May 27, 2013
Previously published on May 23, 2013
The FTC Guides Against Deceptive Pricing and the false advertising laws of every state prohibit false claims of savings from original or regular price. A decision just issued by the Ninth Circuit Court of Appeals should serve as a reminder that retailers may face consumer class actions based on such claims. In Hinojos v. Kohl’s Corporation, a putative class action filed in the Central District of California in 2010, the plaintiff alleged that he purchased several items from Kohl’s that were advertised as being substantially reduced from their “original” or “regular” prices but that were routinely sold by Kohl’s at the advertised “sale” prices. For example, Hinojos purchased luggage that was advertised as 50% off its “original” price of $299.99 and shirts that showed a mark down of 39% from their “original” price of $36.00. He further alleged that the advertised “original” or “regular” prices did not reflect the prevailing retail market prices during the three months immediately preceding the publication of the advertisements in violation of California’s price advertising law. In 2011, the district court dismissed the complaint, finding that no economic injury was alleged because the consumer did not pay more for the products than he otherwise would have. This week, the Ninth Circuit issued a decision reversing the district court’s dismissal of the case. The Ninth Circuit found that Hinojos had properly alleged that he had suffered an economic injury and that the district court’s ruling was inconsistent with the authority established in the 2011 Kwikset case decided by the California Supreme Court. The Ninth Circuit stated that a consumer has standing to sue under California consumer protection laws when the consumer alleges that he would have not made the purchase but for the misrepresentation. The definitions of “original” and “regular” price vary widely from state to state with some states having exacting requirements. The Hinojos case is an example of the increase in class actions and regulatory activity focused on sale price advertising practices. As the Ninth Circuit succinctly put it, “price advertisements matter.”
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