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It's not uncommon to hear shoppers blame retailers for marking up prices before starting sales. A recently-filed lawsuit in the Los Angeles Superior Court against Macy's, Kohl's, JCPenny, and Sears gives some credibility to those outlandish claims. The lawsuit couldn't have been filed at a worse time for the retailers as the negative publicity could impact their holiday shopping season.
The lawsuit claims that the retail behemoths all misled consumers by listing fake original prices when displaying and advertising sale prices. The Los Angeles City Attorney's Office explained in their lawsuit that each of the four retailers used false reference pricing to mislead customers into thinking sale prices were better deals.
Deceptive Sale Advertising
An example that one source pulled from the lawsuit explains how Sears offered a particular washing machine from the very beginning at a "sale" price. Even as the original sale price was reduced even further, Sears continued to make reference to the original price, which the retailer never actually used, thereby making the sale price appear even more attractive. Under California law, in order for a retailer to claim an item is on sale from an original, non-sale, price, they must have actually offered the item at the original, non-sale, price within the last three months, or must clearly disclose the last date it was offered for the price.
Shockingly, both JCPenny and Kohl's settled similar class action claims in 2015. JCPenny settled for nearly $50 million in a combined cash and store credit deal, while Kohl's had to pay out just over $6 million.
Lessons for Small Business
For small business owners and retailers, there is an important lesson to learn from this case: deceptive pricing can cost you. Especially in today's ever-so-connected world where shoppers can do a price-check (on their mobile phones) at your competitor's website, while standing in your store, keeping your pricing honest and clear is critical not just to avoid legal trouble but also to maintain customer loyalty.
At the end of the day, retail shoppers care less about which business is offering the bigger percentage of sale, but rather which business is offering the lowest price.