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Ever seen this on an e-commerce website?
“Limited time only!”
“Only 2 left in stock!”
“Sold 10 times in the last hour!
“5 other people are looking at this!”
“In 25 other people’s carts!”
These are common sales tactics that create a (sometimes false) sense of urgency or scarcity. Experts call it “dark patterns,” laymen might call it the “FOMO” technique. How about this?
“Formerly: $59.99 Now: $29.99!”
“Compare at $99.99!”
“MSRP: $15.99 Our Price: $9.99”
“$49.99$29.99”
Strike-through, comparison, MSRP, or reference pricing tactics likewise create the (sometimes false) appearance of a “great deal.”
These sales techniques are commonplace, but retailers now face a rapidly expanding threat of litigation related to false urgency and false reference pricing. Plaintiffs argue that these tactics mislead consumers by falsely creating the impression of substantial savings when no genuine discount or truly limited-time promotion exists.
The Federal Trade Commission’s (FTC) Guides and Trade Practices Rules are the primary benchmarks for evaluating reference pricing conduct. According to the guidelines, any former price used as a comparison must be a “bona fide” price—meaning the product was “openly and actively offered for sale” at that price over a “reasonably substantial period” in the recent, normal course of business. When retailers rely on artificially inflated or non-existent prior prices, consumers may be misled about their savings, rendering such practices potentially deceptive.
Through the lens of these FTC guidelines and leveraging strong consumer protection laws in California and elsewhere, plaintiffs’ attorneys have initiated a growing number of class actions on this basis.
The Rise of Pricing and Promotions Lawsuits
California is at the forefront of reference pricing litigation and imposes some of the most detailed statutory requirements. Under California Business and Professions Code Section 17501, any advertised “former price” must have been the “prevailing market price” within the three months before the ad, unless the retailer clearly states when the previous price was in effect. This makes California a favorite venue for litigants targeting questionable reference pricing claims.
California also has a distinctive damages model: damages are calculated as the difference between what the consumer paid and the actual value of the product received, which usually requires expert testimony about comparable products or market averages. California plaintiffs often also allege a violation of the Consumer Legal Remedies Act, Cal. Civil Code 1750, which prohibits “certain unfair methods of competition and unfair or deceptive acts or practices” in connection with the sales of goods or services, seeking full refunds for all class members. The bottom line? A false pricing class action in California can be pricey to win, and even more costly to lose.
Other state laws pose similar risks. In New Jersey, a former price must have been offered for at least 28 of the preceding 90 days before use in advertising. (However, the state’s courts have held that consumers did not suffer a measurable loss if they received what they purchased, even if the advertised reference price was inaccurate.) District of Columbia Code section 28-3904(f) makes it unlawful to “make misleading representations of fact concerning . . . price reductions, or the price in comparison to. . . one’s own price at a past or future time,” omit material facts, or use ambiguity to mislead a reasonable consumer “whether or not any consumer is in fact misled.”
In other states, plaintiffs rely on general consumer protection laws that prohibit false or deceptive advertising. For example, New York’s General Business Law Sections 349 and 350 do not specify standards for “former prices” but have nonetheless been used to bring class actions based on misleading pricing claims similar to those in California.
Deceptive pricing disputes are expected to persist; class action plaintiffs’ firms such as Pacific Trial Attorneys (Scott Ferrell), Lynch Carpenter, Tauler Smith, Jennings & Earley, Crosner Legal, and Milberg are filing new pricing class actions every day. Many settle early on to avoid the cost of litigation, leaving theories of liability and damages relatively untested.
Key Takeaways
To mitigate risks, retailers must evaluate their pricing and advertising practices to ensure:
- “Struck through” or other reference prices indicate a genuine prior price offered for a meaningful period within recent months, per state law.
- Product pages clearly specify whether prices are based on past sales or listings.
- Prices are not artificially inflated prior to a sale to create a higher differential against the sale price.
- Marketing emails include a clear subject line that indicates the contents, do not come from a “spoofed” email address, and contain accurate and fully transparent information regarding reference prices.
- Limited-time discounts are truly limited.
- Pricing histories are accurately documented and maintained.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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