Deceptive Pricing Suits Continue to Proliferate

Advertising Law

While the initial wave of deceptive pricing suits appears to be ending in settlements, new class actions are still being filed—including suits against Barneys Warehouse and Kate Spade outlet stores.

Kristen Schertzer’s California federal complaint asserts that Barneys Warehouse uses false reference prices to dupe consumers into believing they are saving money. She characterized the “reference price” on the price tags as “total fiction” and alleged that the company unlawfully, unfairly and fraudulently advertised fictitious prices and corresponding “phantom discounts” on merchandise sold in its retail outlet stores.

“The result is sham price disparity that misleads consumers into believing they are receiving a good deal and induces them into making a purchase,” according to the complaint. “Retailers drastically benefit from employing a false reference pricing scheme and experience increased sales.”

Barneys attaches to warehouse store items a price tag that lists a reference price with a strikethrough, followed by a lower price at which the item is offered for sale. During her visit to the defendant’s store in Carlsbad, California, Schertzer purchased a Hooded Faux Sherpa Knit Scarf with Fringes, as well as a Fatigue CA Camo Crew Long Sleeve Sweater. The price tag for the scarf had a reference price of $260 and a sale price of $129; the sweater also purported to be available at a 50 percent discount, with a reference price of $575 and sale price of $289.

But neither of the items was ever offered for sale or actually sold at the represented reference price, Schertzer told the court. Instead, the reference price was simply a benchmark used to set the false discount price in violation of California law.

A few days later, Schertzer filed a second suit against Kate Spade. Although the merchandise sold at the company’s outlet stores is created specifically for those locations, Schertzer alleges that the company deceptively uses a price tag with a “reference price” and the actual sale price, described as “Our Price,” accompanied by signage that states the percentage of the purported discount.

“The Kate Spade outlet store merchandise is never offered for sale, nor actually sold, at the represented reference price,” according to Schertzer’s class action complaint. “Thus, the reference price is false and is used exclusively to induce consumers into believing that the merchandise was once sold at the reference price and from which the false discount and corresponding sale price is derived.”

In reality, consumers are paying for merchandise at its regular or original retail price, the plaintiff alleged.

Both suits seek to certify classes of California purchasers from February 15, 2015, through the present—estimated in the “hundreds of thousands”—to recover damages, restitution and disgorgement of profits, as well as declaratory and injunctive relief and a corrective advertising campaign by Barneys Warehouse and Kate Spade.

To read the complaint in Schertzer v. Barneys New York, Inc., click here.

To read the complaint in Schertzer v. Kate Spade & Company, LLC, click here.

Why it matters: Deceptive pricing class actions have been popular in recent years. While many have settled—such as the $5 million agreement by Ross Stores over its use of “Compared to” prices, an almost $3 million deal reached by Neiman Marcus and the $6.15 million paid by Kohl’s Department Stores—new suits are still being filed, as evidenced by Schertzer’s recent complaints.



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