Outlet sales of outlet-only clothes under brand name aren't inherently deceptive

Rubenstein v. The Gap, Inc., --- Cal.Rptr.3d ----, No. B272356, 2017 WL 3634212 (Ct. App. Aug. 24, 2017)

The court affirmed the trial court’s dismissal of a claim against the Gap for selling lesser-quality products at its Gap and Banana Republic factory/outlet stores that were never sold at its ordinary stores.  Rubenstein didn’t sufficiently allege a misrepresentation or actionable omission. Rubenstein didn’t identify any advertising or promotional materials or any Gap other statements that its factory store clothing items “were previously for sale in traditional Gap stores or were of a certain quality.” The mere use of its own brand names wasn’t deceptive just because the apparel wasn’t of the quality that Rubenstein had come to expect. “As a matter of law, Gap’s use of its own brand name labels on clothing that it manufactures and sells at Gap-owned stores is not deceptive, regardless of the quality of the merchandise or whether it was ever for sale at other Gap-owned stores. Retailers may harm the value of their brands by selling inferior merchandise at factory stores, but doing so does not constitute false advertising.”  [This line of cases directly addresses, perhaps for the first time in litigation, the occasional debate in the literature about whether trademark owners should be responsible to consumers when they break their own promises about consistent quality that are communicated by a trademark with secondary meaning.] 

Plaintiff alleged that “[r]easonable consumers believe outlet stores sell products that were previously available for purchase at retail stores,” but didn’t allege specific facts showing this to be true.

Moreover, a consumer for whom the retail history of factory store items is material can ask Gap employees about this. A reasonable consumer would also inspect the quality of factory store clothing items before buying them and could return items after purchase if they turn out to be unsatisfactory. In the end, the allegation that Gap is not living up to the quality standards it has set for Gap and Banana Republic brands fails to state a cause of action for a fraudulent business practice under the UCL.

There was also no duty to disclose; the use of the brand name didn’t constitute a partial representation “even if the products are alleged to be inferior to other brand name products.”

Nor was selling nonidentical brand-name clothing in a factory store “unfair.”  In particular, “[t]he injury alleged is not substantial because consumers are getting Gap and Banana Republic brand name items for low prices.”  This interestingly suggests that there’s no quality differential to the extent that consumers are just buying the brand name, not the clothes.  Plus, consumers could have asked sales associates about the items’ history and examined their quality before purchase.