F was to sell all or practically all merchandise at its 'sale' price." He fined the company USD 8000.
Given current practices and the prevalence of discount houses, do you find May D&F's policy, either before or after August 1989, deceptive and unethical?