Is 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
When 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.
Those 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.
We wanted to alert retail readers to these developments in price advertising laws in the United Kingdom from our friends at Lewis Silkin.
Late last year new U.K. Pricing Practices Guidelines were published by the Chartered Trading Standards Institute, replacing the long standing guidelines which retailers and advertisers had been following for many years.
The new Guidelines are not just an edit of the old ones. They are a root and branch reform, taking a “principles-based” approach to the advertising of prices, consistent with the same principles based approach enshrined in the Consumer Protection Regulations 2008.
We know that many of you not only deal with advertising but are also proud to count yourself as among the elite few who wrestle with the intricacies of the Robinson-Patman Act. If that sounds like you, read on as our own Rob Davis analyzes a recent 7th Circuit decision. If not, then stand at ease and remain blissfully ignorant of price discrimination, “like grade and quality,” promotional allowances and other such terms.
The Seventh Circuit’s Robinson-Patman Decision: What Does “Promote” Really Mean?
It might surprise many in the “real world” (which for these purposes means everyone other than antitrust/competition lawyers), but to the antitrust bar, the Robinson-Patman Act is the red-headed stepchild of competition law. Whereas competition law is now focused entirely on consumer welfare and the preservation of competition rather than the profits of competitors—even the small ones—the Robinson-Patman Act is almost obstinately about protecting the little guy. Thus, for years antitrust lawyers and the FTC have been tying themselves into knots to make the Act play well with the other antitrust laws, to varying levels of success.
Enter Clorox Bleach and the Seventh Circuit’s awkward decision in Woodman’s Food Market v. Clorox Company and Clorox Sales Company.
The Office of the New York Attorney General entered into a $500,000 settlement with Walgreens last week over false pricing information in its Walgreens and Duane Reade stores in New York.
The New York Attorney General began investigating Walgreens’ advertising and…
We all love a good bargain, but sometimes a good deal seems too good to be true. In 2011, Cynthia Spann went bargain-hunting at a California J.C. Penney, and walked out convinced that she had saved over 30%. However, she later discovered the products she bought at a “bargain” price had never really been sold at full price. As we have written previously, pricing and discounting claims are a frequent target of FTC enforcement actions, competitive challenges at the National Advertising Division, and plaintiffs’ attorneys. After learning about the alleged false discounting, Spann brought a class action on February 8, 2012, alleging violations of California’s Unfair Competition Law, California’s False Advertising Law, and California’s Consumers Legal Remedies Act. On May 18, 2015, the United States District Court for the Central District of California granted certification of the class action, serving as a timely reminder for retailers and businesses everywhere that businesses must carefully monitor pricing practices to ensure compliance with state and federal law regarding false and deceptive pricing.
According to Spann’s complaint, J.C. Penney’s false advertising campaign was “massive, years-long, pervasive[,] [and] consistent across all” private and exclusive brands of apparel and accessories. The essential aspects of the advertising campaign are familiar to many American shoppers: J.C. Penney stores and websites would feature both an “original” or “regular” price and a substantial dollar/percentage discount, reinforcing the message that the customer had received a bargain by including a line for “Total Savings Today” on receipts. As the FTC notes in its Guides Against Deceptive Pricing, this is a totally legitimate form of advertising as long as the original/regular price is genuine; that is, “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.” However, if “the former price being advertised is not bona fide but fictitious”—in other words, if an “inflated price was established for the purpose of enabling the subsequent offer of a large reduction”—then “the ‘bargain’ being advertised is a false one.” California law is also rather clear on this topic: “No price shall be advertised as a former price of any advertised thing, unless the alleged former price was the prevailing market price as above defined within three months next immediately preceding the publication of the advertisement.”
