United States: The Price Is Not Right: Class Action Risks Of Comparative Price Advertising

Last Updated: May 25 2017
Article by C. Brandon Wisoff


"Was that retail 'bargain' you received really a bargain?" That is the question being asked by a recent spate of lawsuits filed against prominent retailers. Most of these actions have been brought as private party class actions, but price discount claims have also attracted renewed regulatory attention in recent years. The facts and circumstances of these cases have varied. Some actions have challenged as false a retailer's assertion that a product is "on sale" or has been "discounted" from the retailer's former or regular price. Others have challenged a retailer's supposedly favorable price comparisons to prices of a competitor's same products or to prices of other "similar" products that are not actually of like grade and quality. Still others have challenged a retailer's supposed "discount" from a list price or MSRP at which the product has never sold. Despite these differences, the gravamen of the claim in each instance is typically the same: the retailer is allegedly misleading consumers into believing they are receiving a bargain when they are in fact paying the price at which the product normally sells.

While the majority of these cases have been brought in California (with the benefit of California's liberal consumer protection laws), cases are appearing nationwide and the publicity surrounding them suggests their numbers will only grow. That is especially true given the proliferation of internet price searching tools and the resulting pressure that retailers feel to compete on price and to respond to "bargains" being offered by their competitors. The risk to retailer clients is substantial: some of these claims have resulted in multimillion dollar settlements and/or regulatory fines. Even where cases are terminated early, defense costs can be significant.

In this article, I first summarize the historical background and legal bases of these "false discounting" claims. I review how the FTC, which had developed deceptive pricing guides and then vigorously pursued such claims in the 1960's, had – most likely for policy reasons – all but abandoned enforcement actions related to pricing by the 1980's. I also mention generally various state law deceptive pricing provisions, most of which derive from the FTC model. I nextdiscuss the recent resurgence of these claims over the last few years, primarily via private class actions, but also by regulatory (primarily state regulatory) enforcement actions. After summarizing some of the cases and their outcomes, I conclude by suggesting a few measures that retailers can take to mitigate the risks.

FTC Guides Against Deceptive Pricing

The FTC developed "guides" against deceptive pricing in the late 1950's and subsequently amended them throughout the 1960's; the current guides still date back to 1967.1 The guides do not have the force of law; they instead "provide the basis for voluntary and simultaneous abandonment of unlawful practices by members of industry." 16 C.F.R. § 1.5. However, "[f]ailure to comply with the guides may result in corrective action by the Commission under applicable statutory provisions." Id. Under Section 5 of the FTC Act, the Commission has authority to prevent "unfair or deceptive acts or practices in or affecting commerce" which are broadly declared as being "unlawful." 15 U.S.C. § 45. As discussed more fully herein, while there is no private right of action under Section 5 of the FTC Act, many state statutes addressing deceptive trade practices and unfair competition contain restrictions similar to those in the FTC guides. In addition, the guides are often cited in private litigation as setting the norms that should be enforced under state consumer protection law. The guides are thus a critical starting point for analyzing the bona fides of an advertiser's pricing claims.

The guides specifically address several forms of pricing claims relevant here, including (1) "former price comparisons," i.e. claimed discounts from an advertiser's own normal price, 16 C.F.R. § 233.1, (2) "retail price" or "comparable value" comparisons, i.e., claimed discounts from what others in the locale are selling the same or similar product, id. § 233.2, and (3) claimed discounts from a list price or MSRP, id. § 233.3. The guides note, however, that "[t]he practices covered in the provisions . . . represent [only] the most frequently employed forms of bargain advertising," and warn that "there are many variations which appear from time to time and which are, in the main, controlled by the same general principles." Id. § 233.5 (emphasis added).

