Walmart Price Ads Draw Ire of Rivals

Best Buy, Toys 'R' Us, Others Claim Price-Comparisons Are Deceptive; Some States Start Inquiry

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Walmart's increasingly aggressive efforts to advertise specific price comparisons have boosted sales in a weak economy, but now rivals are charging that they're deceptive.

Walmart acknowledges getting inquiries about ads from authorities in Illinois, Missouri, Michigan and Pennsylvania -- and The Wall Street Journal reported Jan. 3 that rivals also have filed complaints in Florida, New Jersey and California.

"The difference between an inquiry and an investigation is important," said Walmart spokesman Steven Restivo, adding that none of the states have opened a formal investigation.

But rivals, including Best Buy, Toys "R" Us and supermarket retailers, say Walmart's ads mislead.

Best Buy, for example, complained to the Florida attorney general that when Walmart recently advertised a Dell laptop as $251 cheaper than one at Best Buy, they were two different models.

Last month, Best Buy sent a letter to its 40 million Reward Zone Members comparing Walmart's ads -- though not by name -- with misleading political ads while reminding them that it matches competitor prices on hardware.

Toys "R" Us took issue with three holiday-season ads. The retailer has "provided the attorney general's offices in several states with documents to assist in their investigations of what we believe is Walmart's resumption of deceptive-advertising practices," said Kathleen Waugh, VP-corporate communications.

The charges come as price comparisons appear to be making a comeback after last peaking during the depths of the recession in 2008 and 2009. This holiday season also saw JC Penney, which had eschewed touting specific prices in TV ads, return to the practice in heavily rotated commercials.

Walmart, which last decade moved away from an everyday-low-price approach, has sacrificed billions of dollars in gross margin the past year to lower prices, returning to same-store sales growth in the process after two years of declines.

Last year Walmart began using reality-show-style production to create local price-comparison TV ads at around 25% the cost of regular ads, Walmart U.S. CEO Bill Simon told a Goldman Sachs investor conference in September. Such ads produced 1.2% gains in comparable-store sales compared with areas where Walmart wasn't running them.

A survey this summer by Minneapolis research firm ClickIQ in five states covered by supermarket retailer Publix found that 49% of consumers familiar with a Walmart campaign inviting them to bring supermarket cash-register receipts to local stores for a price comparison, with 17% saying they'd actually done so. Publix later began running ads touting its own lower prices on some items.

Mr. Restivo said Walmart will keep running price-comparison ads because consumers appreciate them. He said each gets legal review to ensure it complies with Federal Trade Commission guidelines.

But comparison ads are getting trickier as online retailers change prices sometimes hourly to remain competitive or vary prices by ZIP code depending on competition. Even offline, some retailers are adjusting much faster. Kohl's will soon complete a nationwide rollout of digital price "e-signs" to allow quicker and remote changes.

So while Walmart can make item-price ads cheaper than ever, they may have ever-shorter shelf lives and cost the retailer more legal challenges.

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