Ross Settles Deceptive Pricing Suit for $5M

Advertising Law

A deceptive pricing class action will cost Ross Stores almost $5 million after a federal judge in California granted preliminary approval to the settlement agreement.

In their complaint, the plaintiffs asserted that Ross violated California’s False Advertising Law and Unfair Competition Law by displaying two prices on their price tags: a sale price and a “Compare At” price. Reasonable consumers would interpret the advertised reference price to represent the amount charged for an identical product at other stores, the plaintiffs argued.

After several years of litigation, the parties reached a deal. Ross agreed to pay $4,854,000 into a settlement fund to pay for notice and administration costs (not to exceed $600,000), counsel fees of up to $1.2 million and costs of up to $50,000, incentive awards of $5,000 for each of the two named plaintiffs, and payments to class members.

The class is defined to include consumers who purchased one or more items dating back to June 20, 2011, with a price tag that included a comparison price higher than the sales price, and members who submit a valid claim form are eligible for a Ross merchandise certificate on a pro rata basis.

The merchandise certificates will have no expiration date and no minimum purchase requirement; within one year, they may be redeemed for cash in an amount equal to 75 percent of the value of the certificate.

Ross also agreed to advertising changes. The company promised to abide by both federal and California law in the future, and will update its policies and procedures. Specifically, the company will enhance and expand programs intended to promote legal compliance (including periodic monitoring, training and auditing to ensure compliance with price comparison laws). The company promised to “prominently” post signs in each of its stores across the country describing its comparison pricing practices and to augment existing signage with additional details.

U.S. District Judge Michael W. Fitzgerald concluded that the settlement agreement satisfied the Federal Rules of Civil Procedure and was both procedurally and substantively fair, and he granted preliminary approval of the deal.

To read the order in Jacobo v. Ross Stores, Inc., click here.

Why it matters: Deceptive pricing class actions have been a hot trend in recent years, and the $5 million agreement by Ross fits comfortably in the range of “Compared to” settlements, with similar deals by Neiman Marcus for almost $3 million and a $6.15 million deal in California with Kohl’s Department Stores.