When Is a Sale Not a Sale? Los Angeles City Attorney Sues Retailers Over False Reference Pricing

[DIGEST:  CNN, Consumerist, LA Times, Los Angeles City Attorney]

For shoppers who have ever thought a sale seemed too good to be true, California officials are providing some vindication.

The Los Angeles City Attorney’s Office is suing JC Penney, Kohl’s, Macy’s and Sears over claims the retailers falsely inflated the original price on some items to trick customers into thinking they were buying goods at a deep discount.

The lawsuit, filed in December, claims the defendants effectively took away consumers’ ability to make informed purchasing decisions. False reference pricing as a competitive retail tactic plays “a major role in the companies’ overall marketing and business strategies,” said the L.A. City Attorney’s Office.

For example, the lawsuit against Sears alleges that in April 2016, Sears advertised a sale on a Kenmore front-load washing machine with a “regular” price of $1,179.99. However, the suit alleges the washer was never offered for sale for more than $999.99 in the six months after it was first made available.

The suit against Macy’s alleges that in May 2016, the store advertised a silver cross for $30—purportedly 75 percent off the “regular” price of $120. However, according to the claim, Macy’s never actually offered the item for sale for more than $30.

It’s against the law in California to advertise a “former” price of an item unless that price was in effect within the last three months or the advertisement clearly states the date when the item was sold at that price.

This is not the first time consumers have taken retailers to court over misleading sales prices. In December of 2015, two shoppers, one in California and one in Florida, filed a class-action lawsuit against Macy’s and Bloomingdale’s, alleging the retailers falsely inflated the original prices of sale items, enticing them to purchase an item that they thought was heavily discounted.

“In some instances, [Macy’s or Bloomingdale’s] represented that the listed or original price was two or more times the manufacturer’s suggested retail price (“MSRP”), and then offered the item at a purported 50 percent or more discount price which was in fact the original MSRP,” reads the lawsuit.

Kohl’s and TJ Maxx also spurred two different 2015 class-action lawsuits by shoppers; the former alleged Kohl’s’ “regular” prices on labels like Mudd, Sonoma, and Jennifer Lopez are fictitious since the brands are only sold in-house, while the latter claimed false reference pricing.

“Kohl’s was aware that consumers are motivated by information concerning a product’s worth and the prestige that ownership of the product conveys,” reads the 2015 complaint against Kohl’s. “Kohl’s knew that, as discount size increases, consumers’ perceptions of value and their willingness to buy the product increases.”

The Los Angeles City Attorney’s office hopes this current lawsuit will be the last.

"Customers have the right to be told the truth about the prices they're paying—and to know if a bargain is really a bargain," said Mike Feuer, city attorney for Los Angeles. “My office will fight to hold retailers responsible for their practices and to ensure consumers can make informed choices when spending their hard-earned money.”