Evan Schuman's StorefrontBacktalk

The law provides two opposite precedents. The law of contract—for example, a contract to sell a can of corn—generally supports the notion that a quoted price in an ad (or even on a shelf) is not an “offer” that the customer can “accept” by tendering payment. Rather, it is considered an “invitation to negotiate.” This turns the Piggly Wiggly into the Arab Souk, with haggling and negotiation over each item. Thus, the merchant could change the price at will or dictate other terms for the purchase (“No soup for you!”).

Consumer protection laws, however, prohibit things like “bait and switch,” price gouging, and unfair and deceptive trade practices. Under this regime, advertising one price but then withdrawing it would likely be considered a deceptive trade practice.

In the battle between these two laws, the winner is…

Neither. In the real retail world, what would truly win is customer service. Most merchants would honor the lower price simply to keep their customer happy.

I say most, but not all. Take the example of American Airlines. By a quirk of regulation, U.S. airlines are exempt from federal and state deceptive trade laws, particularly where this relates to prices. This is because the FAA has jurisdiction over airline advertising, not the FTC.

Case in point: I recently tried to book a flight for four on American Airlines’ Web site for travel a few months from now. The site advertised a pretty good price for four tickets of $360 each, including taxes and fees. I clicked “proceed” and was prompted to put in the names and dates of birth of all travelers (TSA regs, you know).

But when I went to purchase the tickets by inputting my credit-card number, the Web site now quoted me a fare $120 more. I called the airline seconds later and was told that the higher fare was no longer available, but that a new fare—$240 more than the quoted fare—was available. While I was speaking with the agent, I was told that, no, the new fare was no longer available but that there was an even newer fare—$440 more than the quoted fare—was I interested in booking? All this in the span of about five minutes!

So was American Airlines bound to the price it quoted? Although prices fluctuate and there are a limited number of seats at any price, if the airline quotes a price online, it must make it possible to purchase those seats at that price. That is the nature of contract law. Unlike a print advertisement, which courts have considered the “invitation to negotiate,” a Web site is both the source of the ad and the mechanism of purchase. American must be bound to the price it quoted, even if the FTC can’t and the FAA won’t force the airline to honor the price.

In Guys and Dolls, the character “Big Jule” plays craps with dice from which he had the spots removed—for luck, he says. But not to worry, he remembers where they formerly were. That game ends when associates of one of the other players step in and knock Big Jule out.

Technology now enables merchants—both brick-and-mortar and online—to change prices rapidly in the face of changes in demand. That’s making traditional store purchases more like online purchases. Prices can be centrally changed, and consumers may not know that the price has changed while they are shopping.

Unless retailers honor quoted and displayed prices, you can bet that government regulators will step in and force them to do so. Unless you are an airline or Big Jule.

If you disagree with me, I’ll see you in court, buddy. If you agree with me, however, I would love to hear from you.