What a Crossed-Out Price Has to Have Been

The crossed-out number is regulated, and the test is narrower than people assume. A former price has to have been the real one, openly offered, recently, for a reasonably substantial period. It does not have to be low, fair, or the same as last year’s.

Which means the most useful thing to understand about sale pricing is not what the rule forbids but what it permits.

The four conditions

From 16 CFR 233.1, the federal guide on deceptive pricing. A former price used in a comparison must be:

1. Real — “the actual, bona fide price at which the article was offered to the public”
2. Open — “openly and actively offered for sale … honestly and in good faith”
3. Sustained — “on a regular basis for a reasonably substantial period of time”
4. Recent — “in the recent, regular course of his business”

The thing the rule was written to stop is named in its own text: a comparison is deceptive where the former price is “not bona fide but fictitious — for example, where an artificial, inflated price was established for the purpose of enabling the subsequent offer of a large reduction.”

And the condition it does not impose

Nothing in those four tests says the former price has to be the launch price, or last year’s price, or a price anybody thought was reasonable.

A price that rose quietly in March and was openly charged all summer is a bona fide former price in November. It is real, it was open, it was sustained, it is recent. A forty per cent discount from it is entirely lawful.

That is not a loophole; it is the rule doing its actual job, which is policing invented reference prices rather than drifting ones. But it is why the percentage can be honest and the saving can still be smaller than it looks. Our ereader shortlist found every device on it now listing above the price its maker announced it at, each of those higher prices openly charged for months. Every one of them would pass all four tests.

The list-price version

There is a second rule for the other kind of crossed-out number, the manufacturer’s list price. 16 CFR 233.3 says a list price “will not be deemed fictitious if it is the price at which substantial sales are made in the advertiser’s trade area.”

The obligation it creates is worth knowing because it points the other way from where shoppers assume. Before advertising a manufacturer’s list price as a comparison, the retailer should ascertain whether that is in fact the price regularly charged by principal outlets in the area. The checking duty is the seller’s.

What this changes about reading a sale

Not much about what is legal, and quite a lot about what is useful.

The percentage tells you the relationship between two numbers the seller chose. The rule guarantees the second number was real at some recent point. Neither tells you whether the price is good, and no rule can, because that is a question about the market rather than about the advertisement.

What to actually do

• Treat the crossed-out figure as a fact about the seller’s recent history, which is what the rule makes it, rather than as a fact about the product’s worth.
• Find the price from before the drift. A launch price or a figure you recorded yourself is the baseline the regulation does not require anyone to show you.
• Be sceptical of a very large reduction on an unfamiliar brand, since that is the exact pattern 233.1 describes and the one hardest to check.
• Remember the checking duty is the retailer’s. If a list price comparison looks unlike what shops near you charge, the rule already says it should have been verified.
• Use the same four questions our deal guide asks. They are, not by coincidence, close to the regulator’s.