Sales and Consumer Protection

Peter Shawn Taylor criticises the Canadian Competition Bureau “for going after retailers for discounting too often” (Taylor, 2015). The piece was interesting but Taylor’s arguments were unconvincing.

I’ll focus upon the general arguments rather than the specific cases upon which I cannot comment. Taylor dislikes that consumer protection agencies go after firms who advertise heavily discounted prices but have not sold the good at full price for a sufficient period. He describes such consumer protection against false advertising as attempting to stop discounting. I find this a strange conclusion. Surely firms can charge what they like and so can happily discount whenever they want.

I think consumer protection agencies are trying to prevent firms not from discounting, but from saying that the price is reduced when it isn’t. There is a reasonable agument about how long a “regular” price has to be used before a lower price can be shown as a discount. Surely, however, if a price was never higher showing it as discounted is simply a deceptive practice.

Taylor suggests that consumers are sophisticated enough to see through any deception. This begs the obvious question: If consumers always see through any deception why do firms do it? It costs money to produce signs that say “discount” and it is a hassle to draw attention to the “discount”. Furthemore, false advertising risks incurring the wrath of regulators. Why then would firm’s do this if no one was ever deceived?

Of course, it could just be a mistake on the firm’s part. This involves assuming that consumers, who buy in the product category once in a blue moon, know exactly what they are doing. While firms, containing expert salespeople who know the category, continue to make silly errors by trying to trick consumers who are never fooled.

Consumer protection is a difficult balancing act. Public policy shouldn’t establish massive bureaucracies to solve trivial problems, but neither should we assume that consumer don’t need protection without deeper thought than Taylor gives it.

Read: Peter Shawn Taylor (2015) Taking the Wind Out Of Sales, Canadian Business, April, page 23.