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Advertising, Marketing & Promotions Alert >> Consumer’s California Lawsuit Challenges Department Stores’ “Compare At” Pricing

July 20, 2015

A consumer has filed a putative class action lawsuit in a federal district court in California that challenges the legality of “Compare At” pricing used by a department store chain.

Allegations
The plaintiff is alleging that Ross Stores, Inc. labels products it sells in its California stores with false or misleading comparative prices that purport to be prices charged by other merchants for the same products but that are not competitors’ actual prices.

In particular, the plaintiff alleges that, in its marketing to consumers, Ross Stores advertises “false and/or misleading comparative prices and corresponding false discounts and/or savings for its apparel and other merchandise” since the marked “Compare At” prices for the products that the plaintiff purchased from Ross Stores were not the actual prices at which other retailers sold those products.

According to the complaint, Ross Stores compares the prices of its products, which it labels as the “Ross Price,” with prices supposedly charged by other merchants for the same products, which it labels as the “Compare At” prices.

The plaintiff contends, however, that in advertising the “Compare At” price for a product, Ross Stores is “not actually presenting the prevailing market price for that product” but, rather, uses “vague and misleading measures to inflate the comparative prices, and thus artificially increase the discounts it claimed to be offering consumers.” The complaint alleges that, “often [Ross Stores] has not determined or verified the prices other merchants charge for the identical products it sells.”

In addition, the plaintiff alleges that although the price tags on Ross Stores’ products present a “Compare At” price to the consumer to compare to the lower “Ross Price,” there is no explanation of the “Compare At” price on the price tag. Rather, the plaintiff asserts, the only way a consumer can find an explanation of a “Compare At” price is to log on to the Ross Stores’ website and follow a hyperlink at the bottom of the home page. The plaintiff referred to that explanation which indicates that when identical products “are not available,” the comparison may be “to similar products and styles.”

In the plaintiff’s view, Ross Stores’ explanation of its “Compare At” pricing should be either on or immediately next to the same price tag on which its “Compare At” price is listed. The plaintiff alleges that, through “its false and deceptive marketing, advertising and pricing scheme,” Ross Stores has violated, and continues to violate, California law prohibiting “advertising goods for sale at a discount when compared to false prices at which other merchants purportedly sell the goods” as well as prohibiting “misleading statements about the existence and amount of comparative prices.”

Legal Claims
Not surprisingly, the plaintiff’s complaint cites the usual laws referenced in these kinds of cases as those allegedly violated by Ross Stores, including the Federal Trade Commission Act and California’s Unfair Competition Law and False Advertising Law.

On behalf of his proposed class, the plaintiff is seeking significant damages and disgorgement of profits, as well as attorneys’ fees.

Bottom Line

Although the suit against Ross Stores is in its infancy, it is a good reminder to retailers in California – and across the country – to be familiar with and to abide by the Federal Trade Commission’s “Guides Against Deceptive Pricing” and other state laws containing different or more stringent requirements. Many of these laws prohibit fictitious price comparisons, such as comparisons against a manufacturer’s suggested retail price (MSRP) competitive prices that don’t actually exist. This new case against Ross Stores continues the trend of class actions and regulatory investigations against misleading pricing practices in the retail industry, heightening the practical risk for engaging in these practices.