March 25, 2011 at 9:00 AM ET
While price tags are showing their age, Esther Shapiro sure isn't. The 93-year-old consumer advocate still visits grocery stores in Detroit to make sure they are pricing items accurately. But an important arrow in her quiver is about to disappear. The Michigan Legislature voted to kill the state's grocery store price tag law last week, after Michigan's Gov. Rick Snyder attacked it in annual his State of the State address. That means in all likelihood the little stickers will soon disappear, replaced by shelf tags.
While a few other states still have mandatory price tag laws, Michigan's was by far the most consumer-friendly. The Michigan Retailers Association is rejoicing, but Shapiro sees the reversal as a sad event for consumer rights.
"For many people, (the price tag law) is the only interaction they ever have with consumer protection law," said Shapiro, who once headed Detroit's Consumer Affairs office. She still lives in downtown Detroit, and still complains loudly when she's overcharged at her local grocery store. "A very basic thing I always come back to is consumers' right to know. Times are getting tighter, the value of peoples' income is shrinking, and now they will be even more confused about what things cost."
Price stickers provide obvious and immediate benefits – consumers can be sure about the price of an item, and not be forced to hunt around for it. They can carry items around a store and directly price comparison shop. And they also have an audit trail; once they arrive home, they can compare goods with a price receipt to make sure they're not overcharged. Price tags are common in almost all forms of retail – clothing stores, for example – but are quickly disappearing from the most common shopping stop, the grocery store.
Red Tape readers first met Shapiro four years ago, when the then-89-year-old described her regular shopping trips designed to make sure grocery stores were playing by the rules. In Michigan, consumers enjoyed a powerful price tag law enforcement tool – "bonus" payments up to $5 for each mistake discovered. At the time, she joked about receiving a tidy sum from stores she visited. While the new price tag law doesn't eliminate the bounty payments, it'll be difficult to collect on them now without an audit trail.
Michigan's original price tag law was passed in 1976, during the heyday of consumer advocacy. It was also a time of vastly expanding options for shoppers.
"The consumer market was growing, there were a lot more goods becoming available for consumers to purchase, so there was a general push for more information for consumers," she said.
Shapiro, as head of the state's largest consumer protection agency, spent years educating consumers about the law and helping enforce it. That's why she's so sad to see it go.
Why price matters
Regular readers of this column know there's a lot more for consumers to lament than the simple loss of price tag stickers. I believe that general price confusion is a systematic attack on market economics that favors large corporations over consumers. When it comes to cell phones, pay television, hotel stays and so many other things people buy, consumers are often confused about the ultimate price they'll pay. Travelers, for example, often see one price when search a website for the cheapest flight from New York to London. But after baggage fees are added in, the flight could ultimately cost $150 more. This is annoying on a micro level, but on a macro level it's terrible for the economy. In a world where prices are opaque, comparison shopping is dead. That means companies no longer compete to sell the best products and services for the best price; instead, they compete with each other over who can best confuse consumers and get more money from them.
There is no more crystalline example of this problem than efforts to remove price tags from everyday items like bread and cereal.
Price tags have been terminally ill since the widespread use of scanable bar codes began in the 1970s. Stores like automating consumer checkout, and they hate paying clerks to place sticker after sticker on cans of soup and tomato paste. They also like being able to change prices frequently, at the press of a button – frequent price changes are a hassle when price tags are involved. From their point of view, price tag stickers are as old fashioned as 20 cent bottles of Coke. Shelf tags listing prices are dramatically easier to manage, and provide all the information consumers need, they argue.
Death of the market
But Shapiro and other consumer advocates see things differently. Shoppers can't remember the price of an item they've placed in their cart as they walk the aisles, she said. They can't compare a jar of tomato sauce selected on aisle 7 with the price of a jar sitting at a special display at the front of the store. That means they also can't verify the price of items as they are scanned at checkout.
"Consumers cannot shop with economics in mind unless the price is on the item," she said. "I believe price tags are of equal importance with the FDA rules on (nutrition) labeling."
The end of price tags will also make it much harder for consumers to complain about being overcharged, she said.
"I was recently at a store and took a box of crackers that was on sale to the register and it rang up at the original price. So the clerk had to yell for someone to check the price. That person never showed up, so she had to close the register and walk to the shelf herself, hating me all the way. And so did the people on line behind me," Shapiro said. "Well, I really liked the crackers and went back to buy them several times...and you know what? They never corrected the price at the register.
"I have the time, and the gumption, to complain. But what about the mom with two screaming kids?" she added.
The local advocacy group Michigan Citizen Action didn't fight to stop the price-tag-killing law, called the "Shopping Reform and Modernization Act," but it did argue to keep stickers on food and over-the-counter medicine after conducting a survey that found 72 percent of state residents feared they'd be vulnerable to overcharging as a result ofthe change.
"Price tags are important. Why should a consumer have to be the unpaid store clerk running around figuring out how much things cost?" said Erin Knott, deputy director of the agency.
Adds 10 percent to cost?
There's been a lot of misinformation thrown around during Michigan's rather hastily-arranged price tag debate. The governor cited research offered up by a group called the Coalition for Retail Pricing Modernization saying price tag application cost Michigan stores $2.2 billion annually. The governor cited the cost as a cause of Michigan's downtrodden economy.
The questionable research extrapolates from a 2007 economics paper, which found that prices in an area of New York that then required price tags were about 10 percent higher than stores in nearby New Jersey, which didn't. It ignored other factors which make New York stores pricier. Then, the group calculated 10 percent of Michigan store sales to arrive at the $2.2 billion. The back-of-the-envelope calculation was cited by the governor in his arguments, but derided by consumer advocates.
The economics paper was edited by Sam Peltzman, author of many studies that are critical of consumer protection laws.
The true cost of placing price stickers on Michigan groceries is a small fraction of $2 billion, said Edgar Dworsky, former assistant attorney general in Massachusetts. Today, he runs a consumer advocate site named Mouseprint.org. He's also author of the only other remaining significant state price tag law in Massachusetts.
"We'll see if Michigan consumers get back that $2 billion they say they'll save now," he said.
It's possible that stores will someday develop a better way to communicate price to consumers than little paper stickers placed on items, he said, but "no one's built a better mouse trap yet."
High-tech replacements, like shopping carts with built-in scanners and computers, are promising, but have been installed in only a fraction of stores. Clever apps for smartphones can read bar codes and ever offer up competing prices from nearby stores, but they have their limitations.
"We assume everyone has a smart phone with an app, but they don't," Knott said.
She'll still raise a stink
For now, paper shelf tags are the standard replacement, but those fail on many levels. Items get moved, it's hard to tell which tag applies to which item, and sometimes the tags are simply wrong. Or, as Shapiro points out, children often have a bit too much fun sliding the labels back and forth on the shelf while parents shop, adding to the confusion.
The pile of goods abandoned beneath aisle bar code scanners at stores like Macy's and Target prove that consumers don't know how much things cost unless they go hunting, Dworsky said.
"In a certain sense, it's one more nail in the consumer's coffin," Dworsky said. "Price disclosure is one of the most important consumer rights, and it's disappearing."
While the law hasn't been signed by the governor, he is widely expected to do so soon. It would take effect Sept. 1.
No matter -- Shapiro said she won't stop her trips to the store, those small but enduring efforts to keep grocery stores honest. She already has plans to bring a magic marker with her and write the price on any item she plans to buy as soon as she picks it up off the shelf.
"If they try to overcharge me, I'll just raise a stink now," she said. "That's what people need to do. Say, 'you overcharged me, and say it loudly so people around you hear it. … If the state won't (protect us), we'll have to do it for ourselves."