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Strikethrough Price Lawsuits

Retailers Settle Strikethrough Pricing Lawsuits

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Strikethrough Price Lawsuits

In California and other states, several major retailers have settled strikethrough pricing lawsuits after being accused of violating false advertising laws. The lawsuits were filed in response to a common retail sales strategy: enticing customers to make purchases by highlighting comparison prices, which can include previous list prices that have since been reduced by the retailer or higher prices on similar items currently sold by competitors. This is especially prevalent among major retailers that advertise and sell products online. But comparison pricing is not without risks for the companies. That’s because there are both state and federal regulations of deceptive sale pricing. When a retailer violates these laws, it can lead to retail discount pricing litigation. Moreover, these lawsuits are often filed as class actions that involve many different consumers who were deceived into purchasing items because of deceptive pricing information.

To find out more about some of the major retailers that have been sued for strikethrough pricing violations, keep reading this blog.

Strikethrough Pricing in Retail Ads Can Violate California & Federal Consumer Protection Laws

Since price is often the deciding factor for consumers when the time comes to make a purchase, many retail companies use something known as compare-at pricing or strikethrough pricing. This is a sales and marketing strategy that emphasizes a product’s lower ticket price by comparing it to a higher list price or Manufacturer Suggested Retail Price (MSRP). Unfortunately, some retailers go too far with strikethrough pricing by offering deceptive discounts that mislead customers. Basically, the company mentions an inflated original price in an ad so that the “for sale” price appears greater by comparison.

What happens when a business misrepresents a sales price? For example, a company might offer a product at a perpetual sale price, meaning that it’s just a regular price that the company is lying about and passing off as a discounted price. Or a retail store might carelessly compare their price to another store’s price without acknowledging that the item offered at the other store is substantially different. It’s also possible that a business will use false reference pricing to compare their current price to a much higher price from many months or even years earlier. These kinds of fraudulent marketing and advertising practices may be unlawful violations of both California state and federal laws governing false advertising, consumer fraud, and unfair competition.

California Law

Under California’s comparison pricing law, retail companies that use reference prices when advertising or marketing their merchandise must follow strict guidelines. Most importantly, the original full price mentioned in the ad must be legitimate. If the item was never offered for sale at the higher price, or if it was only offered at that price for a short period of time, consumers may be able to file a lawsuit against the company for false advertising.

When a company cites a comparison price in an advertisement, they must be prepared to show that it was the prevailing market price within the three-month window preceding the publication of the ad. Absent that, the company must “clearly and conspicuously” indicate the date when the former price was in effect. Companies that fail to do either of these things may face consumer litigation in the form of a false advertising claim filed in California court.

Federal Law

The Federal Trade Commission (FTC) has a mission of enforcing federal consumer protection laws. To this end, the FTC has issued guidelines that strictly regulate former pricing. These promotional pricing guidelines stipulate that companies citing a former price in their ads or promotional materials must use an “actual, bona fide price” that was offered to the general public “on a regular basis for a reasonably substantial period of time.”

Major Retailers Named as Defendants in Comparison Pricing Lawsuits

Comparison pricing is a sales strategy used by retailers in a lot of different consumer categories:

  • Clothing & Department Stores: Dillard’s, JCPenney, Kmart, Kohls, Macy’s, Marshalls, Nordstrom, Ross Stores, Sears, Target, TJ Maxx
  • Auto Parts: Advance Auto Parts, AutoZone, Carquest, NAPA Auto Parts, O’Reilly Auto Parts, Pep Boys
  • Tools & Home Improvement: Ace Hardware, Harbor Freight Tools, The Home Depot, Lowe’s, True Value Hardware
  • Sporting Goods: Bass Pro Shops, Champs Sports, Dick’s Sporting Equipment, REI
  • Home & Kitchen Supplies: Bed Bath & Beyond, Best Buy, The Home Depot
  • Alcohol & Wine: BevMo, Total Wine & More

Calvin Klein, The Children’s Place, Dressbarn, Eddie Bauer, JCPenney, Pier 1 Imports, Shutterfly, and Zales are just some of the major retailers that have been named as defendants in nationwide class action lawsuits alleging false reference pricing. Other major retailers have been ordered to pay large judgments in California comparison pricing cases. For instance, a court ordered Overstock.com to pay almost $7 million when state regulators filed suit against the internet retailer.

