alleged price bait-and-switch with large "processing fee" suffices to plead Lanham Act false advertising

New Vision Unlimited, LLC v. Glasses USA, Inc., 2023 WL 3535386, No. 22-22534-Civ-Scola (S.D. Fla. May 18, 2023)

New Vision, an eye-care professional and provider of optical goods and services, including contact lens fittings and contact lens sales with seven brick-and-mortar locations and two websites, brought a putative class action against four online contact-lens retailers for Lanham Act false advertising. The court denied a motion to dismiss.

Defendants promote their lenses through Google and other search engines, advertising low prices that are allegedly “far lower” than the prices New Vision and other “honest” retailers advertise. Consumers of contact lenses are allegedly very price conscious and thus this works, but, New Vision alleged, “only after a customer has filled out online forms, providing details about her prescriptions, contact information for her doctor (to verify her prescription), and certain biographical and payment information, do the Defendants reveal there is a ‘processing fee’ added to the order” of about twice the initially advertised cost. This final cost is allegedly “about the same as the prices honest retailers such as Plaintiff advertise, because this is the true market price.”

Although New Vision alleged that the processing fee was hidden enough that, “many times,” “consumers do not even notice that the total amount they are being charged for the order is about the same as what they would have paid if they bought from [New Vision],” screenshots in the complaint show the processing fee presented in plain type, in normal-size font, in the middle of the secure checkout page. (Those things are not necessarily incompatible, given that consumers might think there’s nothing more than ministerial stuff to do to check out, especially given autofill. I wonder what discovery may show about whether consumers ever complain afterwards.) New Vision alleged that, even if consumers do notice the fee, sunk costs keep them at the sites, and they may also mistakenly believe that all contact-lens retailers charge similar “processing fees.”

Defendants argued that their ads were literally true because consumers can actually purchase one box of the advertised contact lenses for the published price, and any conceivable deception was cured by the full disclosure of the added processing fees prior to final purchase.

Defendants supplied screenshots from each of their websites, showing that no processing fee is added to a consumer’s purchase when only one box is selected. But first, there was no way of knowing whether these current offerings were the same as those during the period at issue in the complaint. Second, the allegations of the complaint were that the typical orders were twice as much as advertised, which this didn’t refute. Third, some of the ads were at least capable of being false even under this interpretation. E.g., one of the Contact Lens King ads in the complaint offers a “90 Pack” for “Only $26.22/box.” “While it may be possible to interpret this, as the Defendants urge, to mean that Contact Lens King will in fact honor the $26.22 price if a customer’s purchase is limited to one box, that is certainly not the only interpretation. … [A] reasonable interpretation would be that the advertised $26.22 price is per box, regardless of how many boxes are ordered.”

Nor did disclosure prior to final checkout solve the problem, given the sunk costs allegations that “the complained of fees are not revealed until deep into the purchasing process or at least not until the consumers have already been lured away.” The court also rejected the argument that, because the complained-of practices were allegedly commonplace, they weren’t actionable. There is consumer protection even in the market for lemons!

Along with literal falsity, misleadingness was also plausible. Even if “consumers won’t notice a processing fee that doubles the cost” was problematic as an allegation, New Vision offered other deceptiveness theories, based on bait and switch advertising/sunk costs.

Materiality was also plausible. Defendants argued that, if consumers didn’t notice the near doubling of the price, then the advertised prices couldn’t have been material; and if they did notice but buy anyway, that also showed immateriality. But “the role the initial alleged price deception played in driving consumers away from New Vision and towards the Defendants” was also relevant. “It is not the materiality of the processing fees that is at issue here but, rather, it is the materiality of the deceptive prices published in the Defendants’ ads that drives consumers to the Defendants’ websites and then ultimately influences their final purchasing decisions.” Defendant-favorable cases, including resort fee cases, were distinguishable as involving more/earlier disclosure (and mostly ignore the sunk costs problem anyway). Defendants “improperly framed their materiality analysis, focusing only on the consumers’ ultimate decisions to go through with their purchases of the Defendants lenses, without any consideration of the separate deceptive advertisement that got them there.”

Although some of the injury allegations were conclusory, New Vision alleged sufficient harm. It described a “typical scenario,” in which one of New Vision’s patients asks for a price for a particular product, compares New Vision’s price to defendants’ ads, “complains that Plaintiff’s store is ‘overcharging’ and ‘too expensive,’ ” and, despite staff’s attempts to explain, leaves without buying and ends up “believing that Plaintiff’s prices are not competitive across the board.” The court was willing to accept that New Vision was attesting to actual sales it has lost in the manner it describes as a “typical scenario.”