The Fictional “Sale” Price Advertising Class Action is Here
A putative class action filed last month in the U.S. District Court for the Southern District of California alleges that Jos. A. Bank misrepresented sale price savings to consumers. Jos. A. Bank is just one of many retailers now facing class action litigation over allegedly fictional sale prices as the plaintiffs’ class action bar has brought a flurry of such cases this year.
The plaintiffs allege that that the men’s clothing retailer regularly ran sales quoting regular prices that were “inflated, arbitrary, and false” and that “Jos. A. Bank’s former prices are a price no consumer has actually ever paid for a Jos. A. Bank suit.” Moreover, the plaintiffs allege that the sales were perpetual, with the items be listed as being “on sale” 100% of the time. In the complaint, the plaintiffs cite the FTC Guides Against Deceptive Pricing which state that the former price quoted must be the actual, bona fide price at which the article was offered to the public on a regular basis for a reasonably substantial period of time. The plaintiffs also cite California law, which requires that the former price quoted was the prevailing market price within three months of the advertisement. Many states have price comparison advertising laws that are more exacting than the FTC Guides.
To illustrate the advertising at issue, one of the plaintiffs alleges that he purchased two suits together as part of a “buy one suit for $197 and get the second for $47” promotion. Television and online advertisements stated that these suits each had a regular price of $595 and represented that the consumer would save $946. Jos. A. Bank has not yet filed a response to the complaint.
The California case against Jos. A. Bank, which seeks to certify a California-only class of consumers, comes after Jos. A. Bank successfully escaped very similar cases in New Jersey and Illinois. In New Jersey, the putative class action complaint was dismissed in 2013 because the district court found that the plaintiffs did not plead facts demonstrating that the “sale” price offered was identical to the true regular price of the merchandise and failed to plead an “ascertainable loss” under New Jersey law because they did not state or estimate the difference between what the regular price actually was and what the discount price should have been. Earlier this month, the Seventh Circuit upheld the dismissal of the Illinois complaint because it agreed with the lower court that specific details about the advertisement seen by the plaintiff and how it was part of a regular unfair business practice were lacking.
For many years, the plaintiffs’ bar had not focused much attention on sale price advertising issues and the enforcement activity by regulators has been sporadic. But that has changed as the economic downturn of recent years has led to more aggressive promotional advertising. Also, there is the explosion in outlet shopping, with more consumers than ever shopping in outlet malls and more brands opening outlet stores. Two recent cases, one filed in New York against Michael Kors and the other filed in California against Neiman Marcus, have taken aim at price claims made at those companies’ outlet stores. Each alleges the retailer places tags on merchandise comparing the outlet price with a price quoted for one of the retailer’s regular stores, but that many of the items were only offered at the outlet store. It has been many years since such “like grade and quality” challenges to outlet stores’ price comparisons to regular stores’ prices have been brought.
It is interesting to note that even the case filed in New York was filed by a California consumer, seeking to certify a California-only class, relying on California law. It is no surprise that California law would be invoked, considering that California law tends to be more consumer-friendly.
Retailers should be wary because the fictional sale price class action is definitely here. Time will tell if it is here to stay.
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