Supply chain disruptions and accompanying inflation for raw materials have challenged many businesses. A recent case involving paint retailer Sherwin-Williams shows how not to deal with these challenges. In a putative class action, plaintiffs accused Sherwin-Williams of surreptitiously adding a hidden “Supply Chain Charge” to every sales transaction. On October 24, the U.S. District Court for the Northern District of New York said the claims may proceed.

The plaintiffs allege they suffered economic injury as a result of a “deceptive bait-and-switch scheme” perpetrated by Sherwin-Williams. They asserted claims of deceptive acts or practices under New York General Business Law § 349, breach of contract, and unjust enrichment. On Sherwin-Williams’ motion to dismiss, the Northern District of New York tossed the unjust enrichment claim, but held that the Section 349 claim and breach of contract claim were plausibly alleged.

Continue Reading Supply Chain Surcharges? Plaintiffs Say You Better Not Conceal Them

When the COVID-19 pandemic began, and consumers swarmed the stores for disinfectant sprays, masks, and household items, state price-gouging laws grew increasingly relevant as sellers sought to cash in on the heightened demand.

In May 2020, New York Attorney General Letitia James took action against Quality King Distributors, Inc., a wholesaler that, according to James, illegally increased its prices to sell Lysol disinfectant products to neighborhood grocery and discount stores in New York. A New York state court tossed the case a few months later, finding that Quality King did not “uniformly raise their prices on Lysol products to these customers.” This week, a New York appellate court disagreed.

Continue Reading The Pandemic May Be Over, but Price-Gouging Laws Live On

In June, New York enacted a ticket transparency law seeking to make sweeping changes to how ticket prices are communicated to consumers and eliminate deceptive ticket pricing practices. The law will go into effect on August 29, 2022, leaving little time for ticket platforms, resellers, and entertainment venues to make necessary changes to their ticket selling practices and checkout flows.

The law requires ticket sellers, resellers, online ticket platforms, and entertainment venues that facilitate the sale of tickets to disclose the total cost of a ticket, including all fees that must be paid to purchase the ticket.

Significantly, this disclosure of the total cost to purchase must be displayed in the ticket listing prior to the ticket being selected for purchase. Disclosure of the total price only in the final steps of the checkout process will not be sufficient under the new law. Ticket sellers must also clearly and conspicuously state how much of the ticket price represents a service charge or other fee.

Continue Reading Ticket Platforms, Beware: New York Axes Hidden Fees for Concerts and Entertainment Events

The FTC is off to the races with another proposed rulemaking. On June 23, the FTC, by a 4-1 vote, issued a notice of proposed rulemaking (NPR) to combat what it perceives as “junk fees” and “bait-and-switch advertising tactics” in the auto sales industry. Congress gave the FTC the authority to write rules governing the retail sale of automobiles, using APA rulemaking and not the more cumbersome Magnuson Moss rulemaking that the FTC normally must follow in consumer protection rulemakings. This authority is no small matter, as on June 30, the Supreme Court issued its decision in West Virginia v. EPA, which will make rulemakings by the FTC and other government agencies more challenging.

The FTC’s proposed rule would prohibit certain misrepresentations, require certain disclosures, prohibit certain “add-ons,” and require more thorough recordkeeping. First, among a whole host of potential misrepresentations, the proposed rule includes prohibiting misrepresenting regarding vehicle costs; terms of purchasing, financing, or leasing; and the availability of vehicles at an advertised price.

Continue Reading FTC Starts the Engine on Car Sales Fees and Advertising Rulemaking, but Other Rulemaking Faces Major Questions

Last week, New York Attorney General Letitia James announced that online travel agency Fareportal Inc., which operates several travel-related websites and mobile platforms, including CheapOair.com and OneTravel.com, will pay $2.6 million to New York for misleading consumers with deceptive marketing tactics.

“Consumers wanted to land affordable tickets through Fareportal’s platforms, but were met with lies instead,” James said in a statement. “Fareportal used deeply deceptive tactics to trick millions of consumers into booking airline tickets and hotel rooms.”

The investigation into Fareportal revealed that, since at least 2017, the company created false urgency around the availability of airline tickets and hotel rooms to pressure consumers into making purchases on its platforms. The AG challenged these marketing tactics as “dark patterns,” referring to alleged misleading design features and methods used to manipulate consumers into buying goods and services. As we have covered previously, alleged “dark patterns” have become a priority in rulemaking and enforcement.

