For BJ's, ignoring item pricing is a bargain
Paying fines is cheaper than the cost of complying with state law
BJ's Wholesale Club of Natick is finding it cheaper to ignore the state's item-pricing law than comply with it.
Every time a state inspector has walked into a BJ's store over the last three years a fine has been issued, and not just little fines. The maximum fine per inspection is $2,500. Last year, the average BJ's fine was $2,130, the highest level in the state. Overall, the company paid $49,000 in fines.
For a retailer that reported a profit of $128 million last year, $49,000 is chump change. It's also probably a lot less money than it costs to comply with the item-pricing law.
Christopher Flynn, president of the Massachusetts Food Association, said it costs each store $150,000 to $300,000 a year to mark prices on the items it carries. BJ's operates 18 stores in Massachusetts, so its item-pricing costs would far exceed $49,000.
BJ's issued a statement saying it is committed to providing ''the clearest and most accurate pricing every day." The company declined to discuss its philosophy about item pricing.
Edgar Dworsky, a consumer advocate who is a big backer of item pricing, said of BJ's: ''They've attempted to avoid item pricing since the beginning."
Advocates like Dworsky say consumers value item pricing because it makes it easier to check a price, comparison shop, and verify a register receipt. Retailers say putting the price on the shelf next to the item is sufficient. Item pricing, they say, drives up their prices, and the benefits to consumers are not worth the cost.
The debate seems to be coming to a head, and the history of BJ's and item pricing helps explain why. In the 1980s, BJ's won an exemption from the state's item-pricing regulation. The regulation, enacted under the Consumer Protection Act in the 1970s, required prices to be on all items offered for sale to the public. BJ's argued it wasn't technically open to the public, since its members pay an annual fee to shop there.
In 1986, supermarkets grumbled that the item-pricing regulation was onerous and sought a number of exemptions. The result was a separate item-pricing law for food stores that exempted milk, eggs, and several other types of products. The state's Division of Standards was given the power to enforce the law with fines.
Dworsky, who was the state's director of consumer education at the time, wrote the food-store law so that BJ's and other warehouse-club stores were covered by it. After the law passed, Dworsky said supporters of BJ's in the Legislature threatened to reduce funding for the state's consumer affairs office if warehouse clubs weren't given additional exemptions. The exemptions were granted, Dworsky said, but later rescinded.
In 1999, Colman Herman of Dorchester noticed that many nonfood retailers were ignoring the state's item-pricing regulation. Attorney General Thomas F. Reilly wouldn't enforce the regulation, so Herman began suing retailers, first in small claims court and later in district court.
In 2002, Home Depot settled a class-action lawsuit over item pricing by paying $3.8 million, with half of the money going to lawyers and half going to nonprofit groups. The settlement spurred many more lawsuits, including one against BJ's.
The lawsuits got the attention of retailers. The retailers pressured Reilly in 2003 to revise the original item-pricing regulation so nonfood retailers could avoid marking prices on individual items in their stores as long as they installed scanners every 5,000 square feet so consumers could check prices themselves.
The amended regulation dropped the provision about offering prices on items for sale, so BJ's found itself covered by two item-pricing laws, one for its food items and one for its nonfood items.
The battle is now shifting to Beacon Hill. Food stores want legislation that would give them the same scanner option as nonfood retailers. BJ's is also pushing a bill that would exempt retailers from item-pricing class-action lawsuits. The BJ's bill has passed the House and is awaiting action in the Senate.
BJ's also succeeded this month in having the item-pricing lawsuit against it dismissed, although the plaintiff is still pursuing the case. In a footnote to his ruling, Superior Court Judge Allan van Gestel urged Reilly and the Legislature to clear up the item-pricing confusion. He noted items for sale at BJ's in the same aisle could be covered by different laws based ''solely upon their edibility."
Reilly has never enforced the regulation and shows no inclination to do so, even though several surveys, including one by the Romney administration, have shown compliance is spotty.
Meanwhile, the state's Division of Standards keeps inspecting food stores, handing out item-pricing fines. Charles Carroll, assistant deputy director of the division, said the inspection process generally works. With the exception of BJ's and a couple of other stores, Carroll said stores do a pretty good job of compliance.
Carroll said BJ's is even given some leeway. Because most items at BJ's are stacked on pallets, Carroll said the store isn't required to break down the pallet and mark prices on all the items. Instead, it only has to mark prices on the items at the top of the pallet and, as those are purchased, mark prices on the lower items.
Carroll said BJ's rarely follows through. The BJ's store in Greenfield was fined eight times last year, five times for the maximum amount. ''They've been so bad for such a long period of time that we want to hit them so they get their act together," Carroll said.
Cingular is running an advertising campaign in which it says the leading independent research company says it has the fewest dropped calls of any carrier ''based on nationwide experience." Cingular said Telephia was the research company, but neither Cingular nor Telephia has backed up the claim.
Telephia sent a letter this month to officials at all four major wireless companies, saying it didn't know how Cingular concluded that it drops the fewest calls. The San Francisco research firm also said it couldn't say whether Cingular's advertising is fair, legal, or responsible.
''While we can't evaluate the specific analysis Cingular uses as the basis of its nationwide claim, Telephia can confirm that Cingular does have a statistically significant lower dropped-call rate than the competition across some market/time period groupings," said Sid Gorham, Telephia's chief executive, in the letter.
Gorham said all the wireless companies have the research, so they are free to dispute Cingular's claim if they want to. None have.
In his letter, Gorham asked Cingular to make clear in its ads that Telephia is the source of the data, not the interpretation.
Mark Siegel, a Cingular spokesman, said the company is undecided about modifying its advertising.
Bruce Mohl can be reached at email@example.com.