always-available, effortless discount plausibly makes higher "regular" price misleading

Vizcarra v. Michaels Stores, Inc., --- F.Supp.3d ----, 2024 WL 64747, No. 23-cv-00468-PCP (N.D. Cal. Jan. 5, 2024)

Vizcarra alleged that Michaels deceptively advertises its products as discounted when in fact they are always available for at least 20% less than the purported “regular” price. The court dismissed her unjust enrichment claim but otherwise allowed her consumer protection claims to proceed.

Allegations: On Michaels.com, Michaels’ entire inventory is always available at a discount of at least 20% off of the “regular” listed prices, and these discounts are prominent in stores and on its webpages. E.g., in January 2023, in search and product pages, the text “Save 20% with code 22MADEBYYOU” appeared in red text immediately below list prices. At least one sitewide discount code offering at least 20% off of all merchandise is always offered (screenshots covered Jan. 2021-Feb. 2023). Similar discounts are offered in stores via coupons that are available both online and in stores. Thus, Michaels’ products are always available—in store and online—for at least 20% off the prices Michaels characterizes as “regular.” For Vizcarra’s in-store purchase, her receipt indicated she saved $11.65.

California’s FAL specifies: “No price shall be advertised as a former price of any advertised thing, unless the alleged former price was the prevailing market price as above defined within three months next immediately preceding the publication of the advertisement or unless the date when the alleged former price did prevail is clearly, exactly and conspicuously stated in the advertisement.”

Michaels argued that it “advertises current—not former—prices,” so it wasn’t covered by the former price rule. But current prices can be former prices—or, more to the point, consumers can receive the message that they are former prices, and that the product was previously available only at the non-discounted price. (And, since reference prices matter a lot to consumers, there’s an obvious incentive to advertise prices no consumer ever actually had to pay, which is where the restrictions on discount advertising have their genesis.) The question wasn’t whether all discount codes or coupons were covered “former price” advertising, but whether it’s possible to offer such a scheme in a way that presents the higher current price as a former price, and whether Michaels did so. By contrast, club memberships or “[c]oupons offered in exchange for receiving something from a consumer, like sharing personal information or repeat purchases, are clearly distinguishable.” The law covered situations where “former” was implicitly conveyed to a reasonable consumer, rather than only explicitly. As another court wrote, “the requirement that a consumer enter a coupon code to obtain the advertised discount is merely a routine, procedural step in the purchase transaction and is not material.”

Drawing all inferences in Vizcarra’s favor, the court found it plausible that “most consumers, when confronted with two prices including a lower price that can be obtained with negligible additional effort, will opt for the lower price.” That would mean that the prevailing market price was the lower, discounted price, whether the products were exclusive to Michaels or otherwise.   

The other consumer protection claims also survived because this conduct was plausibly misleading to consumers, as did claims for intentional misrepresentation and breach of warranty.