Lawmakers Mull Price Tag Changes

February 3, 2003
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LANSING — The Legislature will soon consider a bill that would make price tags on merchandise optional in Michigan stores, said Sen. Mike Bishop, R-Rochester, sponsor of the bill.

The proposal would allow stores to use a new, cost-saving alternative to traditional price tags called electronic price labeling (EPL), said Bishop.

EPL devices would eliminate the need to manually change price tags. Unlike conventional tags, they consist of digital readouts that can be changed at the push of a button, according to Hope College economists Victor Claar and Robin Klay, who have researched the technology.

They cited a study that said 35 percent of a store’s profits in states with item pricing laws go to the labor involved in changing price tags.

If put to use in Michigan, the devices would save businesses millions of dollars, Claar said.

Bishop’s proposal, however, is drawing fire from consumer advocates, labor unions and the American Association of Retired Persons.

Opponents say the change would make it more difficult for consumers to know when they’ve been overcharged.

Under Michigan’s existing item pricing law, it is illegal for stores to replace price tags with EPL technology.

That’s because the devices cannot be placed on individual items but serve only as shelf tags. The law now requires tags on every piece of merchandise in a store except for some exempt items.

Michigan is one of a handful of states with an item pricing law, said James P. Hallan, president of the Michigan Retailers Association, which endorses Bishop’s proposal.

Item pricing laws have been criticized as outdated and hindering stores’ ability to do business, Claar said. “You can actually cause recession by requiring stores to do this sort of thing.”

And stores in states with item pricing laws have less flexibility in marketing their products than stores not subject to such laws, said Klay.

While stores using EPL can change prices as frequently as they want at nominal cost, stores using the old techniques have to be careful in planning their sales because of the labor costs, Klay said.

According to Klay, researchers found that such stores change prices only 40 percent as frequently as stores where item pricing is not mandatory.

EPL technology has begun to pay dividends for stores in a number of states and other countries, including Germany, France and Japan, where it is now used routinely, said Klay.

Although EPL systems are catching on, they remain too costly to be practical for “mom-and-pop grocers,” said Joe Layman, executive vice president of the Midland-based Mackinac Center for Public Policy, a free market-oriented think tank that has played a key role in circulating Claar and Klay’s findings.

“Even for large store chains, it may take about a year for the technology to pay for itself,” Layman said, “but as the technology improves and becomes cheaper, it may become more feasible.”

Bishop, Klay and Layman claim that the savings enjoyed by stores using the new technology will be passed on to consumers.

Holland store managers expressed mixed feelings on the possible end to mandatory item pricing and the onset of EPL.

“Ninety percent of our products come with price tags already,” said Lisa Kimber, manager of the Butternut Dollar General in Holland. “That’s the way it should be. The warehouses should save stores money by pricing things beforehand.”

Holland’s Big Lots Store No. 360, which deals in closeouts, would not be well suited to the new technology, according to manager Gerald Walderzak. Changing prices for a sale is not relevant to its business because its inventory is continually changing, he said. “We don’t carry the same items each week.”

Some groups vehemently oppose a change in the item pricing law.

Ken Fletcher, legislative director for the Michigan AFL-CIO, said, “We’re opposed to any change in the item pricing law. It’s a law that protects the consumers by allowing them to know when they are being charged the wrong price.”

Fletcher also took issue with the contention that savings for stores would translate into savings for consumers. “I can assure you that if they have any savings at all, they’re going to pass them along to the owners and stockholders, not to customers,” he said.

Bill Knox, communications representative of the Michigan Chapter of the American Association of Retired Persons, said, “We believe that item pricing should stay in place on food, drugs and personal care items.”

These items are vital to AARP members, many of whom “are on fixed incomes and can’t afford to be overcharged,” Knox said. “AARP members nationwide agree that Michigan’s item pricing law should remain in place.”

He said AARP does not object, however, to relaxing item-pricing laws on other merchandise, especially on items that are sold in bulk, such as nuts and bolts, and for which it’s impractical to label each item.

Fred Starzyk, the political liaison for Local 951 of the United Food and Commercial Workers, said, “We’re supportive of item pricing. Primarily, we view it as a consumer protection issue. We would oppose any efforts to end or to weaken the item pricing laws at all.”

His Grand Rapids-based union represents employees at a number of retailers, including the Meijer, Kroger and Rite Aid chains, according to the union.

“I suspect that if such a bill were submitted, Gov. (Jennifer) Granholm would veto it. I hope she would,” he said.

As the state’s attorney general, Granholm last fall urged legislators to “stand up for consumers and the economy and defeat pending legislation that would allow retailers to eliminate item pricing by substituting electronic shelf labels.”

Since then, she has made no official statement on the issue, said her deputy press secretary, Mary Dettloff.

Bishop insisted that his Senate bill doesn’t ignore consumer protection, saying that it would double all of the penalties of the 1976 law.

For instance, while current law requires that customers be reimbursed by up to $5 if overcharged on merchandise, the new law proposes raising the limit to $10.

In addition, the bill would require that a store must submit to an independent audit to assure that its scanners are at least 98 percent accurate before opting out of item pricing.

Bishop said his proposal “has been the victim of more disingenuous and meritless attacks than any piece of legislation I’ve worked with in the Legislature. You’d almost have to be in a deep case of denial not to see that there is technology out there that could save millions of dollars if put to use.

“Most of the arguments against it have been purely political and intended to mislead the public as to what the meat of the bill is,” he said. “That’s been frustrating because it’s been harder to educate people on the issue. As soon as consumers can get past all the political rhetoric and get to the facts, most will support it.”

The Mackinac Center’s Layman noted, “The important thing to remember is that changing that law would not force any retailers to stop individual price labeling. Customers who hate electronic price labeling could go to stores that stay with the old system.

“Right now, customers don’t have a choice, and neither do retailers.”           

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