The Maryland attorney general's lawsuit against The Hecht Co.'s mattress advertisements highlights an industrywide issue that is drawing increasing attention from consumer protection officials here and around the country.
Consumer protection officials, noting a sharp increase in ads that may lead consumers into believing they are getting big bargains on a variety of consumer goods, are stepping up their efforts to correct advertising abuses.
State and local consumer protection officials say they are looking closely at comparative advertisements -- those that compare sales prices with either the "regular" price or a competitor's price -- to make sure that they are not misleading.
Meanwhile, the Council of Better Business Bureaus is working with the bedding industry to develop a new voluntary code of advertising for mattress sales, where misleading advertisements are especially prevalent, council officials said.
These attempts come as the Federal Trade Commission continues to maintain a hands-off policy on policing comparative ads, in the belief that any attempt to discourage them could hurt consumers by curbing discounts.
The controversy of sale advertisements flared anew this week when on Wednesday, the Maryland Attorney General's Office sued Hecht's, charging it with using fictitious prices in its sales promotions "to create an illusion of dramatic savings and significant bargains which, in fact, do not exist." The company did so by comparing its sales price with a "regular" price that "was a fictitious price, and was not a price at which the applicable mattresses and box springs had been openly and actively offered to the public."
The lawsuit, contending that Hecht's is conducting similar promotions for other consumer goods as well, is asking the retailer to refund any money to consumers that it gained from the ads.
Hecht's has denied the charges, saying "our longstanding pricing policy fully complies with all applicable state and federal laws." The retailers parent company has filed a separate suit against Maryland's attorney general, seeking a ruling upholding its advertisements as legal and barring the state from proceeding with its investigation.
"We view what we do in our advertising in regards to comparative prices as no different than our competitors," Ken Winfield, Hecht's senior vice president for administration, said yesterday.
Maryland's Attorney General's Office acknowledged yesterday that the state is investigating other retailers as well as Hecht's. "We are afraid it may exist with other stores," said Assistant Attorney General James P. Abbott.
As a result of Maryland's action, the D.C. Department of Consumer and Regulatory Affairs said it will look into the ads, even though it has not received any complaints from consumers or other retailers.
Meanwhile, Fairfax County's Department of Consumer Affairs said it will continue to monitor ads for misleading statements. Fairfax officials have brought a number of cases against retailers for making misleading price claims. the most notable of which was brought three years ago when the Woolco discount chain was closing its stores in the area. After receiving complaints that Woolco had raised prices on several items before applying its heavily advertised out-of-business discounts, Fairfax officials investigated the ads and won an agreement from Woolco to refund money to purchasers of overpriced items.
"Comparative price abuses are by no means new," said Allen Beatty, a vice president at the Council of Better Business Bureaus.
Yet, "in mattresses, the problem is across the board . . . in all major metropolitan areas," noted James E. Baumhart, the bureau's executive vice president for Chicago and Illinois -- where extensive investigations into mattress ads have been conducted.
"Mattress manufacturers have preticketed prices to encourage retailers to use as comparative prices. Hardly ever is it the price at which the product is sold in any major market."
There is a similar problem with jewelry, many small, independent store owners note. "You walk through a mall and you see signs saying 60 to 70 percent off 14-carat gold jewelry," commented Albert A. Foer, chairman of Melart Jewelers. "In many situations these signs don't come down; they are permanent."
Foer, who served in the FTC as assistant director of the Bureau of Competition during the Carter administraiton, pins the blame for the proliferation of these comparative ads on the FTC, the federal agency that is responsible for regulating deceptive ads.
"This problem exploded over the last several years as a result of the FTC's relinquishing its role of protecting consumers against deceptive advertising," Foer said.
The FTC contended yesterday, however, that it stopped enforcing the ads in the mid-1970s after receiving numerous complaints that the agency's actions hurt, rather than helped, consumers.
"Most of these cases were brought as a result of complaints from retailers with higher prices, and the cases tended to be against discounters," said Howard Beals, acting deputy director of the FTC's Bureau of Consumer Protection. "The likely effect of these cases was to make life difficult for discounters and raise prices for consumers."
According to the BBB's Baumhart, "the consumer is not being harmed per se. But he is being misled into believing that there is some urgency in buying mattresses now to obtain that discount. We're concerned about what that does to the credibility of advertising. . . . "