• January 9, 2017

Last week was a bad week for Minnesota-based multi-million dollar wonder-company, “My Pillow,” which got spanked by the Better Business Bureau and sued in a nationwide class action on the same day. (Here is a link to the Star Tribune coverage and here is a link to the class action complaint.)

At issue is a “buy one get one free” (BOGO) marketing effort in which the seller is alleged to have simply doubled the price of its product, a pillow. When consumers buy a double-priced pillow, they get a second pillow “free.” Also at issue are pillows for sale at 50% off “regular price” but the “regular price” was allegedly a double-priced pillow discounted by 50%. The marketing campaigns were further complicated by “coupon codes,” that would enable buyers to in-put a code and get a “special price.”

Some among us will suggest that such consumer lawsuits are ridiculous, that BOGO ad campaigns, “50% off regular price” campaigns, and “coupon codes” are nonsense. Fluff. Tinsel. Smoke. Mirrors. Everyone knows (1) the products being sold; and (2) the price demanded for purchase.

Next, will we have class actions against detergents because the packaging says “NEW AND IMPROVED!” when the detergent formulation is indistinguishable from the detergent in the old package or the “NEW AND IMPROVED” splash graphic has been on the product for decades? When do we simply let sellers hawk their wares and place responsibility on consumers to think through the value proposition, stripped of the sales charm?

An “enigma” code-breaking machine.

The optimal balance of paternalism (that is, “market regulation”) and the free-market is an insoluble enigma.

For many years, scientists have studied and confirmed that consumers are deceived quite easily and often. One such scientist, Dan Ariely, coined a term for his research (and entitled his podcast), “Arming the Donkeys.” The expression was meant to suggest that there is little any of us can do to prevent or stop the exploitation of our irrationality but, with education and regulation, we can give at least a little help to those of us who otherwise fall for silly gimmicks.

While I agree that paternalism can be taken too far (this might be best illustrated by the ATM Fee Notice federal statute and litigation), I think a market-based society that does not recognize and take steps to protect vulnerable members is short-sighted and doomed.

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