It has become increasingly common for consumers to bring comparison pricing litigation in California. That’s because the state has some of the strongest consumer protection laws in the country, including laws that regulate unfair competition, false advertising, and deceptive pricing. California’s comparison price law requires retailers to provide accurate pricing information in advertisements, whether the ads appear in print media or online. The law recognizes that consumers should not be tricked into purchasing an item for the regular full price simply because the retailer included a fake sale price in an advertisement or promotion. If this has happened to you, one of the California false advertising lawyers at Tauler Smith LLP can help you.
To learn more about comparison pricing litigation in California, keep reading this blog.
Comparison Pricing Is a Retail Sales Strategy That May Violate California False Advertising Laws
Retailers that do business in California and elsewhere often use comparison pricing, reference pricing, strikethrough pricing, or compare-at pricing to persuade customers to make a purchase. All of these basically mean the same thing: the retail company prominently advertises that the item is “on sale,” and they back up this claim with a visual comparison between the current sale price and the original list price.
Comparison pricing is subject to strict regulations because lawmakers recognize that a lot of retailers go too far with deceptive ads that aren’t entirely honest about the former prices. For example, the reference price mentioned in the advertisement or promotion might be from a very long time ago, or it might be for an item that is not the same as the one currently being sold. Since the California comparison pricing law requires businesses to use actual sales prices that are relevant and timely, these types of former pricing representations with deceptive discounts could expose a retailer to consumer litigation.
California Has Strong Consumer Protection Laws
Under both federal and state consumer protection laws, retailers that do business in California cannot use fictitious price comparisons when advertising products. Consumers should also keep in mind that the comparison pricing laws apply to both in-person sales and online sales.
The jurisdiction where a comparison pricing lawsuit is filed can make all the difference when it comes to the outcome of a case. That’s because certain states have very strong consumer protection laws that hold businesses to extremely high standards for advertising, marketing, and sales practices. California has some of the strongest consumer fraud statutes, including §17501 of California’s Business & Professions Code that directly addresses fraudulent marketing and advertising practices.
Comparison Pricing Lawsuits Filed Against Retail Companies in Los Angeles
Failure to comply with California’s law on comparison pricing could expose retailers to significant liability, including a class action lawsuit filed by consumers who purchased products after viewing the misleading advertisement with deceptive sale pricing. Just some of the major retailers that have been sued under California’s false advertising law in recent years include Amazon, The Gap, Guess, J.Crew, Kate Spade & Company, Neiman Marcus Group, Overstock.com, and Walmart.
In California, the Los Angeles City Attorney’s Office has made a point of going after large retailers that use deceptive pricing in ads to generate sales. The crackdown on false reference pricing prompted the LA City Attorney to bring civil suits against several major department stores that did business in the city, including JCPenney, Kohl’s, Macy’s, and Sears. The retailers were accused of deceptively marketing thousands of items at “sale” prices that did not exist.
California’s False Advertising Law Prohibits Deceptive Prices in Retail Ads
Section 17501 of California’s false advertising law explicitly prohibits advertisements that use a misleading or inaccurate former price.
The California law stipulates that there must be a legitimate basis for the comparison price cited by the retailer, whether it’s a list price or Manufacturer Suggested Retail Price (MSRP). Businesses are not allowed to create false impressions about discounts by referencing prices that never actually existed just to make the ticket price look like a good deal. The retailer must be prepared to provide proof that the item was previously sold for a higher price. But even that might not be enough for the retailer to avoid retail discount pricing litigation. For example, if the former price was only in effect for a short period of time, the retailer might not be legally allowed to mention this price in an advertisement because there will be serious questions about whether the original compare-at price was legitimate.
Three-Month Time Period
The California law places limits on the comparison prices that retail businesses may mention in an advertisement by explicitly barring them from mentioning an item’s former price unless it was the “prevailing market price” within the three months immediately preceding the ad’s publication.
