Wal-Mart Under Fire From Competitors
CNBC General Assignment Reporter
Wal-Mart's recent price comparison advertisements may be enticing consumers, but the promotions are also angering competitors.
Toys "R" Us and Best Buy, two retailers targeted in the Wal-Mart ads, are taking action by making complaints to attorneys general in several states against the discount retailer.
Wal-Mart spokesperson Steve Restivo confirmed the retailer was contacted by Michigan, Illinois, Missouri and Pennsylvania regarding its rivals' complaints, but no legal action has been taken by any of the states or the retailers beyond letters and the conversations that were exchanged.
"We are confident in the legal, ethical and methodological standards associated with our local grocery basket and national price comparison ads," Restivo said. "Our ads are supported by a rigorous internal process to help ensure accuracy, which includes legal review and oversight as well as documentation supporting our statements about quantities and pricing....We know competitors don't like it when we tell customers to compare prices and see for themselves but we think consumers deserve every chance to find value."
But rivals dispute this. E. Tim Walker, an attorney at Edwards Wildman, sent numerous letters to the Michigan Attorney General's office on behalf of Toys "R" Us in early December alleging Wal-Mart's advertising from Nov. 28, 2012, to Dec. 4, 2012, among other dates, was "deceptive to the consuming public."
In a statement to CNBC, Toys 'R Us said it had provided several attorneys general with its own documents to assist in their investigations of Toys 'R Us' allegations. For example, in three separate letters sent on Dec. 4, 5, and 12, Toys 'R Us provided a number of examples to the Michigan Attorney General.
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"The ad states that Wal-Mart is selling a Fisher-Price Kitchen for $39.97 on 'December 9, 2012 at 1:17 p.m.', the time of the hypothetical purchase," a Toys 'R Us spokesperson told CNBC. "But, actual Wal-Mart prices found by third-party shoppers on December 9, 2012 were $69.97, $79.88, $79.96."
Toys 'R Us alleged further discrepancies in the same commercial, but on a different toy.
"The ad also states that at Wal-Mart, a Holiday Barbie doll was $32.97 on Dec. 9, 2012, but the actual Wal-Mart price found by third-party shoppers on that date was $39.97. The pricing shown for Toys"R"Us in the ads is also incorrect."
Wal-Mart told CNBC, "If [Toys "R" Us] points out the date stamp on the ad states 'December 9, 2012', we would note that that represents the date the ad was filmed. TRU is correct that the Walmart price in stores on 12/9 was not $39.97, as the price reduction would not have been in effect until the following day, 12/10. However, this is irrelevant since the ad did not run until 12/11, and by the time TRU or any customer viewed the ad, the price in our stores was the same as the advertised price. Moreover, the ad clearly disclosed the TRU price as of 12/9, and also disclosed that TRU's prices might change."
It is too early know how this will play out, and the course of events could differ from state to state. While both retailers have international locations and operations, Wal-Mart is headquartered in Arkansas, Toys 'R Us is headquartered in New Jersey and both are incorporated in Delaware. Although the contended advertisements ran nationally, Toys 'R Us notes in the 1990's, the Michigan Attorney General investigated a similar campaign by Wal-Mart, resulting in a settlement in which Wal-Mart agreed to cease/desist from certain similar practices.
Separately, Minnesota-headquartered and -incorporated consumer electronics and appliance retailer Best Buy's general counsel Keith Nelson sent a similar complaint to the Florida Attorney General's office on Dec. 20, 2012. A Best Buy spokesperson was unsure why the legal team chose the various state attorneys general they spoke to, but said Florida, Michigan and Illinois are among those contacted.
Best Buy's letter to the Florida Attorney General's office focuses on claims regarding the price of a Dell computer that is mentioned in the ad. Best Buy alleges the machines being compared are not the same model.
In response, Wal-Mart tells CNBC, "Our advertised Dell laptop was 'similar' to Best Buy's offering in aspects that are important to our customers."
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In addition to the complaints it made regarding the advertising, Best Buy sent an email letter to 40 million customers who are members of its Reward Zone loyalty program on Dec. 10 to explain its side of the price comparison advertising as well as its own price-match policy. The company said, in part:
"The presidential election is over, and no matter how you feel about the outcome just about everyone is happy we've seen the last misleading TV commercial. Some retailers, unfortunately, didn't get the memo — and they're pounding the airwaves with ads that make us feel like the political season never ended. Ugh. Well, at Best Buy, we stand for something different. Here's our promise to you: We are dedicated to having the best pricing on the products people care about most, like smartphones, tablets and televisions. And if for some reason we don't have the lowest price, we will match any price on our hardware products."
Best Buy told CNBC Wal-Mart's price comparison advertising had a measurable impact on its profits due to Best Buy's price-match holiday guarantee requiring it to match competitors ads. Best Buy's Jeff Haydock said Best Buy lost "tens of thousands" in profit the day Wal-Mart's promotion was posted on Facebook offering the iPhone 5 for $150.
In an email to the Florida Attorney General's Office obtained by CNBC, Nelson wrote "[Facebook] This is the only place they advertised the offer. More importantly, they don't appear to have much if any in stock. Technically, we should not be price matching offers if the closest local competitor store is out of inventory, but we are matching in some cases. On Monday ALONE we gave away $130K in margin related to the iPhone. 18% of our iPhone sales had a price match with at least half tied to Walmart. At this trend we will drop over $750K in erosion this week on iPhone."
In response to the iPhone 5 inventory allegations, Wal-Mart told CNBC, "On the day of the posting, we had enough units on hand to meet our sales forecasts. We shipped double the quantity of units the week of the announcement versus the previous weeks. We were 98% in stock in all stores that carry these items."
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-By CNBC's Courtney Reagan; Follow her on Twitter @CourtReagan
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