What’s the News?

A California federal judge recently certified a class action lawsuit that alleges violations of California consumer protection laws by J.C. Penney Corporation, Inc. (J.C. Penney). Specifically, the class claims that J.C. Penney engaged in a misleading pricing scheme by promoting “sale” prices on items that may never have been offered for sale at the advertised “regular” price.  This case is a reminder to retailers to ensure their “sales” reflect legitimate discounts on regular priced items.

Background on the Case

In March 2014, plaintiff Cynthia Spann filed a class action lawsuit against J.C. Penney, claiming that, for years, the retailer engaged in a fraudulent pricing scheme in violation of California consumer protection laws. Spann claims that she and other J.C. Penney shoppers were tricked into believing that they were buying items at marked down prices when, in fact, the advertised discounts were fabricated. J.C. Penney, like many retailers, advertises potential savings on various items by displaying the item’s “regular” price next to a limited-time “sale” price. According to Spann’s complaint, however, many of the items advertised at a “sale” price had never been offered at their corresponding “regular” price—meaning that customers were not getting an actual discount. Spann claims that she would not have purchased numerous items if not for the company’s misrepresentations, and asked the court for monetary restitution and an injunction against such misrepresentations going forward.

Further, the complaint estimated that “hundreds of thousands” of shoppers were similarly harmed by J.C. Penney’s pricing scheme, and sought the court’s approval to sue the company as a class. J.C. Penney objected to class certification, arguing that each potential plaintiff’s claim required an individualized inquiry, making the lawsuit a poor candidate for class-wide adjudication.  In a recent order, the court certified the class over J.C. Penney’s objections. In the court’s view, while the individual claims had some inevitable factual variation, they all shared the central allegation that J.C. Penney had engaged in a systematic effort to mislead consumers through its pricing, making a class action an appropriate means of adjudication.

The Takeaway

Advertising items at a discounted price is a ubiquitous—and wholly permissible—advertising strategy when done properly.  But certain basic rules must be followed.  Notably, items should never be advertised as being “on sale” if they were not previously offered at a bona fide higher price for a substantial period of time.  Retailers should conduct regular reviews of “sale” prices to ensure that they are compliant with the applicable state laws, as well as the guidance provided by the Federal Trade Commission.