Major Retailers Trick Shoppers with Fake Sales: Five Fast Facts

Los Angeles, California — The Los Angeles city attorney announced on December 8, 2016, that he intends to sue four of the nation’s biggest department store chains for deceiving customers. The attorney’s office alleges that the four retailers have misled consumers with deceptive ads.

The dishonest advertising allegedly promoted false sales on thousands of retail items. Shoppers were deceived into thinking products that were on sale at the stores were being offered for huge discounts.

Here are the 5 Fast Facts you should know:

1Retailers Named in the Lawsuits are JC Penney, Sears, Kohl’s, and Macy’s

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The lawsuit has been brought against the four retailing giants by LA city attorney Mike Feuer. Credit: City of Los Angeles

In charges filed in the Los Angeles County Superior Court, L.A. attorney Mike Feuer says these companies advertised inflated “original”, “list”, or “regular” prices for merchandise, along with hefty supposed “reductions” from those prices. The problem is that ads were false, because the items in question had never, in fact, been sold at those “original” prices.

The fake “original” prices misled customers into believing that they were getting better bargains from the supposed “sale” prices than they were actually getting. “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 LA city attorney Mike Feuer, who filed the charges.

2The Accused Retailers Are Refusing to Comment

"Bullring - Selfridges lit up in the evening - Sale" by ell brown is licensed under CC BY
The stores named in the lawsuit were using “false reference pricing practices” and advertising fake sales. Credit: Flickr / Elllott Brown / Creative Commons

The four big box retailers being named in the lawsuits have refused to comment on the charges. JC Penney says it “doesn’t comment on pending litigation”. Sears also declined comment. When asked for a statement Kohl’s, too, did not respond. And Macy’s affirmed that it doesn’t “comment on litigation matters”. However, the attorney’s office cites multiple alleged examples of deceitful sales practices by all four retailers.

For example, the lawsuit against JCPenney says the store promoted a maternity swim top for $31.99 in an ad, saying this was a 30 percent reduction from the fake “original” price of $46.

Sears claimed a Kenmore washing machine, according to LA City Attorney, had a false “regular” price of $1,179.99, and a (misleading) “sale” price of $999.99.

The suit against Kohl’s mentions a pair of Belted Cargo Shorts, an exclusive in-house product, offered for $35.99, supposedly marked down from the fake “original” price of $60.

And the claim against Macy’s alleges that it promoted a “Giani Bernini Large Cross Pendant Necklace in Sterling Silver” for “75% off” supposedly marked down from the fake “original” price of $120. But the necklace was never priced at more than $30.

3The Lawsuits Refer to the Scams as a “False Pricing Reference Scheme”

"Macy's at San Tan Mall in Gilbert, AZ" by evblogger is licensed under CC BY
One retail giant charged in the lawsuit is Macy’s. Credit: Flickr / Aaron Burr / Creative Commons

The Los Angeles city attorney’s office accuses the retailers of undertaking what he alleges was a “false reference pricing scheme”. The fake prices led shoppers to believe they were getting major discounts and tricked them into buying products they might not otherwise have purchased. The lawsuits allege the stores undertook a “misleading and deceptive false price advertising scheme”.

The suits also say that fake prices constitute an unfair way of competing against rival retailers selling same or similar products with true list prices and real discounts. City attorney Mike Feuer wants court injunctions that can prohibit the four retail companies from continuing to present fake discount prices in their ads. Feuer also seeks to levy a civil penalty of up to $2,500 against the stores for each violation.

4The Scam May Have Been Going on for Quite a While

"Canal City in Fukuoka" by JoshBerglund19 is licensed under CC BY
A shopping mall decorated for the Christmas holiday shopping season. Credit: Flickr / JoshBerlund19 / Creative Commons

Feuer’s lawsuits were launched exactly two weeks after Thanksgiving, in the middle of the holiday shopping season. However, a statement from the L.A. city attorney’s office hints that the retailers’ underhanded tactics have been going on for quite a while.

The “false reference pricing practices” allegedly “play a major role in the companies’ overall marketing and business strategies” according to the city attorney’s office. Moreover, the suits allege that the companies set fake prices for “thousands of products”. An L.A. Times article about the lawsuits observes, “The rise of Amazon.com has put pressure on traditional retailers to draw eyeballs to their own websites”.

Ron Friedman, a retail expert at the L.A. accounting Marcum, agrees. “Brick-and-mortar retailers have a major problem” he points out, adding, “It’s very difficult for them to compete because the millennials and youth today want to shop online”. Friedman believes the deceptive pricing outlined in the lawsuits is now widespread in retailing. He says, “There is no regular-priced merchandise, especially in stores like Sears or Kohl’s or TJ Maxx”. He concludes, “The whole category is all about the sale price”.

5The Stores Have Been Breaking California Laws

The Los Angeles County Superior Court building in downtown Los Angeles. Credit: Wikimedia Commons / Google Maps / Coolcaesar

According to the laws of the state of California, a store cannot advertise a former price unless that figure was in fact the going price three months previously, or unless the date of the former price is shown clearly in the ad. The suits allege that the practices of the four retail giants were established “to create a false sense of value and to persuade customers to purchase the merchandise at an allegedly reduced ‘sale’ price”.

The lawsuits allege, “Misleading and deceptive false price advertising schemes play a major role in the companies’ overall marketing and business strategies”. And this is not the first time at least two of the retailers have been charged with dishonesty.

According to a statement from the L.A. city attorney’s office, “J.C. Penney and Kohl’s were previously the subject of class action lawsuits alleging similar deceptive business practices. Despite these representations, the companies allegedly continue to engage in misleading and deceptive pricing practices”.

“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” concluded attorney Mike Feuer.

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