City of Los Angeles Sues Major Retailers Over Price Inflation

01-10-2017
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The City of Los Angeles is suing four major retailers (JC Penney, Kohl’s, Macy’s, Sears) for deliberately inflating the original prices of some products to trick customers into thinking they were getting a better deal. The lawsuits accuse the retailers of using a “misleading and deceptive false price advertising scheme,” as a marketing strategy to sell their products, and that the companies used false reference prices on “thousands of products.”

For example, Sears advertised a front-load washer with a fake original price of $1,179.00, but never offered the washer for more than $999.99 online during the six months it was first made available for purchase. Macy’s offered a cross pendant necklace for purchase online at a 75% discount for five months, claiming the original price was $120, but selling it for $30. California law forbids retailers from advertising the ‘original’ price of an item unless it has been on the market for that price for at least three months. Retailers must also tell shoppers the date it was being sold at that price. This type of marketing tactic, known as ‘false reference pricing,’ is unfortunately a common practice amongst major retailers. With the rise of online shopping giving consumers the power to compare prices among retailers, and websites like Amazon.com giving a platform for independent sellers to sell products at a discount without worrying about the operating costs of a traditional brick-and-mortar store, traditional retailers have seen a drop in clientele, which causes business to suffer.

“Brick-and-mortar retailers have a major problem,” said Ron Friedman, a retail expert at an advisory and accounting firm in Los Angeles. “It’s very difficult for them to compete because the millennials and youth today want to shop online.” Even if retailers choose to sell an item at the list price, they will often start dropping the price in a matter of weeks. The lawsuits are seeking civil penalties and injunctions to prohibit these practices. This is not the first time major retailers have been sued for false reference pricing. In 2015, class action lawsuits were filed against JC Penney and Kohl’s for the same thing, which ended in a $50 million settlement for JC Penney, and a $6.15 million settlement for Kohl’s.

If you feel you have fallen victim to misleading or false marketing tactics, the law firm of Hodes Milman Liebeck can provide you with the assistance you need. Contact us today online at hmlm.com or call 866-730-1976 for a complimentary case evaluation.

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