E-Retailer False Advertising Matter

An Analysis Group team was retained to support Professor Joel Steckel of NYU Stern on behalf of a major e-retailer defendant in a litigation and damages case in which the government alleged that the defendant had made untrue and misleading comparative advertising claims about the prices of its products. At issue was the use of specific reference pricing conditions, including advertising terms that the plaintiff asserted were misleading.

The Analysis Group team, led by Managing Principal Rebecca Kirk Fair and including Vice President Kristina Shampanier and Senior Economist Laura O'Laughlin, assisted Professor Steckel in conducting two experiments: an online experiment with the e-retailer's website itself and an Internet panel study to assess the impact of the advertising language on consumer perception and behavior. In the first study, sample groups of consumers were randomly selected to view versions of the defendant's website with either "MSRP" (manufacturer's suggested retail price) or "Compare" labels throughout their shopping session and subsequent website visits. An analysis of survey results of consumers who made purchases during the study period found no difference in consumer recall of the product price, the reference price, or the term used with the reference price. There was also no difference in the sales conversion rate. In the second study, Professor Steckel sought to determine whether consumers' understanding of reference prices changed with the labels used, for example "was," "compare at," "compare," and "MSRP." Not surprisingly, and consistent with the first study, no differences were found.