By David Zetoony, David.Zetoony@bryancave.com
Nothing catches a customer’s eye quite like the word “free.” Perhaps that’s why so many retailers advertise that they are giving away another unit of a product (e.g., “buy one get the second free”); another product altogether (e.g., “buy X and get Y free”); a complimentary product (e.g., “free vase with purchase of flowers”); or, as is often the case with online sales, a free service (e.g., “free shipping,” “free rush delivery,” “free gift card,” or “free gift wrap”).
Although almost every retailer uses free promotions at some point in time, many retailers, including many national chain stores, are not aware of the state and federal rules that regulate how free offers can be made, and are surprised to learn that a free offer can lead to something that is certainly not free -- a government investigation, a class action lawsuit, or, as happened earlier this summer to Staples and Office Max, a legal challenge from a competitor.
Although retailers should consult an attorney to determine if a specific promotion that they intend to run complies with the advertising laws (and for retailers that operate in more than one state the advertising laws of each state in which they operate), here are some general things to think about in terms of using free promotions.
Its not free if the customer pays more
You should not increase the price of the item that you are selling in order to recover any part of the cost of the item that you are giving away for free. This applies to situations in which you are giving away free products, and to situations in which you are giving away free services such as shipping. To avoid any allegation that a business has increased its price to recover the cost of the free product, consider pricing the product that you are selling at, or below, the lowest price that it was sold in the 30 days before the free promotion begins.
Terms* and conditions†
Any terms, conditions, or restrictions on the free offer must be clear and conspicuous. Avoid putting terms and conditions in a footnote, or in fine print, or as