Best Buy Cries Foul on Wal-Mart iPhone Pricing Ads

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Best Buy added its voice to other retailers complaining about what they say are Wal-Mart's misleading advertisements touting better prices on specific items than its rivals, according to The Wall Street Journal.

In particular, Best Buy claimed Wal-Mart's campaign promoting a price of $150 for the iPhone 5 forced Best Buy, because of its price-matching policy, to suffer a $65,000 loss in profit the day the promotion first ran on Facebook.

The foul, Best Buy said, is that Wal-Mart didn't even have enough iPhones on hand to meet the demand.


Wal-Mart refutes that claim, saying it shipped twice as many iPhones for the promotion. It wouldn't, however, say just how many iPhones that was.

Best Buy also pointed to a holiday ad by Wal-Mart claiming that a Dell laptop would cost $251 more if bought at Best Buy. Best Buy said its laptop was a more expensive model than Wal-Mart's, and in a letter to the Florida attorney general's office, the company wrote that comparing the two models would "be like comparing a Toyota to a Lexus."

Toys R Us has also complained to several state attorneys general about Wal-Mart's "deceptive advertising practices that mislead consumers regarding specific product pricing comparisons," said Toys R Us spokeswoman Kathleen Waugh, according to the Minneapolis Star Tribune.

In the early 1990s, according tothe Journal, Wal-Mart was involved in a dispute with Target and Kmart about misleading price comparisons. In 1994 it agreed with Michigan's attorney general to change its price-comparison ads and to stop comparing products with different features.

Retailers have also complained to attorneys general in Florida, New Jersey, and California.

Reuters has reported Best Buy sending a letter to members of its loyalty program comparing the Wal-Mart ads to political ads meant to delude voters.

Wal-Mart defended itself to the Journal, saying, "We know competitors don't like when we tell customers to compare prices and see for themselves."

Best Buy is in a tough spot here. How long can the world's leading consumer electronic equipment retailer maintain its price-matching policy against allegedly misleading price ads from the world's largest retailer?

The increasing commoditization of even the most sophisticated electronic gear puts ever more pressure on competitive pricing. With a razor-thin third-quarter operating margin of just 0.5%, Best Buy can't absorb too many more $65,000 one-day profit losses. It will be worthwhile for investors to keep watch on just how seriously Best Buy's complaints are received in the various states attorneys general's offices.

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The article Best Buy Cries Foul on Wal-Mart iPhone Pricing Ads originally appeared on Fool.com.

Dan Radovsky has no position in any stocks mentioned. The Motley Fool recommends Apple and Facebook. The Motley Fool owns shares of Apple and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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