A plaintiff is not required to show economic loss in a lawsuit over fake “sale” prices, a California court recently ruled.
After purchasing items from discount tool and equipment retailer Harbor Freight for several years, Ted Shimono filed a putative class action against the company that challenged its advertised prices. Harbor Freight promoted its products at “sale” prices next to a comparative and fictitious “regular” price that was neither a customer store price nor a prevailing market price, the plaintiff alleged.
For example, in June 2015, Shimono purchased a solar security light for a purported “sale” price of $39.99. The advertising for the light contained the words “Only $59.99,” which was struck through with a line, suggesting to the plaintiff that Harbor Freight’s usual price for the item was $59.99 and that it was being offered at a discount from that former price. However, when he investigated, he discovered that the prevailing retail price for the security light during the three months immediately prior to his purchase was not $59.99.
Shimono proffered other examples, including a 50-foot retractable hose listed at a “sale” price of $89.99 next to a “comp at” price of $166.00. The same hose was on sale on Amazon.com for $67.29 plus shipping, the plaintiff claimed, with a comparable hose listed at $64.98 on Home Depot’s website. Harbor Freight never offered the hose, nor was it valued, at $166 as was implied by the company’s advertising, the plaintiff told the court, and was instead an amount intended to deceive consumers into paying higher prices.
Harbor Freight moved to dismiss the suit, arguing that the plaintiff failed to allege that he paid more than the value of its products and neglected to plead the circumstances indicating fraud with respect to his own purchases.
However, U.S. District Court Judge Christina A. Snyder reached the opposite conclusion.
“Plaintiff has offered detailed factual allegations supporting his general claim that defendant’s advertising scheme is misleading, that he purchased a product advertised pursuant to said scheme, and that he did so in reliance upon the misleading pricing scheme,” the court wrote, finding that Shimono stated a plausible claim for relief.
The court also rejected Harbor Freight’s position that the plaintiff had to allege he bought a product that was worth less than he paid. Shimono must only allege an “economic injury,” Judge Snyder wrote, as at the early stage of the litigation a specific measure of the amount of the loss is not required.
Further, the Consumer Legal Remedies Act only requires an allegation of “any damage,” the court added, a “capacious” standard that includes any pecuniary damages as well as opportunity costs and transaction costs that result when a consumer is misled by deceptive marketing practices.
The court denied the defendant’s motion to dismiss.
To read the order in Shimono v. Harbor Freight Tools, click here.
Why it matters: Consumer class actions alleging deceptive sale pricing are a hot trend right now, particularly against outlet stores. Federal lawmakers have stepped in, requesting that the Federal Trade Commission take a closer look at the issue and consider establishing a formal definition of terms like “list price.”