The plaintiffs’ bar has a new angle on retailer discounting cases, which attack California retailers who discount merchandise by showing an “original” or “former” price next to a much lower, discounted price to imply tremendous savings.
Initially, plaintiffs relied on California’s False Advertising Law, Unfair Competition Law, and the Consumer Legal Remedies Act to allege that consumers are deceived into purchasing items based on allegedly “false” discounts. The FAL specifically prohibits discount “advertising” of this sort unless the former price was “the prevailing market price… within three months” prior.
Using these cases as a springboard, plaintiffs have recently developed a new liability theory – attacking percentage discount sales – which is proving difficult for defendants to shake.
For example, in Knapp v. Art.com, Inc., plaintiff alleged he was enticed to purchase framed artwork during a 40% off sale ending at midnight that day, only to later learn that a 45% off sale commenced at 12:01 a.m. Plaintiff further urged that defendant consistently offered discounts ranging from 30 to 50 percent, rarely offering goods at the full retail price, thereby falsely inducing consumers to purchase under the mistaken belief they were receiving a bargain.
Even though plaintiff admitted that a special discount code had to be entered to receive the sale price, meaning some consumers were paying full price, the district court denied the defendant’s motion to dismiss based on pure allegations that the 40% off sale was illusory.
In Veera v. Banana Republic, LLC, two sets of plaintiffs launched another attack on a 40% off sale, alleging it was misleading because the sale signs did not disclose that the discount did not apply to everything in the store. In each instance, plaintiffs claimed they were lured into the store by the 40% off signage, selected numerous items for purchase, only to be informed at checkout that the discount only applied to select items. Plaintiffs claimed they ended up buying non-sale items anyway to avoid embarrassment in front of their children and other customers waiting in line behind them, and out of frustration over wasted time spent in the store.
While the trial court granted summary judgment for defendant because plaintiffs knew that the items were not on sale and purchased them anyway, the court of appeal reversed, finding that whether the signage induced plaintiffs to enter the store – thereby creating a “bait and switch” scenario where plaintiffs were caught up in “the momentum to buy” – was an issue of fact for the jury.
The take away? Aside from the fact that it increasingly seems that no good deed – or offer of a bargain – will go unpunished in California, how often a retailer can offer sales and how little “momentum to buy” is required to establish reliance and a potential injury is less clear after these decisions. The comparative price cases at least set forth a statutory standard for retailers. Knapp and Veera, on the other hand, put forward ambiguous and inconsistent standards that – as the dissent in Veera observed – “will invite exhaustive litigation” as plaintiffs continue to push the envelope against retailers.