But what happens when the company’s sale lasts longer than 90 days? In situations like this, California’s promotional pricing guidelines call for the company to revise its advertisement or run the risk of violating the strikethrough pricing statute. That’s because the former price listed in the ad will no longer fall within the 90-day window, which means that it’s no longer valid under the law. In other words, a sales ad that was initially legal will become illegal and could serve as the basis for a consumer to file a lawsuit.
Importantly, California does give retailers an opportunity to revise their ads so that they avoid violating the law. The company can either change the former price in the ad once it becomes outdated or they can “clearly, exactly, and conspicuously” note the date when the former price applied so that the advertisement is not misleading.
Define Relevant Terms
In addition to establishing a three-month timeframe for evaluating the appropriateness of the former price being advertised, the California false advertising statute also attempts to define relevant terms for retailers and consumers. For instance, what does the law mean by “prevailing market price”? This matters because the actual price of the item in question will go a long way toward determining whether the former price was legitimate or false.
Here, there are several factors that must be considered. For instance, what was the actual price of the item at other stores in the same geographical area or region? Also, were any sales made at that price? And, if so, how many units sold? Moreover, were there different prices for the item during the three-month period being evaluated? Since a court can consider any or all of these factors in a strikethrough pricing case, it is important for consumers to speak with a qualified California consumer protection attorney before making any final decisions about how to proceed with their case.
Standing to Sue in California Strikethrough Pricing Claims
It is often easier for plaintiffs to establish that they have standing to sue in a comparison pricing claim brought under California’s false advertising law. Of course, the plaintiffs in a California comparison pricing case must establish that they have standing to sue. In the past, this meant that the plaintiff needed to show that they purchased the item and that they did so at a price higher than they otherwise would have paid. Absent this showing, the door was open for defendants to argue that the plaintiff did not suffer any injury or economic harm because they received exactly what they paid for and therefore got “the benefit of the bargain.”
Things became much easier for plaintiffs when the California Supreme Court ruled in Kwikset Corp. v. Superior Court that plaintiffs in false advertising cases no longer need to prove that the product they purchased was worth less than the amount paid for it. Now, plaintiffs who bring a comparison pricing claim in California courts merely need to show that they purchased the item because of the deceptive pricing information in the ad; the prevailing market price or MSRP of the item no longer matter.
False Reference Pricing Class Action Lawsuits in California
California false advertising laws regulate companies that do business in the state, including broad protections against sales price misrepresentations. This has led to numerous class action lawsuits being filed on behalf of consumers who have fallen victim to false reference pricing.
It is important for consumers to recognize that they can file a civil suit, or join a consumer class action, even when the retail company does not have a physical brick-and-mortar location in California. As long as the consumer is in California and accessed the business’ website to view the ad or to make a purchase, they may be eligible to bring a Section 17501 claim for false reference pricing.
How Much Money Can Consumers Recover in a California Comparison Pricing Claim?
When a retailer is sued for violating California’s false advertising law, the monetary damages may be substantial. That’s because the statute allows for recovery of actual damages by the plaintiff, as well as the imposition of civil penalties against the defendant. These civil penalties can quickly add up because the defendant can be ordered to pay $2,500 for each violation of the law. Moreover, the court may have the option to impose an additional fine of $2,500 for each violation that injured a senior citizen or a disabled person.
Other California False Advertising Statutes: CCPA and CLRA
One strategy that retail companies might use to get around the California false advertising law is to hide their sales in customer loyalty programs. But this tactic may be a violation of the California Consumer Privacy Act (CCPA), which gives consumers another avenue for filing suit against retailers.
Additional legal claims that may be available in comparison pricing cases include violations of the Consumers Legal Remedies Act (CLRA), especially if the defendant’s conduct involved deceptive language in the advertisement.
Contact the California False Advertising Lawyers at Tauler Smith LLP
A lot of retailers use comparison prices in advertisements to encourage consumers to make a purchase while the item is “on sale.” If you bought a retail product because the retailer used deceptive pricing in a store ad or an online ad, you should speak with an experienced Los Angeles consumer protection attorney at Tauler Smith LLP.