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Best Buy Cries Foul on Wal-Mart iPhone Pricing Ads

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Best Buy (NYSE: BBY  ) added its voice to other retailers complaining about what they say are Wal-Mart's (NYSE: WMT  ) misleading advertisements touting better prices on specific items than its rivals, according to The Wall Street Journal.

In particular, Best Buy claimed Wal-Mart's campaign promoting a price of $150 for the iPhone 5 forced Best Buy, because of its price-matching policy, to suffer a $65,000 loss in profit the day the promotion first ran on Facebook.

The foul, Best Buy said, is that Wal-Mart didn't even have enough iPhones on hand to meet the demand.

Wal-Mart refutes that claim, saying it shipped twice as many iPhones for the promotion. It wouldn't, however, say just how many iPhones that was.

Best Buy also pointed to a holiday ad by Wal-Mart claiming that a Dell laptop would cost $251 more if bought at Best Buy. Best Buy said its laptop was a more expensive model than Wal-Mart's, and in a letter to the Florida attorney general's office, the company wrote that comparing the two models would "be like comparing a Toyota to a Lexus."

Toys R Us has also complained to several state attorneys general about Wal-Mart's "deceptive advertising practices that mislead consumers regarding specific product pricing comparisons," said Toys R Us spokeswoman Kathleen Waugh, according to the Minneapolis Star Tribune.

In the early 1990s, according to the Journal, Wal-Mart was involved in a dispute with Target (NYSE: TGT  ) and Kmart about misleading price comparisons. In 1994 it agreed with Michigan's attorney general to change its price-comparison ads and to stop comparing products with different features.

Retailers have also complained to attorneys general in Florida, New Jersey, and California.

Reuters has reported Best Buy sending a letter to members of its loyalty program comparing the Wal-Mart ads to political ads meant to delude voters.

Wal-Mart defended itself to the Journal, saying, "We know competitors don't like when we tell customers to compare prices and see for themselves."

Best Buy is in a tough spot here. How long can the world's leading consumer electronic equipment retailer maintain its price-matching policy against allegedly misleading price ads from the world's largest retailer?

The increasing commoditization of even the most sophisticated electronic gear puts ever more pressure on competitive pricing. With a razor-thin third-quarter operating margin of just 0.5%, Best Buy can't absorb too many more $65,000 one-day profit losses. It will be worthwhile for investors to keep watch on just how seriously Best Buy's complaints are received in the various states attorneys general's offices.

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