The question is, which is worse, deceptive advertising or inflation? The answer depends on which branch of government you ask.
The Federal Trade Commission staff has contended that Kroger Co., the third largest retail food chain in the country, was deceiving consumers with its "Price Patrol" advertising that purported to show Kroger's prices were lower than its competitors.
The ads compared, on a weekly basis, the prices of 150 products at Krogers and several competitors on a weekly basis. The results, which invariably showed Kroger to have the lowest prices on most products, were advertised by Kroger, also on a weekly basis.
The problem, the FTC staff contended, was that Kroger didn't mention that meat and produce were not included in the survey. And, the staff pointed out, the 150 products that were chosen for the survey were chosen by the same executives who set the prices on their products.
Consequently, the FTC staff has alleged that since July 1977, it was misleading for Kroger to state, as it did, that its survey proved "Kroger is the Low Price Leader," or "The Price Patrol Proves You Save More at Kroger," or "Documented Proof: Kroger Leads in Lower Prices!"
The FTC staff called on Kroger to either stop the price comparisons or change them to involve a survey that is methodologically sound, fair, impartial and one that discloses what the FTC considers to be material facts, like what products are not included and who picked the products that were included.
Enter government branch No. 2, the White House Council on Wage and Price Stability, more than a year and a half later.
In a letter to FTC Secretary Carol Thomas in December, COWPS Deputy Director R. Robert Russell wrote that the FTC proceeding against Kroger "has been brought to our attention by counsel for the Kroger Co.
"A central issue in the Kroger case is the appropriate basis for price advertising claims," COWPS wrote. "Should a retailer be required to base claims of low prices on 'scientifically pure' surveys or should less rigorous methods be acceptable?"
COWPS acknowledged in the letter that the "quality of information conveyed to the consumer will improve as more rigorous and exttnsive sampling techniques are employed," but added that the cost of "elaborate surveys to the retailer, and thus to the consumer, will also increase."
Simply stated, COWPS contended that if you force retailers to use stringent tests for their comparative advertising, it will discourage that type of advertising. "More importantly," COWPS added, "if the dissemination of price information is discouraged, price competition will be discouraged, The result would be higher prices."
Kroger has contended that survey techniques that would satisfy the FTC would cost so much, no one would do comparative pricing advertising, and the consumer would be the big loser.
While COWPS agreed with Kroger's logic, it still added at the end of its letter: "We do not presume to judge the merits of this proceeding."
"Personally," one FTC official said, "I don't think the White House read the case. What good is any comparative pricing advertising if it is rigged?"
The COWPS letter has been presented to an administrative law judge who will decided soon on what judge who will decided soon on what kind of action is appropriate.
"The major point the White House makes is valid," the FTC source said. "We want to encourage more comparative advertising. But our point is we don't want deceptive advertising in any case."