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Advertising, Marketing & Promotions Alert >> Hobby Lobby Settles Allegations It Broke a Deceptive Advertising Commandment

July 2, 2014

Hobby Lobby Stores, Inc., the Oklahoma City-based arts and crafts retailer founded by David Green, has settled an investigation by the New York State Attorney General’s office into its allegedly deceptive advertising.

Background
In the settlement, Hobby Lobby agreed to change its advertising practices over the next 60 days, contribute $138,600 in supplies to about 700 public schools near Hobby Lobby stores in upstate New York, and pay $85,000 in civil penalties and other costs.

New York State Attorney General Eric T. Schneiderman said in a statement that, in 2013, his office began tracking marketing materials advertising 50 percent off and 30 percent off sales. Attorney General Schneiderman said that his office’s investigation found that Hobby Lobby advertised its custom framing, furniture, and home décor products as sale items for more than 52 consecutive weeks and that Hobby Lobby “misled customers into thinking they were receiving steep discounts through deceptive advertising over a two-year period.”  

Ruling
Attorney General Schneiderman said that his office’s investigation determined that Hobby Lobby had violated the false advertising provisions of New York General Business Law Section because sales “that are never-ending are in violation of the false advertising law.” 

“When companies mislead customers by advertising never-ending sales, our office will hold them accountable,” Attorney General Schneiderman said. “Ultimately, a permanent sale is no sale at all.”

 

Bottom Line

The Hobby Lobby action is a good reminder that, despite intense competition in the retail category, aggressive sale and price comparison advertising can run afoul of the law if pushed too far.  Regulatory actions against these types of advertisements are also becoming more frequent.  Companies should be familiar with, and abide by, any state and local sale and pricing regulations that exist in each state in which its retail stores are located.