United States: Everything's On Sale (Or Is It?): Lessons For Retailers Looking To Avoid Class Action Lawsuits

Jon G. Shepherd is a Partner in our Dallas office and Brian J. Goodrich is an Associate in our Washington DC office.

Almost every company selling consumer products has a sale on something at some point. And some companies offer everyday low pricing or a variant of that practice. But other companies market – or at least seem to market – their products using a perpetual sale price, either substantially discounting their prices or advertising buy one, get one free and similar offers. Many companies use "compare at" slogans to demonstrate how much of a bargain the consumer is getting. Without taking proper precautions, however, companies falling into the latter groups could be subject to consumer claims for false advertising, unfair competition, and the like.

Plaintiffs' success in these types of false advertising claims has varied in different jurisdictions. Plaintiffs' success in these lawsuits has depended to a certain extent on states' prevailing standing doctrine and the strength of their consumer protection regime. Some plaintiffs have struggled to show that any harm occurred, as, according to some, the consumer receive the benefit of their bargain. California, however, recently accepted the theory that a plaintiff may be able to demonstrate standing if they successfully argue that they would not have bought the item but for the sale and the seemingly irresistible bargain and value they were receiving. While that result may have been a product of the robust consumer protection regime in California to a certain extent, retailers should be wary that other jurisdictions may follow suit. 

Increase in Legal Challenges to Retailers' Pricing Policies

There has been an increasing number of lawsuits challenging large retailers' pricing policies. Several large retailers, such as Jos. A. Banks Clothiers, are currently enmeshed in class action litigation in California concerning sale-price misrepresentation issues. Other companies, including Kate Spade & Co., Overstock.com, Neiman Marcus Group Ltd LLC, and The Gap, Inc., have been sued based on allegations that their compare to or compare at price advertisements are unlawful. At least one retailer chose to settle outside of court over allegations that the retailer held items out as marked down from an original price that was never, in fact, charged.   

California is a particularly favorable jurisdiction for such claims because its False Advertising Law, which is expressly incorporated into its Unfair Competition Law, contains a specific prohibition against advertising a price as a former price of any advertised thing if the retailer actually was not charging that former price. More specifically, California's False Advertising Law (FAL) states:

No price shall be advertised as the former price of any advertised thing unless the alleged former price was the prevailing market price ... within three months next immediately preceding the publication of the advertisement or unless the date when the alleged former price did prevail is clearly, exactly and conspicuously stated in the advertisement.

California does not stand alone.  Similar claims have been pursued with varying levels of success in other jurisdictions, including Illinois (Jos. A. Banks, Omaha Steaks) and New York (Michael Kors).

Other states, such as Texas, are less hospitable to these types of claims. Retailers operating in Texas have one advantage that California retailers do not: Texas does not contain an analog to California's FAL. That does not mean there is clear sailing for Texas retailers, however, because both California and Texas, as well as many other states, prohibit making false or misleading statements of fact concerning the reasons for, existence of, or amount of price reductions. Non-California retailers also need to remain cognizant of the statutory prohibitions against unconscionable conduct and common law misrepresentation claims. The Federal Trade Commission also has the power to pursue false or misleading price comparison advertising.

Options for Retailer Defendants

Of course, that consumers can file lawsuits does not mean that those lawsuits will be successful. Some false advertising claims have failed because the plaintiff did not adequately plead at the complaint stage or prove at the summary judgment stage actual damages. Typically, a retailer will argue that because the inherent value of the product is the same whether or not the original price represented by the retailer was accurate, the purchaser suffered no economic harm because the consumer obtained the product she expected at the price she expected to, and did, pay. Put slightly differently, the retailer argues that no harm exists because the purchaser obtained the benefit of his bargain: the retailer offered a product for sale at a certain price and the purchaser paid that price and received the product. Indeed, the retailer could argue that the actual value of the product exceeded the price the consumer paid. Although these arguments have been rejected in California, other jurisdictions appear more receptive to them. 

Additionally, while not all courts agree that advertising practices such as perpetual markdowns or "compare at" prices harm consumers that buy the advertised products, courts do agree that reliance on those advertisements is required for a plaintiff to allege harm.  Retailers may be able to defeat plaintiffs' claims if they can show that either the consumer did not prove they were personally deceived, or that the consumer did not understand "compare at" to refer to the price the item was previously sold at.

Additionally, given that these claims typically are brought as class actions, a retailer can defeat class certification by demonstrating common questions do not predominate given that, among other things, (1) the alleged misrepresentation was not made to or seen by all class members, (2) different advertisements were used (i.e., prices changed) during the proposed class period, (3) reliance issues would preclude class certification, and the like. Of course, the retailer always can demonstrate that the ad was truthful and fully complied with all legal requirements.

Lessons for Retailers

As the Ninth Circuit said in Hinojos, price advertisements matter.1 This principle is belied by the increase in false advertising litigation over the past few years involving markdowns and price comparison sales techniques. Kate Spade & Co. became the most recent target of a deceptive advertising lawsuit in November 2015; the retailer was hit with a proposed class action in the Northern District of California alleging violations of both the California FAL and Texas Deceptive Trade Practices Act.

Retailers need to remain cautious of using one-size-fits-all advertisements as what may be perfectly acceptable in Texas could subject the retailer to a class action seeking treble damages in California (and elsewhere). Retailers should carefully review their price advertising to ensure that they have selected appropriate language, such as compare to MSRP or compare similar or previously priced at and the like. Retailers that offer products at sale or reduced prices should ensure that they first sell those products at the regular or original price for a period of time prior to commencing the markdowns. Retailers that use compared to price advertisements should ensure that they have valid support for the chosen compared to price they select. Retailers should periodically review their price advertising to ensure continued compliance with the relevant laws and adjust their prices or advertisements as necessary. And finally, retailers should retain the information supporting their selected prices for at least as long as the statute of limitations applicable to each advertisement.


1. Hinojos v. Kohl's Corp., 718 F.3d 1098, 1107 (9th Cir. 2013). 

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Fox Rothschild LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Fox Rothschild LLP
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions