Business groups laud item pricing repeal effort; others abhor it

The state House of Representatives passed legislation last week that offers retailers a reprieve from what some consider to be stringent consumer pricing laws. House Bill (HB) 4158, which will now be considered by the state Senate, would repeal the state’s 1976 Consumer Item Pricing Act, which generally requires that the total price of a consumer item be stamped or affixed to each one.

The bill would put into place the proposed Shopping Reform and Modernization Act, which would contain many of the provisions currently in the Consumer Item Pricing Act related to advertising the price and quality of goods and on prohibited practices, with some modifications.

For example, the current penalties for violations would remain intact when a retailer charges a price for an item that is more than the displayed price, but the definition of “displayed” would no longer require the price to be stamped or affixed to each item. Instead, the bill requires that the price be displayed “by signage, by an electronic reader, or by any other method that reasonably conveys the current price of a consumer item in the store,” like big-box retailers that place a price sign below a grouping of like items.

“Prices rung up must match and if there’s a discrepancy the consumer is entitled to the bounty or 10 percent, so the consumer protection is still there,” said Scott Watkins of the Anderson Economic Group. “Before the law was you had to have a sticker on everything, but now it’s less stringent and you can price items in other ways.”

The proposal, introduced by state Rep. Lisa Posthumus Lyons (R-Alto), comes on the heels of Gov. Rick Snyder identifying the current law as a contributing factor in the state’s struggling economy and calling for its repeal during his State of the State address last month.

“By cutting red tape and reforming Michigan’s pricing laws, we will finally provide retailers with the flexibility they need to deliver the most competitive prices, most convenient shopping experience, and the best technology to Michigan consumers. That’s good news for Michigan, good news for job makers, and good news for shoppers, whether or not you have kids in tow at the market,” Lyons said.

The proposal is thought to catapult retailers from the sticker-gun past into a high-tech, consumer-focused world, enabling them to use technology to better communicate the price of items to consumers, while removing the requirement that a price sticker be placed on every individual item in a store.

“The governor pointed (out) that we stick out like a sore thumb,” said Michigan Retailers Association Senior Vice President Tom Scott. “It is detrimental to business investment in retail and prevents technological advances for the best shopping experience. Businesses won’t invest in technology as long as we’re stuck with costly requirements to put a sticker on everything.”

“We’ve suggested stores install some type of scanners in the carts themselves to keep and record pricing (which) gives the total so (consumers) know what the costs are while they’re shopping,” said state Sen. Mike Kowall (R-Commerce, Highland, Milford, Walled Lake, Wixom, Wolverine Lake, White Lake, Orchard Lake, West Bloomfield).

The proposed legislation would apply to all retailers, but exempts “big box” wholesalers like Sam’s Club and Costco.

“The attorney general ruled these as wholesale operations and that they are considered clubs vs. retail operations,” Scott said.

The law does not apply to items sold by volume or weight, prepared food intended to be immediately eaten, unpackaged items, live plants or animals, vehicles, vehicle parts, greeting cards or small items weighing less than 3 ounces and sold for no more than 30 cents.

Retailers also can choose to exempt up to 25 items that would otherwise need to be price marked. A list of exempt items must be posted with the prices in a conspicuous place near the unmarked items.

For the small mom-and-pop outfit like the Clothing Cove in Milford, the goal is to keep up with technology while adhering to pricing laws, no matter how tedious the practice is.

“We scan everything and every item has a bar code,” said Clothing Cove owner Eric Horsley. “We use high-tech (equipment) to grab the right price at the checkout.”

Currently, Michigan is one of three states that has this type of item pricing law; but of the trio, Michigan has been called the most restrictive. Massachusetts requires item pricing only on grocery items and New York mandates item pricing in only a couple jurisdictions.

“Only Michigan requires all items sold at retail with individual pricing on each one, whether it’s a can of soup or a CD,” Walton said. “Under Michigan law, every item must have a price. It’s very unique to Michigan and a burden our businesses are facing.”

According to Dale Hollandsworth, Consumer Communications Representative for the Kroger Company, the proposed legislation is a welcomed departure from the item pricing law that’s currently enforced.

“It means that we will be more competitive with states in the union to invest capital in Michigan and (it) frees up capital for technology solutions,” Hollandsworth said. “We support the governor’s position 100 percent and are glad it’s moving forward.”

According to a study commissioned by the state’s retailers, the item pricing law adds $2.2 billion to retail costs in the state without any tangible benefit to consumers. Watkins extrapolated the data from a price study conducted in 2006 between New York, which then had strict item-pricing requirements, and neighboring New Jersey, which did not.

“Both of these areas had identical markets — we used this as a base by looking at groceries and household goods in Michigan,” Watkins said. “We did some economic modeling and found that the regression that affects price is the item pricing law.”

Watkins, who authored the study, found that item pricing laws cost consumers an average of 8 percent to 10 percent more than in states without similar laws. However, the study was denounced by the United Food and Commercial Workers (UFCW), which stated the conclusions are skewed given that it was not conducted in Michigan stores — and therefore doesn’t accurately reflect the impact of Michigan’s item pricing law.

“Some have argued that item pricing costs consumers $2.2 billion a year,” said UFCW Political and Legislative Director Chris Michalakis. “This might be the most inaccurate price to ever come out of a Michigan retail establishment. The bogus study didn’t account for factors such as differences in property values, cost of living, transportation costs, and market forces.”

Some lawmakers like state Rep. Charles Smiley (D-Burton) concur.

“It’s an outrage that legislators are rushing to end a law that has protected Michigan consumers well for three decades, but to do so based on faulty research makes it even worse,” Smiley said.

Most groups impacted by the legislation agree that it’s a step in the right direction, as it still regulates consumer pricing, but at the same time is more palatable for retailers. Others are skeptical about how the proposed legislation will affect them over the long haul.

“We don’t know to what degree it will impact us yet,” said Horsley. “We price everything individually except beads, but errors do happen. Overall it’s tough on retailers. There is no intent to commit fraud. We’re just trying to build up our business.”

Opponents of the legislation, like the UFCW, maintain that it will end up hurting retail employees and gouging consumers via inflated prices.

“The legislation is harmful for consumers and workers,” Michalakis said. “It guarantees the price on the tag is the most you’ll pay at the point of sale, but that’s not guarantees on shelf pricing. A simple price tag can be helpful in a number of ways. In these tough times, it’s the most effective way to comparison shop. It gives customers a guarantee that the price they see on the item is the exact price they will pay at checkout. Shelf tags alone don’t provide such a guarantee.

“Many retailers give more time for stocking crews so the money saved by this legislation would come off the backs of workers,” Michalakis said. “As long as there are no price tags, retailers will benefit from lower labor costs.”

Kroger representatives say otherwise.

“I don’t see any significant impact to employees,” Hollandsworth said. “If you ask people working in the grocery business, they’d tell you those stickers get caught up in fans and drains and coolers, causing them more time when they could be stocking shelves and giving better customer service.”

And advocates — for one side or the other — aren’t the only ones dealing with the issue. State legislators continue to grapple with how the proposal could impact consumers.

“The item pricing law is an important consumer protection that Michigan residents need now more than ever,” Smiley said. “With families being squeezed in all directions these days, especially our seniors on fixed incomes, every penny counts. People deserve to know how much they are paying for products, and they shouldn’t have to worry about that changing by the time they get up to the checkout counter.

“Eliminating the item pricing law leaves far too much opportunity for shoppers to be accidentally overcharged or intentionally ripped off,” he said.

Kowall, who chairs the Economic Development Committee that will discuss the bill this week, said he doesn’t see the proposal reinventing retailer procedures all that much, and said, therefore, that it won’t pose any threat to consumers or union workers.

“While they won’t have to sticker, most retailers will continue to do so,” Kowall said. “There’s no danger for consumers and it shouldn’t affect comparison sales. As for the union worried about losing jobs for their workers, stores will still need people to stock shelves. In talks with retailers, they have assured me they will still be stickering goods.”

Scott’s group was roped into discussions to suggest changes that could be incorporated into the bill before it was passed by the state House. He said that most groups were on board with the new language.

“We worked with the AARP (American Association of Retired Persons) to include their language and to ensure consumers see the price right,” Scott said. “Both the AARP and Attorney General are happy with its consumer protection, so all in all it’s good legislation by helping businesses compete and helping consumers at the same time.”

However, the UFCW contends that retailers would be the only winners in the event it becomes law.

