Class representatives recently filed suit against national retailers The Gap Inc., Banana Republic LLC, and Saks Fifth Avenue LLC, alleging that the defendants inappropriately mark certain items in a manner that is unfair and unlawful. In Malik v. Saks Fifth Avenue LLC and Rubenstein v. The Gap Inc., both venued in the Superior Court of California, Los Angeles County, the claimants allege that the defendants deceptively mark the price of certain items in a manner that manipulates the consumer into purchasing the item. The claimants assert that Saks Fifth Avenue marks items at outlet retail locations with two different prices. One price is the “Market Price,” which represents what the consumer would pay at a traditional retail location, while the second “Retail Price” represents the outlet price. Consequently, according to the claimants, the consumer believes that he or she is obtaining a significant discount. The claimants assert, however, that Saks Fifth Avenue manufactures the items for sale specifically at the outlet location, and the items are never on sale at the “Market Price” in a typical retail location.
Additionally, the claimants assert that the Gap places signs near racks of clothing indicating that the items on the rack are for sale. Only certain items on the rack are in fact at sale prices, but by the time the consumer reaches the counter to pay for the purchase, the consumer has already committed mentally to purchasing the item. Finally, claimants assert that Banana Republic displays misleading sale signs in the front window of stores, but only certain items in the store are actually discounted.
The Malik and Rubenstein suits come on the heels of a recent class settlement in another deceptive marketing case. In September, a federal judge in Ohio preliminarily approved a class settlement in a suit against Glaceau Vitaminwater, which is a subsidiary of Coca Cola Company. According to the claimants, the company marketed its products as health drinks, containing important vitamins and minerals, when in fact the products were merely sugar water. The claimants asserted that the marketing plan was deceptive in that it manipulated the consumer into believing the drink would provide beneficial health effects. Although denying legal liability, Vitaminwater agreed to change the labeling on the product containers to accurately state the caloric content of the product. Additionally, Vitaminwater agreed to remove certain statements from the labels to avoid allegedly misleading the consumer. Volz v. The Coca-Cola Company, 1:10-cv-00879 (S.D. Ohio 2010).
These fashion class actions and the recent Vitaminwater class settlement demonstrate the fine line between frequently occurring sales tactics and deceptive manipulation. To the extent the claimants in Malik and Rubenstein are successful in establishing the requirements to obtain class certification, these cases could send a ripple effect throughout the retail industry. Such effect is especially likely for retailers that operate stores in both traditional retail locations and outlet locations.