Fair Advertising

Question

Berel owns a hardware store. Since Purim and Pesach are approaching, he wishes to
embark on an extensive advertising campaign. He is concerned that such advertising should
be within the bounds of halachah. He has some specific questions: (a) May he
drastically reduce the price of one or two items – selling them at a loss – in
order to attract the customers, hoping that they will then buy other items which are sold
at normal prices (loss-leader)? (b) He wishes to sell an old model electric drill. May he
put up a sign extolling the virtues of this drill when he knows that the latest model is
available elsewhere at a similar price? (c) He has several lines in stock that did not
sell well in previous years. Can he polish them up and put them in the shop window (with
special lighting effects) in order to encourage sales?


Answer

When attempting to promote one’s goods, one must first make sure he does not
infringe upon the prohibition of deception (genayvas da’as). There is no
difference whether one deceives through speech or through any other means, written or
otherwise. One may not deceive a non-Jew either (see Choshen Mishpot 228:6). Even
if another person is grateful to you for a favor that he mistakenly thinks you did for
him, this is wrong. However, if a person pays more than he should for goods because of
deceptive information, this does not invalidate the sale. The usual laws of overcharging
apply (see the essay entitled "Overcharging and Underpaying" in this
series). Polishing up used goods to make them look like new is forbidden, but there
is no problem with polishing new goods to enhance their appearance (Ibid, Para. 9).

The rule is that when advertising, one may promote the goods in any way, as long as he
does not make a false claim. It is perfectly permissible to list the qualities of your
product in great detail, as long as all that you write or say is true. One does not have
to be concerned that a newer model is available at the same price or that the same item is
available at a cheaper price elsewhere. Each trader decides what publicity to give his
goods and his business. The customers then make their choice. A trader who sells a
superior product at a better price may see the customers going to his competitor who
charges more for goods of a lesser quality, simply because of the latter’s
advertising strategy! However, to claim that your goods are the cheapest or the best on
the market, when this is not true, is obviously forbidden. One may only praise one’s
own goods, but criticizing the competitor or his wares is forbidden (and could well be Loshon
Hora –
slander)!

It sometimes happens that traders make false claims when customers are bargaining about
the price. Statements such as, "If I sell it to you at that price, I am making a
loss!" or, "Do you really expect me to make five shekel profit on a top-quality
washing-machine?" can only be made if they are really true! The
"loss-leader" tactic is a legitimate method of drawing customers to one’s
business, as long as it is confined to a few products. To sell all one’s goods at a
non-economical price (no profit at all or at a loss) in order to drive the competitors out
of the market is unacceptable, since it constitutes unfair trading. Special offers, free
gifts and prize draws are all acceptable advertising tactics.

AS TO OUR ORIGINAL QUESTION, we can answer all Berel’s question in the
affirmative. (a) The loss-leader strategy is an accepted advertising ploy. However,
temporarily reducing all prices in order to gain monopoly of the market is
forbidden. (b) Listing all the real qualities of an item is permissible, even if a
newer model is available at the same price, since no deceptive claim has been made. (c) To
polish up old unused stock in order to help sales is also permitted. Masking a
product’s age or making a used item look as if it were unused constitutes deception.