The FTC guides expressly address and provide commentary with examples concerning "former price comparisons," which are described as "[o]ne of the most commonly used forms of bargain advertising," i.e., the "offer of a reduction from the advertiser's own former price for an article." 16 C.F. R. § 233.1(a). While it is certainly risky to claim a discount from a former price at which substantial sales were not actually made, the guides note that "[a] former price is not necessarily fictitious merely because no sales at the advertised price were made." Id. § 233.1(b) They warn, however, that in such cases the advertiser "should be especially careful . . . that the price is one at which the product was openly and actively offered for sale, for a reasonably substantial period of time, in the recent, regular course of his business, honestly and in good faith – and, of course, not for the purpose of establishing a fictitious higher price on which a deceptive comparison might be based." Id. Each factor is important: thus, comparisons to prices that were not openly offered in the recent past for a reasonable period of time in the ordinary course of business are suspect. Id. § 233.1 (d). The guides also warn that comparisons to former prices may be scrutinized regardless of whether the advertisement expressly uses such words as "Regularly," "Usually," or "Formerly" to describe the former price. Id. § 233.1 (e). They also caution against misleading discount claims concerning trivial reductions, such as advertising that an item has been "' Reduced to $9.99,' when the former price was $10." Id.

The guides also expressly address "retail price comparisons" and "comparable value comparisons." Id. §233.2. A "retail price comparison" is where an advertiser "offer[s] goods at prices [claimed to be] lower than those being charged by others for the same merchandise in the advertiser's trade area." Id. § 233.2(a) (emphasis added). A "comparable value comparison" is "[a] closely related" claim where an advertiser "offer[s] a reduction from the prices being charged either by the advertiser or by others in the advertiser's trade area for other merchandise of like grade and quality." Id. § 233.2 (c) (emphasis added). Both types of pricing claims are treated similarly. For "retail price comparisons, the advertiser should "be reasonably certain that the higher price he advertises does not appreciably exceed the price at which substantial sales of the article are being made in the area." Id. § 233.2(a). For "comparable value comparisons," the advertiser should "be reasonably certain, just as in the case of comparisons involving the same merchandise, that the price advertised as being the price of comparable merchandise does not exceed the price at which such merchandise is being offered by representative retail outlets in the area." Id. § 233.2(c). Of course, "comparable value comparisons" carry the additional warning that the other comparable merchandise should "in fact, [be] of essentially similar quality and obtainable in the area." Id.

Finally, the guides expressly address price comparisons to a manufacturer's "list price" or "suggested retail price," i.e., MSRP.2 The guides note that a claimed discount from MSRP can be misleading, reasoning that "only in the rare cases are all sales of an article at the manufacturer's suggested retail or list price." Id. § 233.3(c). They go on to state that "this does not mean that "all list prices are fictitious and all offers of reductions from list, therefore deceptive." Id. § 233.3(d). The guides reason that even if a list price is not the actual price for all sales, it may still be the actual price for many sales "at least in the principal retail outlets which do not conduct their business on a discount basis." Id. The guides thus conclude that an advertised discount from MSRP "will not be deemed fictitious if [the MSRP] is the price at which substantial (that is, not isolated or insignificant) sales are made in the advertiser's trade area . . . ." Id. "Conversely, if the list price is significantly in excess of the highest price at which substantial sales in the trade area are made, there is a clear and serious danger of the consumer being misled by an advertised reduction from this price." Id. In addition to offering a few illustrative examples, the guides do recognize that one "who does business on a large regional or national scale cannot be required to police or investigate in detail the prevailing prices of his articles sold throughout so large a trade area." Id. § 233.3(g). However, they also warn that every advertiser must "in every case act honestly and in good faith in advertising a list price, and not with the intention of establishing a basis, or creating an instrumentality, for a deceptive comparison in any local or other trade area." Id. 233.3(i).

As can be readily seen, the guides talk in general undefined terms like "substantial sales," "reasonably substantial period of time," "recent past," "comparable merchandise," and "good faith." While this flexibility is perhaps needed for regulatory enforcement decisions, use of the guides for standard setting in private litigation has led to much uncertainty, and thus risk.

To view the article in full click here.

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
Frankfurt Kurnit Klein & Selz
Fox Rothschild LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Frankfurt Kurnit Klein & Selz
Fox Rothschild LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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