Amazon Settles California Deceptive Pricing Lawsuit for $2 Million

California district attorneys also filed a complaint against Amazon for using unlawful comparison prices when advertising products. The case was brought by district attorney’s offices in six California counties: Alameda, Riverside, San Diego, Santa Clara, Santa Cruz, and Yolo.

The complaint, which was filed in San Diego Superior Court, alleged that the reference prices mentioned by Amazon in their ads did not match the prevailing market prices for the items being sold. The Amazon ads distinguished former prices from current prices by stating “Was” or “List” next to the higher price. Many of the online ads also had strikethrough lines across the former price, making it clear to consumers that the newer “sale” prices were lower. But California prosecutors said that these comparison prices were misleading because there was no evidence to suggest that they were real prices.

Shortly after the legal complaint was filed, Amazon agreed to settle the deceptive advertising case for approximately $2 million. This included civil penalties and restitution to the consumers who purchased products because of the misleading price listings. The court also ordered Amazon to make significant changes to its pricing disclosures in online ads. (E.g., including hyperlinks on the website that clearly define key terms such as “Was” and “List” when used with prices.)

Contact the California False Advertising Lawyers at Tauler Smith LLP

Tauler Smith LLP is a California law firm that represents consumers in false advertising cases throughout the United States. Call 310-590-3927 or send an email to find out if you might have a legal claim against a retailer for using deceptive comparison prices in product advertisements.

Deceptive Pricing Class Action

California Deceptive Pricing Class Action Lawsuits

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Deceptive Pricing Class Action

It has become increasingly common for consumers to join California deceptive pricing class action lawsuits against retailers that market and sell products with deceptive pricing information. California’s false advertising law is often used as the basis for consumer class action litigation concerning false reference pricing because the state law is favorable to consumers. In recent years, there have been a number of class action suits filed in state court as consumers sued major retailers because of misleading pricing. Some of these cases settled, with the retail company agreeing to change their sales policies and paying out large settlement amounts to consumers. If you bought an item because of a comparison price in an advertisement, the Los Angeles consumer protection attorneys at Tauler Smith LLP can help you.

Keep reading this blog to learn more about California consumer class action lawsuits alleging deceptive pricing by retailers.

Reference Pricing Is a Tool Used by Retailers to Generate Sales

A comparison price, reference price, or strikethrough price might refer to the full price at which the retailer previously sold the product, the list price at which another seller currently offers the product, or the Manufacturer Suggested Retail Price (MSRP) of the product. Retail companies often rely on reference pricing as a marketing strategy to entice customers to make purchases by emphasizing that the ticket price represents a significant discount over full price. The idea is that the customer will see a sales price next to a higher regular price and be more likely to buy the item because it is on sale. This is commonly known as comparison pricing or strikethrough pricing (because the original price may have a line through it), and it can be an effective tool to increase sales revenues.

The general idea behind comparison pricing laws regulating these advertising strategies is that retailers should be transparent about the pricing of their products, including older prices that have been discounted for current sales. Common examples of unlawful comparison pricing include the following:

  • The retail company includes a former price in an advertisement even though the item was never offered at that price.
  • The company mentions a former price that was used in the distant past and is therefore no longer relevant. (Under the law, this may be allowed if the ad discloses when the former price was used.)
  • The retailer references a former price that was not used in the regular course of business.
  • The company uses a former price that may have been available to some customers but that was not openly offered to the public.
  • The retail company artificially inflates the initial price of an item just so that they can later reduce the price and misleadingly call it a “sale.”

Jurisdiction in Deceptive Pricing Class Action Lawsuits

The jurisdiction matters a great deal when bringing consumer litigation. For example, California’s law is more plaintiff-friendly than other states, with California courts often finding in favor of plaintiffs who file legal claims alleging false reference pricing. There is also a reduced standard for establishing economic injury in California cases, since the plaintiff merely needs to show that the former pricing representations were misleading and that the false information is what prompted the purchase.

