|NAD says the home-improvement retailer can't claim 'Lowest Prices, Guaranteed.'
“There’s a difference between claiming to be the 'best' or 'lowest' from words that say you are 'good' or 'better,'” said Andrea Levine, director of the National Advertising Division (NAD). “We felt an unqualified lowest-price guarantee sends the message to consumers that if you come and buy here, you are guaranteed the prices would be the lowest you could pay anywhere. There’s a high level of proof you need to claim that.”
NAD opened the case against Home Depot March 22 after a referral by the Better Business Bureau in the Atlanta region. The ads were created in-house and included print media and in-store ads.
NAD ruled the “Lowest Prices, Guaranteed” claim was likely to be interpreted as a lowest-price offer rather than a price matching/beating policy by consumers and that the message discouraged comparison shopping. Home Depot argued the claim was supported by its price-matching policy, in which consumers get a 10% discount if a local competitor beats them on price, even as it conceded it does not always offer the lowest price.
The Home Depot was not able to reply to requests seeking comment at press time. The Home Depot “plans to comply with NAD’s recommendation in future advertising,” according to the NAD report released yesterday.
Wal-Mart as precedent
In explaining its decision, NAD pointed to a recent case against Wal-Mart as precedent. In that case, the National Advertising Review Board concluded that the retailer's “Always” slogan ("Always Low Prices. Always") “communicated much more than a customer-specific matching program; it suggests a routine pricing policy that customers can count on without the need to do comparative shopping.”
Brian Postol, a retail analyst with St. Louis-based investment house A.G. Edwards & Sons, said the decision by NAD will have little, if any, impact on the home-improvement retail category, where price parity reigns. Rival home-improvement retailer Lowe’s offers a similar “Everyday Low Prices Guaranteed” claim, but sticks with adjective “low,” not the superlative “lowest.”
'Level playing field'
“You’re never going to see Home Depot and Lowe’s significantly below each other on price,” Mr. Postol said. “It’s a level playing field. There is not a price war out there. It’s competitive, but it’s not about who can undercut who and hurt the whole industry. It is pretty rational at this point.”
Home Depot case also involved two other ad claims -– “Nobody beats our prices guaranteed” and “Home Depot has 2,000 Appliances.” NAD supported the retailer’s ongoing use of both claims.
NAD said the retailer’s price-beating policy supported the first claim, as long as “they are accompanied by a clear and conspicuous disclosure outlining that policy.” To support its 2,000 appliances claim, Home Depot submitted a confidential spread sheet listing the advertised 2,000 appliances. NAD accepted Home Depot’s argument that although not every Home Depot location has 2,000 appliances in stock all the time, consumers can order them all online.