BOGO offers -- that is, "buy one get one [free]" deals -- are popular with consumers. Indeed, a pending case in the Northern District of California, demonstrates just how popular. In Sharpe vs. Puritan's Pride, Inc., a putative class action, the Court recently addressed the defendants' motion to dismiss a complaint that alleged that defendants used misleading "buy one/get one free" promotional and other deceptive marketing pitches to induce the sale of vitamins and health supplements.
Specifically, plaintiffs alleged that defendants' BOGO offers were deceptive because there was no regular price to discount: "there has been no reasonably substantial period of time" when Puritan's Pride sold products at anything other than BOGO and limited-offer prices. Further, plaintiff alleged, "the misleading statements induced consumers to buy vitamins and supplements from Puritan's Pride on the basis of cost savings that were illusory."
In denying defendants' motion to dismiss some of the claims, the Court found that "Plaintiffs allege a perfectly plausible injury in the form of losing money by being duped into buying products they otherwise would not have purchased but for the deceptive conduct." The Court further noted that "[t]he time may come when plaintiffs might need to put a finer point on the quantification of their loss, which very well might entail a price/value analysis...But for pleading purposes...they have adequately alleged injury."
Clearly, discounts and BOGO offers are enticing enough to get people to part with their money, hence the finding of a "perfectly plausible injury." But that means these incentives are sexy to regulators and class action plaintiffs (and their lawyers) too. For marketers offering such incentives it is important to keep the principles of the FTC's pricing guides (and state law analogues) in mind -- both the Guides Against Deceptive Pricing and the Guide Concerning the Use of the Word "Free" and Similar Representations. (Probably a good idea to remember the Guides Against Bait Advertising too.)
The fundamental principal is that if a marketer is characterizing a price as special, it must actually be that. As the Guides note, "because the purchasing public continually searches for the best buy, and regards the offer of “Free” merchandise or service to be a special bargain, all such offers must be made with extreme care so as to avoid any possibility that consumers will be misled or deceived." To be special, it must be different from the actual regular price -- and there must be an actual regular price. As stated in the Guides, "Where the former price is genuine, the bargain being advertised is a true one. If, on the other hand, the former price being advertised is not bona fide but fictitious...the “bargain” being advertised is a false one; the purchaser is not receiving the unusual value he expects."