It is also possible for consumers to file a federal comparison pricing claim. Federal Trade Commission (FTC) guidelines prohibit retailers from deceptive sale pricing that uses inflated former prices as a point of comparison. For example, companies are not allowed to artificially inflate the price of a product for a short period of time just so that they can later reduce the price and then claim that the product is “on sale.” In false advertising and unfair competition cases, a federal court may look to the intent of the business to determine whether the initial price was set high solely for the purpose of later offering a large discount. Evidence of this unlawful intent could be that the retailer immediately reduced the inflated price and did not maintain it for a reasonable amount of time.

Winning Your California Comparison Pricing Class Action

False advertising claims involving deceptive pricing information are often filed as class action lawsuits in California. That’s because the plaintiffs are typically consumers who made a single purchase of a discounted retail item. The good news is that when you join other consumers in a comparison price class action, you are more likely to get the benefit of experienced legal counsel that can help you and all the other plaintiffs get reimbursed for the difference in value from your purchase, as well as statutory damages.

Certifying the Class

A knowledgeable California consumer fraud lawyer can make sure that you meet the requirements of a class action suit, which include establishing commonality among all plaintiffs through similar questions of fact and law. For example, your attorney may be able to get the class of plaintiffs certified by showing that all class members were victimized by the retailer’s sales price misrepresentations and that the same deceptive advertisement with false former prices was used in all instances.

In a California comparison pricing class action, it might also be easier for additional members of the class to gain standing to sue. That’s because at least one California appellate court held, in Branca v. Nordstrom, Inc., that the class members in retail pricing cases do not necessarily need to have purchased the same retail items as the named plaintiff. Rather, all that is needed for the additional individuals to join the class action suit is proof that they purchased items advertised with a comparison price.

The Discovery Process

One major advantage to filing a class action consumer lawsuit in retail discount pricing litigation is that the defendant will be subject to discovery during the class certification process, and discovery could produce significant evidence of wrongdoing. In order to certify the class, the plaintiffs’ attorney must show that there are common questions of law or fact among the plaintiffs and that those common questions predominate over any individual issues in the case. Since the discovery process allows the plaintiffs’ attorney to request documents from the defendant, this is an opportunity to potentially press the retailer for emails, price reports, and other internal documents that the retailer might not want exposed.

Depending on the type of information that is turned over during discovery, the plaintiffs may have strong evidence that the retailer violated consumer protection laws and intentionally misled consumers with deceptive comparison prices.

Damages & Financial Compensation Available in California Strikethrough Pricing Cases

The damages that might be available to plaintiffs in California strikethrough price cases include both compensatory damages and statutory damages. This gives consumers a lot of leverage against a retail company that violates state or federal promotional pricing guidelines by using fraudulent advertising practices. Moreover, when the retailer engaged in willful violations of the law, they may be subject to treble damages that can triple the compensatory damages available in the case.

Contact the California Consumer Class Action Lawyers at Tauler Smith LLP

Tauler Smith is a Los Angeles law firm that represents plaintiffs in consumer class action litigation in California and across the U.S. If you bought a retail item because the retailer used deceptive advertising, you should contact our legal team today.

Call 310-590-3927 or email us to discuss your eligibility to join a consumer class action lawsuit.

Federal Law on False Reference Pricing

Federal Law on False Reference Pricing

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Federal Law on False Reference Pricing

A lot of major retailers have an online presence these days with company websites and advertisements on social media platforms like Facebook, Twitter, and Instagram. The explosion in online sales has also led to competition between traditional retailers and e-commerce businesses that are all fighting for the same internet-savvy customers. Sometimes, those companies become too aggressive and employ fraudulent marketing practices, such as using deceptive pricing information in ads. This type of advertising violates the federal law on false reference pricing. If you purchased a product because of a comparison price in an advertisement, the experienced consumer protection lawyers at Tauler Smith LLP can help you file a lawsuit against the retailer and get financial compensation.

For more information about federal laws on deceptive pricing by retailers, keep reading.

Why Do Retail Companies Use Comparison Pricing in Advertisements?

It’s a simple fact that retail businesses often rely on sales to get customers to make purchases. That’s because sales and discounts on an item’s full price can be attention-grabbers in promotional materials and advertisements, particularly when the customer believes that they are getting a once-in-a-lifetime bargain or deal. One of the strategies that retailers utilize in their sales ads is to include strikethrough pricing or comparison pricing. This is when the business provides two prices that the customer can compare to each other: a former list price or MSRP and a reduced current price. The original price usually has a line through the text to differentiate it from the new lower price, and the price with the line through it is known as the strikethrough price.

