Arts and crafts retailer Michaels reached a $1.8 million settlement with the State of New York over allegations that the company deceived consumers into believing they were receiving discounts when they were in fact paying the regular store price.
The settlement includes $800,000 in civil penalties and a donation to state schools worth $1 million in arts and crafts supplies. The company also agreed to change its advertising practices.
According to New York State Attorney General Eric T. Schneiderman, Michaels advertised its “custom framing” as a sale product for at least 104 consecutive weeks, using newspaper flyers, in-store banners, and signs to advertise that the framing service was either at least 50 percent off or a certain dollar amount off.
State law prohibits never-ending sales, the AG said, and Michaels’ actions violated Section 350-D, the false advertising provision of the state’s business law.
“For years, Michaels duped consumers into thinking they were receiving huge discounts, when in fact, they were simply paying the regular store price,” said Schneiderman. “Through deceptive advertising practices, this company violated the law and took advantage of hardworking consumers trying to save money.”
The AG’s office began tracking the company’s marketing materials in 2009 and found that Michaels advertised the custom framing sale in at least one form every day over a two-year period for its 48 stores in New York.
Why it matters: Companies that engage in promotional pricing should check relevant state law to ensure that their practices are not in violation of advertising regulations.