district court misunderstands "fake sale" claims, finds price not to be a "statement"

Nguyen v. Lovesac Co., 2025 WL 950511, No. 2:24-cv-01293-TLN-JDP (E.D. Cal. Mar. 28, 2025)

Weird decision finding that a price isn’t an actionable representation, which—even if true—ignores the difference between a price and a putative former price represented by a strikethrough, which implicates specific provisions of consumer protection law enacted precisely to protect consumers from false and misleading price comparisons. Nguyen alleged that Lovesac inflates its product prices for the sole purpose of marking them at a discounted “sale” price.  Price quotes allegedly include a purported “discount” the customer is receiving on their purchase, which correlates with a “limited time sale” and a fictitious strikethrough reference price accompanied by a purported percentage off. Lovesac allegedly warrants to consumers that their purchase received a certain “% off” of their purchase, resulting in “-$XX” to the initial subtotal.

The court initially found that Nguyen didn’t sufficiently allege which sofa he purchased, though he did allege the price. He didn’t allege any “particular size, fill, material, or any of the other customizable features he purchased.” The complaint also failed to allege, about the investigation purporting to show that the “sales” were not really sales, “what products were tracked, what the prices were on specific dates, whether any individual item prices were identified or tracked, whether the investigation included the specific ‘Sactional’ items Plaintiff purchased, or any other meaningful details about the investigation.”

More concerningly, the court rejected Nguyen’s allegations of misleadingness where the product he bought “displayed an original, strike-through price of $7,175.00, representing [a] purported $1,793.75 ‘discount.’ ” The court instead relied on cases holding that “the price of a product can[not] constitute a representation or statement about the product.” Parent v. Millercoors LLC, No. 3:15-cv-1204-GPC-WVG, 2016 WL 3348818 (S.D. Cal. June 16, 2016); Boris v. Wal-Mart Stores, Inc., 35 F. Supp. 3d 1163 (C.D. Cal. 2014). But a “price” is not a juxtaposition with a putative former/regular price—as evidenced by the fact that legislatures around the country bar specifically false advertising relating to “sales.” It’s not the actual selling price that makes the misrepresentation—it’s the struck-through price presented as some sort of ordinary price. But the court missed that distinction: “pricing about the product alone cannot constitute a representation or statement about the product.”

The California Supreme Court, however, has specifically held that a consumer who buys a product in reliance on a false/misleading reference price has suffered an injury. Hinojos v. Kohl’s Corp., 718 F.3d 1098 (9th Cir. 2013) (citing Dhruv Grewal & Larry D. Compeau, Comparative Price Advertising: Informative or Deceptive?, 11 J. PUB. POL’Y & MKTG. 52 (1992) (“By creating an impression of savings, the presence of a higher reference price enhances subjects’ perceived value and willingness to buy the product. . . . [E]mpirical studies indicate that as discount size increases, consumers’ perceptions of value and their willingness to buy the product increase, while their intention to search for a lower price decreases.”)). As the Hinojos court pointed out, the “what a great bargain!” effect is exactly why the California legislature barred the practice.