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Suppose I am a television manufacturer. I produce TVs that can (and do) show High-Definition broadcasts as well as standard definition broadcasts.

For marketing purposes, I clearly state that all my TVs can show HD broadcasts - my question is: Is it legal for me to charge a additional premium for HD viewing, even though the entire functionality already exists in a non-premium version? Any smart person reading the literature would realise that the TV already supports HD, but a less-smart person - let's say they're ripe for the picking.

Or alternatively, is there any stupid-person-protection-laws that prevents me from selling identical items at two different prices by advertising specific features, even though from the business point of view, the premium is pure profit?

  • Where are you? This would be different under different circumstances. – Terry Oct 20 '15 at 15:24
  • In the UK, but I would be curious about the US too. – adelphus Oct 20 '15 at 16:12
  • The Bush and Lomb suit over their labeling and pricing identical contacts differently might be relevant dash.harvard.edu/bitstream/handle/1/8889441/… It's a US case though – ColleenV parted ways Oct 20 '15 at 18:03
  • It's Bausch and Lomb. Thanks smartphone auto-correction! It is not exactly the same situation because contacts are considered medical devices, but there is some relevant legal reasoning on different aspects of the suits. – ColleenV parted ways Oct 20 '15 at 18:23
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I agree with @feetwet that the risk is consumer protection laws that prohibit false and misleading conduct. I disagree with the conclusion that what your question proposes isn't false and misleading conduct because you told the truth.

Putting aside the fact that there is a clear intention to mislead (a slam dunk for the regulator); the test for false and misleading conduct is not if you told the truth, it's if a reasonable person in the circumstances would be misled. IMO the conduct you propose is misleading.

For example, in Australia the supermarket giant Coles was prosecuted for advertising bread rolls as "Fresh baked in-store" and "Baked today, sold today". In fact, the rolls were made in Ireland and par-baked there, frozen, shipped to Australia, thawed and then finished baking in store. Technically they told the truth, however, the ACCC thought it was deceptive, a reasonable consumer would expect that the whole process had taken place on site. The Federal Court agreed with the ACCC and imposed a $2.5 million fine.

That said: if you are not engaging in deceptive and misleading conduct you can charge different prices to different consumers for the same product. Car yards do this all the time - a consumer who is a good negotiator will get a better price than one who is not.

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If you don't make any false or misleading claims I don't believe there is any law or regulatory agency in the free world that would prohibit this. Since I can't prove a negative, here is a broad analogy followed by a fun anecdote:

There are plenty of products that are functionally equivalent but where the price charged is entirely determined by the labeling. In the U.S., "store-brand" (a.k.a. white-label) products are often literally the same as the brand-name products that may be stocked immediately adjacent to them. I.e., they come off the same production line, and the only difference is the packaging.

Bottled water might be another great example. Especially water that is filtered and remineralized, as opposed to (maybe) spring water.

Now the fun but perhaps not perfectly related example: You can cripple a product to sell it at different prices: Intel famously segmented the market for its processors with its 486 CPU: It was offered in a DX version, which had the full functionality, and a cheaper SX version, which started as a DX chip to which extra manufacturing steps were applied in order to disable the math co-processor. So even though the SX cost (marginally) more to manufacture, it was sold at a lower price because it had been crippled.

  • I had heard that the store-label goods had less stringent quality controls, but I can't find my source now. Because fewer pieces are rejected, the white-label items are cheaper even though they come from the same facility. – ColleenV parted ways Oct 20 '15 at 19:34
  • @ColleenV - That is true of some. There are also white-label goods that don't get all the features of the brand name equivalent. But there are plenty where there is literally no difference between the brand and white-label version. – feetwet Oct 20 '15 at 21:41
  • To expand on the intel chip saga I recall a chip where you could upgrade the chip, after you do that a technician came along and snipped a single wire to unlock the functionality already on the chip. – ratchet freak Oct 21 '15 at 16:11

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