Sometimes, consumers feel pressured to buy an item because they are worried that the sale won’t last. But when the discount wasn’t real to begin with because the “full price” was inflated, the consumer ends up being tricked into making a purchase. A retail company that violates comparison pricing laws by using deceptive advertising is subject to government investigations, retail discount pricing litigation, and significant monetary penalties. They may also be named as the defendant in a consumer class action lawsuit, where consumers could be eligible for both statutory damages and actual monetary damages. In fact, a number of consumer class action lawsuits alleging deceptive sale pricing have been filed against major retail companies in California and other states. Some of these cases concluded with judgments in favor of the plaintiffs, while others concluded with pre-trial settlements totaling tens of millions of dollars.

FTC Guides Against Deceptive Pricing

The federal government has laws against unfair competition, false advertising, and false reference pricing. The Federal Trade Commission (FTC) specifically regulates sales advertisements for retail companies involved in interstate commerce, which applies to most businesses that sell products online. The reason behind the law is that companies have been caught using misleading prices to deceive customers. For example, a retailer might frame their current price as a “sale price” even though it is the same as a regular price. This can be done by including a “compare at” or reference price in the advertisement.

The FTC gets its authority to investigate allegations of consumer fraud from the Federal Trade Commission Act, which includes the FTC Guides Against Deceptive Pricing. These promotional pricing guidelines set limits on when companies can use former price comparisons in advertisements. Generally speaking, any former price mentioned in an advertisement or promotion must have been offered honestly and in good faith. Other, more specific requirements of the FTC guidelines include the following:

  • The original higher price referenced in the ad needs to have been openly and actively offered for sale.
  • The item should have been available at the former price during the regular course of business.
  • The item needs to have been available at the former price recently, not in the distant past.
  • The former price must have been offered for a reasonably substantial period of time before being reduced.

Federal Law vs. California Law on False Reference Pricing

California’s law on false reference pricing is broader in scope than the federal law, which is why Los Angeles consumer protection lawyers often file these lawsuits in state court rather than U.S. district court. For instance, the federal guidelines are less clear than the California false advertising law when it comes to specifying timeframes for establishing the prevailing market price. The FTC guidelines state that companies must maintain a price for a reasonable length of time before reducing it; otherwise, the initial price may be considered a false reference price. Similarly, how long ago can the company go back to reference a former price? What is considered “reasonable” under these circumstances? Federal law is unclear on this, but the California comparison pricing law is explicit: any prices used during the previous 90 days may be allowed.

Although the federal law on comparison pricing isn’t as robust as the California law, it still imposes significant requirements on businesses that make former pricing representations in their advertising.

Winning Your Federal Comparison Pricing Lawsuit

When deciding whether you should take legal action against a company that engaged in sales price misrepresentation, you need to speak with an experienced consumer fraud attorney who understands the nuances of federal consumer protection laws. Depending on the facts of your case, it may be possible for the retailer to argue in court that you did not suffer any economic harm when you made the purchase because you ended up with a product that you wanted at the price that you expected to pay. The retailer’s argument would be that regardless of their false comparison pricing claims in the ad, you should not be entitled to financial compensation or damages.

A knowledgeable consumer protection attorney can help you prove the required elements of your claim, which includes showing that you relied on the false reference pricing and made the purchase because of the retailer’s misleading statements.

Contact the California False Advertising Attorneys at Tauler Smith LLP

The California false advertising attorneys at Tauler Smith LLP represent plaintiffs in consumer litigation throughout the United States. If you purchased a product online or in a retail store because of a comparison price mentioned in an advertisement, you may be able to file a lawsuit and get financial compensation.

Call or email us today to schedule a free consultation.

California Comparison Pricing

Comparison Pricing Litigation in California

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California Comparison Pricing

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.

Actual Prices

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, and UCL

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.

The California Unfair Competition Law (UCL) is another consumer protection statute that applies broadly to a wide range of conduct by companies, including unlawful, unfair, and fraudulent business practices. Deceptive or false advertising is also prohibited by the statute.

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.

Call 310-590-3927 or email us to schedule a free initial consultation.