The Role of the Federal Government in Regulating Prices
While individual states are responsible for passing and enforcing laws and regulations related to pricing, the federal government does provide a uniform set of rules that each state generally adopts. These rules are established by The National Conference on Weights and Measures (NCWM) which is required by law to work for “cooperation with the states in securing uniformity in weights and measures laws and methods of inspection.” States are not required to adopt these rules as law but they generally do as uniform standards are good for businesses and consumers. The NCWM was established as the result of passing the Fair Packaging and Labelling Act in 1967, one of its mandates being ‘…to facilitate value comparisons…of many household consumer commodities.‘ The regulations that the NCWM releases covers a lot of areas, unit pricing being just one. The regulations covering unit pricing (at least as of August 1, 2013) are right here for those really interested in this stuff (remember, states are not required to adopt these): http://www.nist.gov/pml/wmd/pubs/upload/section-IVc-13-h130-final.pdf The following link has a handy chart as of August 1, 2013 giving an overview of which states have adopted which standards. http://www.nist.gov/pml/wmd/pubs/upload/section-II-13-h130-final.pdf Before seeing this, I had no idea that some states required displaying unit pricing while others don’t. For example, Arkansas and Virginia have adopted the NCWM’s regulations on unit pricing. California and New York have unit price regulations but not fully based on the NCWM standards (they could have implemented the NCWM’s standards but they just don’t adopt updates each year for example). Louisiana and Missouri have not adopted the NCWM’s standards but do follow the NWCM standard as a guideline (meaning they have their own regulations). Several states do not follow the NCWM’s standards at all including Texas and Colorado. This last bit is interesting as I have lived in both states and seen unit pricing displayed on the shelves. It seems in several cases even when there is no regulation in place, retailers do voluntarily display this information ‘for the consumer’s benefit’ Color me suspicious but the cynic in me says its a way to head-off regulations that could be far more burdensome. Also, following uniform practices even when not required is probably easier on those retailers that operate in multiple states. Whatever the reason, transparency is a good thing. The NCMW actually gives the retailer a few different options on how to display the unit price. That little number on the tag on the shelf is just one of the options. It is probably the most cost-effective option from the retailers point of view since that is the only way I ever see it. For example, the retailer has the option to post the unit price directly on the product itself – that must get expensive in printing costs and labor to have to tag every single product.
The regulations require uniform units of measure. Price per ounce is the most common way I see unit price posted but according to the NCWM, this is not required. However, once a unit of measure is selected, it must be consistently used. From the NCWM:
by weight (can of corn): Price per kilogram or 100 g, or price per pound or ounce, if the net quantity of contents of the commodity is in terms of weight.
by dry measure or volume (bag of flour): Price per liter or 100 mL, or price per dry quart or dry pint, if the net quantity of contents of the commodity is in terms of dry measure or volume.
by liquid volume (soft drinks): Price per liter or 100 mL, or price per gallon, quart, pint, or fluid ounce, if the net quantity of contents of the commodity is in terms of liquid volume.
By unit (eggs): Price per individual unit or multiple units if the net quantity of contents of the commodity is in terms of count.
By area (flooring) Price per square meter, square decimeter, or square centimeter, or price per square yard, square foot, or square inch, if the net quantity of contents of the commodity is in terms of area.
So one retailer could charge for bananas by unit ($.25 each or $2.50 for 10) while others charge by weight ($.50 per pound). Once a retailer picks a method, they should stick with it. Some products come in different packages but the unit of measure for that product must be consistently used. The example the NCWM gives is soda (like Dr Pepper) that comes in 2 Liter bottles and 12 fluid oz cans – whatever unit of measure the retailer decides to use, they have to use the same for both package sizes of Dr Pepper. They also have to use the same unit of measure for similar products like Pepsi and Coke (being colas). But I wonder if sodas can be displayed using a different unit of measure from colas or do both fall under the category of ‘soft drinks’ and all soft drinks must be displayed the same way? And what about eggs sold by the dozen and liquid eggs sold by the carton like Egg-Beaters? A recent trip to the store showed the retailer priced a carton of eggs by the dozen and a container of liquid eggs by the ounce. So why is per ounce so commonly used? A retailer could price milk by the gallon, soft drinks by the liter and liquid eggs by the pint if they wanted to. I bet it has to do with printing costs. Sticking with a single unit that can be used by more products means they can print more of the same labels and don’t have to store a bunch of different labels around. ‘Ounce’ can be used for liquid products (like milk) and products measured by weight (like cans of corn). It is probably easier and cheaper to print up a bunch of reusable stamps that can be used for all of these products ahead of time and all they have to do is feed them into a printer that just prints the price per unit.
- Fair Trade Commission: Fair Packaging and Labelling Act
- National Institute of Science and Technology: A Guide to Retail Pricing Laws and Regulations
- Journal of Marketing Research: The Consumer Economics of Unit Pricing
- Houston Chronicle: How Does Unit Pricing Work?
- Lifehacker: How the Unit Pricing Labels in Stores Can Trick You into Spending More