MRA labels ad guidelines ‘badly flawed’continued from page 1 The Michigan Retailers Association calls furniture advertising guidelines issued by the Michigan attorney general’s office “badly flawed” and says they should be thrown out. “The more our members become familiar with these vague and overreaching guidelines, the more problems they discover,” said MRA’s Larry Meyer, chairman and CEO. “That’s not surprising, because the guidelines are the result of a flawed process that circumvented procedures which would have ensured widespread participation from the retail industry and consumers. The guidelines don’t just create problems for furniture retailers, they have the potential to affect the entire retail industry.”
The Home Furnishing and Comparative Advertising Guidelines for Michigan Retailers has received a cool welcome at best by the state’s furniture retailers. Dealers say they are concerned about the advertising limitations the guidelines carry. They also object to what they see as an insinuation of industry-wide dishonesty. “Furniture retailers have been singled out unfairly,” said James Schwark, president of Schwark Furniture in Shelby Township and an MRA board member. In essence, the guidelines define a sale price as a percentage or fractional discount off the retailer’s Original Selling Price (OSP), not the Manufacturer’s Suggested Retail Price (MSRP). “Other retailers advertise sale prices and show markdowns from MSRP on tags, so issuing guidelines for furniture alone just isn’t right,” Schwark said. Attorney General Jennifer Granholm, the Better Business Bureaus (BBB) of Eastern and Western Michigan and the Michigan Chapter of the National Home Furnishing Industry (NHFI) developed the guidelines to end what the attorney general calls misleading or deceptive advertising and inflated price comparisons. Key provisions of the guidelines deal with the terms “sale” price, “regular” price and expectations behind establishing an OSP. According to the guidelines, an OSP may be established by one of two methods. The Offer Method is the actual, good-faith price at which the seller openly and actively offered the merchandise to the public on a regular basis for a “significant period of time.” The Sale Method is the price at which the seller made a “substantial number” of sales of the merchandise in the recent, regular course of business. Schwark points out that the jewelry, floor covering and window treatment industries have followed the markdown-from-MSRP formula for advertising, yet remain unregulated. He says he’s also frustrated by how the guidelines evolved. “These guidelines were not born from customer complaints,” Schwark said. “A few small furniture retailers went to the attorney general and the BBB, complaining that bigger furniture dealers had an advertising advantage. If consumer complaints had brought about these guidelines, they would be a lot easier to swallow.” The guidelines, which went into effect September 9, affect not only print, radio and television advertising, but the way items are priced in stores. “What bothers me the most is that I have to undergo all these changes to protect my customers from supposed advertising dishonesty, when fairness has been the hallmark of Schwark Furniture for 40 years,” said Schwark. The attorney general’s office, however, is holding fast to its stance that the guidelines are needed. “We felt there was too much gray area surrounding the term ‘sale price,’” said Greg Bird, acting director of communications for the Department of Attorney General. “When a customer buys an item, they should know the regular price and the sale price—clearly and honestly. Before these guidelines were set forth, we didn’t feel that was always the case in furniture stores across the state.” While Bird acknowledged that not all Michigan furniture dealers were given the chance to assist in drafting the guidelines, he said that the blessing of the Michigan chapter of the NHFI should be ample retailer representation. “We feel confident that between the attorney general’s office, the BBB and the NHFI, we have drafted guidelines that will work for Michigan retailers and serve Michigan consumers.” Schwark said better guidelines could have been drafted with greater input from more retailers. “I understand these guidelines are an attempt to make furniture retailers accountable, but our store was accountable and advertised responsibly before,” Schwark said “Now, to be compliant, we have to re-tag 80,000 square feet of showroom into a format I don’t think customers will prefer.” MRA’s James P. Hallan, president and chief operating officer, said state law required the attorney general’s office to follow legislative rule-making procedures instead of issuing guidelines. The difference, he said, is that rulemaking carries the force of law and requires more widespread participation in the process. “The Administrative Procedures Act says agencies are not to adopt guidelines in lieu of rules,” said Hallan, an attorney. Mark Schrag, owner of Seasons in Okemos and chair of MRA’s Executive Committee, echoes Schwark’s comments. “We at Seasons have always been clear and up-front regarding prices on our merchandise,” said Schrag. “The guidelines will change some of our tagging procedures, but it will not provoke massive change of our pricing and selling practices, because we have never been purposefully misleading.” Schrag said that while the guidelines are set up to help consumers, there are ways the guidelines could have negative effects. “Oftentimes, manufacturers will run sales when a new line comes out,” Schrag said. “The customer will no longer be able to capitalize on those manufacturer discounts because the sale may not last for the days required to set an OSP.” The guidelines state that if a retailer violates the guidelines the BBB will send a letter demanding the store discontinue the advertising in question. The retailer then has 10 days to discontinue the sale and respond to the BBB. If a retailer has not responded in 10 days, or a second infraction is reported, the BBB will set up an arbitration hearing for the retailer and the attorney general’s office. The guidelines further state that either the BBB or the Michigan Department of Attorney General may “shop” or survey retailers without notice and without identifying themselves to monitor in-store pricing activity. |
MRA
is considering legal action to enjoin enforcement of the guidelines, Meyer
added. A decision will be made after further review of the guidelines
and additional discussion with members.