Continue Reading New York Attorney General Secures $2.6 Million from Fareportal for Deceptive Marketing Tactics

A major point-of-sale financing and leasing company and the Federal Trade Commission (FTC) have reached a proposed settlement to resolve an investigation into whether the company’s practices and representations to retail consumers violated the FTC Act. The announcement of the settlement highlights the importance of disclosing all material pricing terms to consumers, including in an e-commerce environment and, for point-of-sale financing companies, reviewing and synchronizing their promotional messages with retail partners. The settlement also revealed disagreements among the Commissioners on issues of individual liability and the proper measure of monetary relief.

The settlement resolves an investigation into Aaron’s, Inc. and its wholly owned subsidiary, Progressive Leasing (Progressive), regarding disclosures related to lease-to-own and other financial products. Under the proposed agreement, which remains subject to the approval of the United States District Court for the Northern District of Georgia, Progressive would make a payment of $175 million to the FTC and enhance certain of its compliance-related activities, including monitoring, disclosures, and reporting.

Continue Reading FTC Settlement Underscores Importance of Pricing Disclosures for Lease-to-Own Companies

Following the Trump administration’s declaration of a public health emergency at the end of January, numerous states have successively declared states of emergency due to the coronavirus health crisis.  These declarations triggered many states’ price gouging laws, which typically outlaw the sale or rental of essential goods and services, for example, water, toilet paper, protective masks, hand sanitizer, fuel, power, etc., at an unconscionable or unreasonably high price.  In states without price gouging laws, lawmakers are drafting legislation prohibiting similar acts and are using state consumer protection laws to prosecute price gouging behavior in the interim.  Nationwide, state attorneys general are aggressively enforcing price gouging laws.  Moreover, on March 25, 33 state attorneys general sent letters to the CEOs of Amazon, Craigslist, and several other online platforms calling on the companies to take measures to prevent price gouging on their online platforms.

While the concept of price gouging is not a new one — many of these laws have been on the books for years and were used to prosecute bad actors after events such as 9/11, hurricanes, and even particularly bad flu years — what is unusual now is the national scope of the coronavirus emergency and the level of involvement of the federal government.  On Monday, March 23, the president signed an executive order to prevent hoarding and price gouging of crucial medical supplies. It authorizes criminal prosecution of anyone whose purchases exceed reasonable limits. Attorney General Barr concurrently announced that the Justice Department has already launched hoarding investigations to carry out the order.  Add this to the (majority of) states pursuing the issue along with the online platforms, and the risk that accompanies violation of the price gouging laws increases significantly — particularly if you sell medical supplies and equipment. 
Continue Reading Caveat Venditor: Coronavirus Emergency Declarations Trigger Patchwork of Price Gouging Laws, Executive Order, Investigations

wine bottlesIs the government about to make it harder for companies to settle consumer class actions? The Department of Justice’s Consumer Protection Branch, in a Statement of Interest (Statement), has requested that a Judge set aside a proposed class action settlement that would enrich plaintiffs’ attorneys to the tune of nearly $2 million. Specifically, the DOJ

ticket stubsWhen a widespread industry practice comes under regulatory scrutiny, companies that end up in the crosshairs sometimes fall back on the “everyone does it” defense. This argument has an intuitive appeal in the consumer-protection context—consumers are presumably aware of practices that are common across an entire industry, the thinking goes, and they make purchasing decisions with knowledge of these practices.

The online ticket reseller StubHub recently tried this approach at NAD. It didn’t go over so well.

NAD launched an inquiry into StubHub’s fee-disclosure practices to determine whether consumers were being misled about the total cost of tickets sold on the site because StubHub does not disclose the service fees when it initially displays the ticket price. StubHub discloses the fees, which can range from 24% to 29% of the ticket cost, only at the time of checkout, after the consumer has already made the decision to buy the tickets. NAD was concerned that consumers do their comparative shopping when they see the initial price display—not at the time of checkout, when the true cost of the ticket is revealed—and thus are misled into believing that the StubHub tickets are cheaper than they are.

Continue Reading “Everyone Does It” Doesn’t Fly at NAD

a gas station damaged during Hurricane HarveyThose of us living outside the Texas and Louisiana Gulf Coast region have looked on in disbelief and sadness as unrelenting rain has inundated those areas. The tragedy, though, has also reminded us of the better parts of our nature as we have seen countless examples of stranger helping stranger. However, from time to time Texas law enforcement officials have also reminded us of the worst parts of our nature as they have warned businesses against price gouging and the severe penalties associated with such activity.

Which led us to wonder, what is price gouging in the state of Texas? How is it different from the general rules of supply and demand? Doesn’t everything always cost more around the holidays? Has socialism infiltrated Texas? So we decided to take a look.

Continue Reading Price Gouging in the News