During the past two years, over 100 lawsuits have been filed across the country against more than 60 retailers alleging deceptive pricing practices. The vast majority of these suits have included allegations that the retailer offered “perpetual sales.” That is, that the retailer constantly offered items at a discount, such as advertising an “original” price at which the item was never actually offered, or constantly offering storewide percentage-off discounts.
In the past, “buy-one, get-one” free (BOGO) promotions, and similar pricing models (such as “free gift with purchase,” “buy three, get two free,” “free installation with purchase, etc.”), have slipped under the radar of the plaintiffs’ bar.
This changed last month, with Sharpe et al. v. Puritan’s Pride, et. al, 1:16-cv-06717-NJV (N.D. Cal). Filed in Mendocino County on October 14, 2016, and removed to the Northern District of California on November 21, 2016, the Sharpe complaint targets the use of BOGO-type sales by online vitamin and supplement retailer Puritan’s Pride. The complaint alleges that “defendants prey upon consumers by promising that, among other things, consumers will obtain a ‘free’ Puritan’s Pride product as a gift, if consumers buy a Puritan’s Pride branded product,” and by advertising that “free” products will only be available for a limited time, when in fact the promotions are ongoing. The complaint goes so far as to claim that “there has been no time in the preceding four (4) years” when Puritan’s Pride was not offering this kind of promotion on its website.
The complaint is reminiscent, to say the least, of other deceptive pricing claims. According to the complaint, “Under these circumstances, whereby Defendants advertise a permanent sale, or always provide ‘free’ Puritan’s Pride products along with the purchase of Puritan’s Pride product, consumers cannot actually be getting anything free. Rather, the cost of the ‘free’ products must be built into the price of the products that Plaintiffs and the Class purchased.”
In support of its claims, the complaint cites to the FTC’s Guide Concerning Use Of The Word “Free” And Similar Representations, 16 C.F.R. § 251.1, a separate section of the Code of Federal Regulations from the FTC’s oft-cited Guides Against Deceptive Pricing. Although the Guides Against Deceptive Pricing do not specify the duration of time that an item must be offered at a “former” price before being offered at a discount, (see 16 CFR §233.1, stating that former price should be used “for a reasonably substantial period of time”), the Guides for “Free” pricing offer much more specific guidance:
Frequency of offers. So that a Free offer will be special and meaningful, a single size of a product or a single kind of service should not be advertised with a Free offer in a trade area for more than 6 months in any 12-month period. At least 30 days should elapse before another such offer is promoted in the same trade area. No more than three such offers should be made in the same area in any 12-month period. In such period, the offeror’s sale in that area of the product in the size promoted with a Free offer should not exceed 50 percent of the total volume of his sales of the product, in the same size, in the area.
In the new suit, plaintiffs seek to represent a nationwide class of “All persons who purchased Defendants’ Puritan’s Pride branded products,” in addition to California and New York sub-classes. This class definition is similar to the approach taken by plaintiffs in several recent “Compare At” and MSRP cases, which have targeted price comparisons on private label items, and in some cases, limited the class definition to include only people who purchased such items. Here, however, plaintiffs explain that although Puritan’s Pride sells name-brand products, the BOGO sales are only ever offered for the retailer’s private label items. The complaint brings claims under California’s Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act; New York’s Deceptive Acts and Practices Act; and the consumer protection statutes of 39 other states; and for unjust enrichment. Interestingly, plaintiffs do not purport to bring a claim under California’s “Former Price Law,” Cal. Civ. Code § 17501, which has been a focus of numerous other complaints alleging “perpetual sales.”
Hopefully, the Sharpe suit is not a precursor to a new wave of pricing claims against BOGO-type sales. If the previous waves of cases are any indication, however, similar suits may be on the horizon. Retailers who frequently offer BOGO sales or other “free product” promotions would be wise to consult with counsel experienced in this area to make sure that they are protected.