“This is especially useful in these hard economic times, when many of us shop on a fixed budget,” Michalakis said. “Item pricing also gives customers a paper audit trail, when even after a purchase, a customer can make sure that the price they expected to pay for a good matched what they were charged at checkout. This bill provides no such audit trail when retailers rely on shelf tags alone.”

The UFCW has voiced concerns that layoffs and mediocre customer service would follow if the legislation passes; however, Walton doesn’t share that viewpoint.

“They wouldn’t necessarily have to lay off, just re-employ labor to services more valued by customers,” Walton said. “Now retailers won’t have to pay cost for stickers on individual items and can invest in better technology and more time stocking and customer service.”

Hollandsworth also begged the following question: How do the other 48 states without restrictive item pricing laws manage to ensure customer protection?

“Are we so much different than any other state that doesn’t have these laws?” he asked.

Michalakis contends the proposal would strip away consumer rights if the state Legislature chooses to continue forward with nixing the 35-year-old law.

“Electronic shelf labels enables retailers to change their prices throughout the day and engage in price discrimination, where prices can go up and down throughout the day,” Michalakis said. “Imagine the cost of a gallon of milk fluctuating like the cost of a gallon of gas.”

Advocates of the legislation agree that reforms in item pricing laws are long overdue and will help move Michigan into the 21st century by opening the door to investment and innovation focused on improving the shopping experience without being weighed down by the provisions of the existing statute.

“We’re the only state that requires this and it causes us not only to compete with countries like China, but even in domestic markets,” Hollandsworth said. “New pricing laws will help business and retailers and will trickle down to other industries. It will allow us to pursue capital without the hindrance of the hidden tax and I believe each store will handle it differently.”

“This law provides pricing flexibility instead of mandating one way to do it that was time constraining and expensive,” Scott said. “It allows retailers to indicate the price and method for shoppers and yet ensures consumer protection.”

The proposal maintains Attorney General oversight, includes state advertisement and rain-check requirements, and retains the bounty provision that requires payment of the difference plus 10 times the difference between an advertised price and an inaccurate price charged at checkout.

“The law shouldn’t be scrapped completely,” Watkins said. “It provides disincentives to retailers who wrongfully price items and will be punished for their oversights and at the same time, customers are protected.”

The proposed changes would provide consumer protection from overcharges. If people notice they were overcharged for an item, they can go back to the store within 30 days of the purchase and receive the difference between the price tag and the receipt, plus a bonus of 10 times the difference. The bonus can’t be less than $1 or more than $5.

Should the seller refuse to pay the difference, the shopper can sue for actual damages or $250, whichever is greater.

“If you tell the cashier during the transaction, then you won’t get the bounty, but if caught after you would get the difference plus 10 percent of that difference which treads the line because some retailers have said people can be malicious by waiting to get the bounty,” Watkins said. “Some have actually made a living by visiting stores and finding wrong prices to benefit.”

As in current law, the bill authorizes the Attorney General to maintain an action to enjoin a continuing violation of the act. Currently, the Attorney General must first notify a defendant of the intention to seek an injunction if the defendant does not cease the activity, and the bill allows the Attorney General to accept from the retailer an assurance of discontinuance of practices alleged to be in violation. A prosecuting attorney or law enforcement officer who receives notice of a violation of the act or of an injunction, judgment, or assurance is required to immediately forward written notice to the Attorney General.

Penalties for a knowing violation of the act would remain the same as they are under the current law: A civil penalty of up to $1,000 for a first violation and up to $5,000 for a second or subsequent violation. The Attorney General, as is currently the case, would be authorized to promulgate rules to implement and administer the act.

The bill would also allocate $100,000 from the state’s General Fund for the Department of Attorney General for Fiscal Year 2010-11. The appropriation would be for the Attorney General “to develop and implement a public consumer education program to provide general information and advice regarding the advertising and pricing requirements of (the new act) and the remedies available to the consumers.”

The Michigan Department of Agriculture indicates that its Consumer Protection Section is the agency that currently investigates violations of the item pricing law, conducted on a complaint basis only. Should the legislation pass, there is a widespread concern that there will be an influx in complaints.

“While there are some detractors in the bill, the amount of energy put into the overall industry as a result would create growth in the industry, new jobs and facilities,” Hollandsworth said.