National retailers, including companies like Kohl's, Sears, and Justice, are facing a wave of class litigation relating to discount sales and pricing practices. Plaintiffs have attacked two main practices that they allege violate consumer protection laws: (1) advertising that products are "on sale" on a near-continuous basis, i.e., that the purported "sale" is not the temporary reduction in price promised; and (2) comparing a product's offer price to another price (usually MSRP or the "former" price) when the comparison price does not actually represent a regularly offered market price so that the lower offer price is based on a "phantom discount."
In May 2015, a California district court certified a deceptive pricing class against J.C. Penney. In perhaps the most troubling part of the order, the court appeared to suggest the viability of a damages model based on restitution of all profits from impacted sales. Last week, J.C. Penney announced a settlement in principle of the case. Around the same time, Ascena Retail Group, Inc. (owner of the Justice brand) announced a settlement of the raft of deceptive pricing class actions filed against the company nationwide. In addition to the $6 million it paid earlier this year to settle an Ohio-only deceptive pricing class, Ascena agreed to a $50 million settlement fund for a national class, with plaintiffs' attorneys to receive $15 million.
We expect that the announcement of the large class settlement in the Ascena cases, particularly when coupled with the J.C. Penney certification order and proposed settlement, may spur plaintiffs' attorneys to seek out new potential targets for new cases. Companies that frequently provide sales and advertise discounts from former or MSRP prices should be aware of the plaintiffs' bar search for the next "phantom discount" and "continuous sale" defendants.
A copy of the order can be found here.