Thursday, August 25, 2016

Inconceivable: allegedly made-up price comparison allows consumer suit

Chester v. TJX Cos., 2016 WL 4414768, No 5:15-cv-01437 (C.D. Cal. Aug. 18, 2016)

When an opinion begins with the quote, “You keep using that word. I don’t think it means what you think it means,” it’s not going to go well for the false advertising defendant.

Plaintiffs brought the usual California claims against three off-price retailers under the TJX umbrella: TJ Maxx, Marshalls, and HomeGoods.  TJX’s price tags list (1) the price the retailer is selling the item for; and (2) a higher, comparative reference price accompanied by the phrase, “Compare At.” Neither tags nor ads define the term “Compare At” or otherwise offer context for the pricing provided. Some of defendants’ products also have a second price tag noting a purported manufacturer’s suggested retail price, or “MSRP,” for an item.  Where is “compare at” defined?  A page on the TJ Maxx website, found by searching the fine print, and a sign near the customer service/returns counter at one retailer store.  It says:

The “compare at” price is our buying staff’s estimate of the regular, retail price at which a comparable item in finer catalogs, specialty or department stores may have been sold. We buy products from thousands of vendors worldwide, so the item may not be offered by other retailers at the “compare at” price at any particular time or location. We encourage you to do your own comparison shopping as another way to see what great value we offer.

Plaintiffs alleged that they, like other reasonable consumers, expect that the “Compare At” tags listed “prices at which the ‘principal retail outlets’ in California have sold, or are selling, those products in any ‘substantial volume.’” This picks up on the FTC’s preferred means of substantiating such a claim.  Using the term for unverified estimates of possible prices, they argued, was deceptive.

The court quickly disposed of TJX’s standing challenges, including its challenge to plaintiffs’ standing to seek injunctive relief.  “It is inconceivable to think prospective relief in the false advertising context is bound by the rules of ‘fool me once, shame on you; fool me twice shame on me.’”  Accepting the no-standing argument would “eviscerate” California’s consumer protection laws.

TJX argued that plaintiffs hadn’t alleged sufficient facts about why the tags were deceptive to a reasonable consumer.  It argued that the FTC guidelines allowed it to offer price comparisons between one item and another of comparable value, and that those comparisons could be based on good faith estimates. However, the FTC specifies that comparison prices cannot “appreciably exceed the price at which substantial sales of the article are being made in the area.”  Comparisons must thus be based on actual prices, not “estimates” of prices at which “a comparable item” in another store or catalog “may” have been sold.  By contrast, TJX’s definition says outright that an item “may not be offered by other retailers at the ‘compare at’ price at any particular time or location.” “If Defendants believe that ‘estimates’ are the same as ‘comparisons with actual merchandise,’ then the Court is here to say that this word does not mean what you think it means.”  The court referred to TXJ’s practice as looking at “what a fictitious retailer may charge.”  Ulp.

Moreover, the FTC had more limits; the FTC Guidelines require retailers who use reference pricing to make “clear to the consumer that a comparison is being made with other merchandise.”  This TXJ failed to do: “a link at the bottom of a webpage and a sign near the return counter, not the sales counter, will not suffice” given the predominance and prominence of the “compare at” claims. “[I]t is unrealistic for Defendants to expect consumers to pull out their smart phones and search the retailer’s website for a definition of the seemingly clear phrase, or chance that they see a sign offering insight before they reach the check-out counter.” The tags and ads therefore didn’t clearly communicate a comparison between “like” items rather than with the same item.

As the court pointed out, there’s a reason that retailers use reference pricing: “it makes consumers think they are getting a deal.” Relying on the plain meaning of “compare at” to draw in consumers while also using an unrecognizable internal defintion of that phrase “is not very sportsmanlike. Anyone who says differently is selling something.”

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