False Sale Prices Result in Real $6M Settlement

Advertising Law

General Nutrition Centers (GNC) agreed to pay $6 million to settle a class action accusing the national retailer of promoting “phantom markdowns” on its website.

Three separate class action lawsuits were filed against GNC, alleging that the company falsely advertised the existence of discounts on its website to consumers across the country. After three years of what the court’s memorandum called “vigorous” litigation, the parties reached an agreement that included both monetary and injunctive relief.

Class members—an estimated 3.6 million consumers nationwide who made a purchase through a promotion from GNC’s website dating back to January 1, 2012—can choose a $5 cash payment or a $15 voucher that may be redeemed for merchandise through the site. The voucher is fully transferrable, has no expiration date and can be redeemed with no additional purchase.

An additional $5 cash payment or $15 voucher is available for class members who made a total of five or more purchases or a purchase in excess of $100 in a single transaction from the website within the class period.

Class members will also receive a coupon for $30 off a purchase totaling $100 or more through the GNC site. The coupons are additional consideration on top of the voucher relief and class payments and will not diminish claimant recoveries.

In addition, the fund will cover class counsel fees and expenses up to $1.5 million and service payments of $5,000 for each of the five named plaintiffs.

The settlement agreement also requires GNC to take reasonable steps to ensure its comparative discount advertising on the website complies with then-existing law. The defendant also promised to disclose on its site the basis of any reference pricing or similar practices.

To read the memorandum in support of preliminary approval of settlement in Carter v. General Nutrition Centers, Inc., click here

Why it matters: Calling the proposed deal “an excellent result in a complex, high-risk, hard fought case,” the plaintiffs asked the Pennsylvania federal court to approve the settlement. The $6 million agreement fits comfortably within the range of other deceptive pricing cases, such as Fossil, Inc.’s $4.5 million payout, the $5 million Ross Stores agreed to pay and a $6.8 million resolution in a case against The Children’s Place.



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