While many focus important questions such as whether or not to brine the turkey and whether to cook the stuffing inside or outside of the bird, many of our clients focus on bigger issues of whether the holiday sales season will put the company in the red or the black. What used to be just a push for Black Friday, and then extended to include Cyber Monday, now includes pre-Black Friday and specials through December. In this busy shopping season, retailers are trying to drive traffic, sell merchandise, and clear out winter inventory in anticipation of the coming year. Shoppers are looking for a bargain and that perfect gift. Sunday papers, email inboxes, and television commercials all boldly proclaim the greatest sales of the year, and consumers definitely take notice. With fast moving inventory and quickly changing stock levels, there are times when a retailer might run out of certain items. Retailers in this position need to pay careful attention to consumer protection laws.
In 2011, as part of its systematic review of all of the agency’s rules and guides, the FTC opened a public note and comment period for the Retail Food Store Advertising and Marketing Practices Rule, better known as the “Unavailability Rule,” to consider whether the rule should be expanded to cover other retailers. On November 19, 2014, the Commission decided to keep the Rule unchanged. This means that the Unavailability Rule still only applies to retail food stores. Still, other retailers would be wise to take this Rule’s guidance to heart.…
You feel pretty good heading to work wearing that designer outfit you picked up at a bargain price over the weekend at the local outlet center. But what if that deal you got wasn’t a deal at all? Questions have increasingly been raised about the potentially deceptive marketing practices related to the quality and source of products sold by fashion retailers in their outlets or factory stores. Further, concerns over outlet pricing is not only an American problem. This past month, the British tabloid Daily Mail conducted its own investigation into outlet retailer practices in England, warning consumers to beware of lower quality merchandise manufactured purely for outlet stores.
Back in the day, outlet stores were a place where manufacturers could sell discontinued products or inventory left over from last season. However, outlet stores are now big business, growing from an estimated $12 billion in 1997 to $25 billion this year. Increasingly, national clothing retailers are creating separate, lower-quality product lines to be sold exclusively though their outlets.
This issue has caught the attention of some federal lawmakers. Earlier this year, four members of Congress called upon the FTC to investigate potentially misleading marketing practices by outlet retailers. In their letter, the members of Congress noted that they did not take issue with the potentially lower quality of the outlet merchandise. Nor does it seem should they; after all, many consumers may be more than willing to purchase lower-quality brand-name merchandise at a steep discount. Instead, the senators voiced concerns about the potential for outlet shoppers to be misled about whether the outlet product lines were ever sold (or intended for sale) at a regular retail store, and whether the products were ever sold at the advertised “retail price” used as reference pricing at the outlet stores. (Reference pricing, in case you’ve actually never been to an outlet store, occurs when a product’s “retail price” or “list price” is advertised next to the discounted outlet price.) The letter inquires whether outlet store reference pricing is deceptive when “made for outlet store” merchandise has never been sold at regular retail locations—making the “retail price” impossible to substantiate.
A recent California state court held that Overstock.com, Inc. (“Overstock”) must pay the price for its allegedly deceptive pricing practices. Seven district attorneys throughout California brought a complaint against Overstock in 2010, alleging five separate violations of state law. The focus of these claims was that Overstock allegedly made false and misleading statements in reference to the “advertised reference price” (“ARP”) that appeared on its website. Specifically, the attorneys general stated that Overstock was deceiving consumers about the savings the company promises by routinely fabricating or inflating the prices its competitors reportedly charge, and that where Overstock did examine the competing prices for a certain product, it deliberately lists the highest retail price rather than the price most often encountered. Last week, the trial court issued an injunction against the online seller, and assessed an approximately $6.8 million civil penalty.
In examining the claims, the court paid special attention to Overstock’s terminology on its website, as well as its pricing policies. First, it distinguished between Overstock’s use of the term “list price” from its later use of the phrases “compare” and “compare at.” It also noted that until September 2008, Overstock had no processes or procedures in place to confirm that for any given list price there was in fact at least one instance of a sale at this price. However, at that point Overstock created a “Pricing Validation Team” to document the sources of ARPs. Still, Overstock would seek and use as the ARP, the highest street price it could find.…