What a Discount on a GLP-1 Price Is Compared Against

Answer first: a discount is a claim about a second price

A reduction is never a fact about one number. It is a relationship between the price you would pay and some other price, and the other price is the part you cannot see.

That second price comes in three shapes. It is the seller's own former price, or the price other sellers charge, or a list or suggested price set by somebody upstream. Each shape has its own test.

The Federal Trade Commission published guides on exactly this in the Code of Federal Regulations, under the heading Guides Against Deceptive Pricing. They are old, they are written about general merchandise rather than about medicine, and they are still the clearest statement of what makes a bargain claim informative.

Reading them does not tell you whether any particular program is behaving well. It tells you which question to ask about a number that has a line through it.

What a guide is, and what it is not

The Commission's own rules define the category. Industry guides are administrative interpretations of laws administered by the Commission, published for the guidance of the public in conducting its affairs in conformity with legal requirements.

They are not a separate statute and not a private cause of action. The Commission's rule adds that failure to comply with the guides may result in corrective action by the Commission under applicable statutory provisions.

The statute underneath them is the Federal Trade Commission Act, which declares unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce unlawful. The pricing guides describe how the Commission reads that prohibition when a seller advertises a bargain.

So the practical status of what follows is: a well-argued description of when a price comparison misleads, written by the agency that would bring the case. That is worth a great deal to a shopper and it is not legal advice to anyone.

A former price has to have been a real one

The first guide covers a reduction from the advertiser's own former price. It says the comparison is legitimate where the former price is the actual, bona fide price at which the article was offered to the public on a regular basis for a reasonably substantial period of time.

Where it is not, the guide is blunt about what has happened. An artificial, inflated price established so that a large reduction can be announced afterward makes the bargain a false one, and the reduced price is in reality probably just the seller's regular price.

The guide does not require that sales were actually made at the former price, but it fences that carefully. The advertiser should be especially careful that the price was one at which the product was openly and actively offered for sale, for a reasonably substantial period of time, in the recent, regular course of business, honestly and in good faith.

It also warns against language that implies more than an asking price. Wording that says an item formerly sold at a given price should not be used unless substantial sales were actually made at it.

The guide's worked example is a retailer who raises a pen well above his usual price, holds it there for a few days knowing almost nobody will buy, then cuts back to his normal figure and advertises a terrific bargain. Nothing about that pattern is specific to pens.

Sale, with no numbers attached, still makes a claim

The same guide reaches an advertisement that states no former price and no percentage, and simply says sale. Where the amount of reduction is not stated, the advertiser must take care that it is not so insignificant as to be meaningless.

The test the guide sets is what a consumer would think if they knew the size of the reduction. It should be sufficiently large that a consumer, knowing what it was, would believe a genuine bargain or saving was being offered.

The guide gives the nominal case directly: an item advertised as reduced to a figure a penny below what it was is misleading, because the consumer understands the claim to mean a much greater reduction than a token one.

For a shopper the useful move is simple. Where a page says sale without saying from what, the reduction is the missing number, and asking for it is reasonable.

A comparison with other sellers has a different test

The second guide covers advertising a price as lower than what others charge. Its rule is that the advertised higher price must be based upon fact, and not be fictitious or misleading.

It sets a threshold. A seller claiming to sell below the prices charged in its area should be reasonably certain the higher price it advertises does not appreciably exceed the price at which substantial sales of the article are being made there.

Its example of a failure is a retailer quoting a retail value that only a few small outlets charge, while the larger outlets in the main shopping areas sell at or near the advertised price. The quoted comparison would have no real significance to that retailer's customers.

The guide also covers comparisons against other merchandise rather than the same item. Such a comparison can be legitimate where it is made clear that a comparison with other merchandise is being made and the other merchandise is in fact of essentially similar quality and obtainable in the area.

One thing to notice while reading it: the guide is built around a trade area, meaning the area in which the seller does business. That concept was written for local retailing and does not map neatly onto a company selling nationally through a website, which is a reason to read a cross-seller comparison carefully rather than a reason to assume anything about it.

A list price is a comparison too

The third guide covers advertising a reduction from a price established or suggested by a manufacturer. It opens with the reason such claims work: many buyers believe a manufacturer's list or suggested retail price is the price at which an article is generally sold.

It does not condemn the practice. A list price is typically a price at which articles are sold at least in the principal outlets that do not run on a discount basis, and it is not deemed fictitious if it is the price at which substantial sales are made in the advertiser's trade area.

It draws the line at the other end. Where a list price is significantly in excess of the highest price at which substantial sales in the trade area are made, the guide describes a clear and serious danger of the consumer being misled by an advertised reduction from it.

It also splits responsibility by who is advertising. A local retailer, having general knowledge of prices in its area, should check whether the list price is in fact charged by principal outlets there. A manufacturer or distributor operating on a large regional or national scale cannot be required to police prevailing prices in detail across so large an area, provided it disseminates the list price in good faith as an honest estimate.

This is the guide that matters most where a brand-name figure appears next to a very different one. The gap between an approved product and something else is a comparison the reader is invited to make, and the question is what the higher number represents.

The variations the last guide sweeps up

The final guide covers everything that is a version of the same idea. It says retailers should not advertise a retail price as a wholesale price, and should not represent that they are selling at factory prices when they are not selling at the prices paid by those buying directly from the manufacturer.

It covers reduced merchandise that is not equivalent. Seconds, or imperfect or irregular merchandise, should not be offered at a reduced price without disclosing that the higher comparative price refers to the merchandise if perfect.

It reaches two forms of urgency directly. A seller should not offer an advance sale where it does not in good faith expect to increase the price later, and should not make a limited offer which, in fact, is not limited.

That last clause is the most portable line in the whole part. A countdown that resets, or a price described as ending that does not end, is a claim about the future being used to close a sale today.

Reading a discounted price without the discount

Cover the struck-through number and look at what is left. If the remaining figure is one you would pay without hesitation, the comparison added nothing. If it is not, the comparison was doing the persuading.

Then ask three questions about the second number. How long did that price stand, was it a price the seller actually offered, and is it still available anywhere if you wanted it.

Ask whether the reduction is conditioned on something. A rate unlocked by a prepaid term, by an automatic refill arrangement, or by a first order is a different offer from a general price cut, and this site covers each of those conditions separately.

Then run the comparison you actually care about, which is between two sellers over the same period, rather than between one seller and its own earlier self.