Peter Shawn Taylor discusses sales and consumer protection. He criticizes the Canadian Competition Bureau “for going after retailers for discounting too often” (Taylor, 2015). The piece was interesting. Sadly, Taylor’s arguments were unconvincing.
Sales And Consumer Protection
I’ll focus upon the general arguments rather than the specific cases. I cannot comment on the specific details of any cases. I simply don’t know them well enough. (Plus I’m not a lawyer). 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. As such, they can happily discount whenever they want. This does not stop discounting or cheaper prices more generally.
Stopping Lying, Not Discounting
I think consumer protection agencies are not trying to prevent firms from discounting. Instead, they attempt to prevent firms from saying that the price is reduced when it isn’t. In simple terms, lying. One can have a reasonable argument about how long a “regular” price must exist 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 argues that consumers are sophisticated. They will see through any deception. This begs an obvious question. If consumers always see through any deception why do firms do it? It costs money to produce signs that say “discount”. It is a hassle to draw attention to the “discount”. Furthermore, false advertising risks incurring the wrath of regulators. Why then would firm’s do this? If no one was ever deceived there would simply be no incentive to lie. Taylor’s idea that no one is fooled ever simply isn’t credible given we see firms lying.
Consumers Know, Firms Don’t?
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 well, continue to make silly errors by trying to trick consumers who are never fooled. I am not buying that as a statement of what regularly happens. Is anyone?
Consumer protection is a difficult balancing act. Public policy shouldn’t establish massive bureaucracies to solve trivial problems. That said, neither should we assume that consumer don’t need protection without deeper thought than Taylor gives it.
For more about consumer protection and assumptions about markets see here, here, and here.
Read: Peter Shawn Taylor (2015) Taking the Wind Out Of Sales, Canadian Business, April, page 23.