The Santa Clara County City Attorney's Consumer Protection Unit, together with prosecutors from several other California counties, recently sued Rite Aid Corporation and its subsidiary, Thrifty PayLess, for false and deceptive advertising in connection with its +Up Rewards program and Wellness+ cards, and improper policies regarding gift cards. According to the complaint, Rite Aid ads that stated "It's like paying…" or "It's like getting it for…" conveyed to consumers that they would pay the stated prices for items purchased using their Wellness+ card when, in reality, the item could not be purchased for the stated prices. Instead, the items had to be purchased at a higher price and a coupon printed at the end of the customer's receipt that could be used only for savings on a future purchase before an expiration date, among other restrictions. The DA's office alleged this misled customers as to the actual price of the advertised items. In the recent settlement, Rite Aid agreed to clearly display the program's limitations, and all the conditions necessary for customers to purchase items for advertised prices. This case is similar to recent challenges before the NAD to Office Max and Staples' advertising of their respective loyalty programs. There, the NAD found both companies' ads that stated "it's like getting one for free" were misleading when customers actually received a coupon for a future purchase.
Prosecutors also alleged that Rite Aid improperly failed to redeem gift cards with a cash value of less than $10. The settlement requires Rite Aid to reprogram its credit card terminals and train employees to offer customers cash redemption for gift cards with a balance below $10.
In total, Rite Aid agreed to pay $800,000 in penalties and costs.
Tip: Statements regarding the benefits of a loyalty program should clearly communicate the exact nature of the benefits the consumer will receive. The use of qualifying language such as "It's like…" generally will not be viewed as being effective to alter the reasonable consumer's interpretation of statements regarding the benefits of a loyalty program.