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Investigations

Consumers Misled by Deceptive Pricing and Price Anchoring

75% Discount from Original Prices?  How Retailers Use Deceptive Pricing to Trick You 

It’s the holiday season and we’re all rushing to get our shopping done.  Everywhere we turn retailers are offering huge discounts in stores, online, via radio and television, and direct telephone calls to potential customers.  But let the buyer beware, a big discount is not always what it seems.  Many retailers dramatically inflate the suggested retail price of products in order to then advertise huge discounts.  This deceptive pricing is routinely practiced by retailers offering sales, free items, and a percentage off.  It doesn’t just happen during the holidays either, but all year long.

A number of class actions have recently been filed against retailers challenging the practice of  “price anchoring,” a deceptive pricing practice in which discounted prices are compared to allegedly inflated “original prices,” “former prices,” or “regular prices.”  The actions claim that the practice is deceptive because the stated original prices are outrageously inflated to make buyers believe they are getting a good deal.  However, the stores named in the deceptive pricing suits never actually offered the discounted items at the alleged original price.  As an example, the average reasonable consumer may not be tempted to buy a $50 sweater.  But if that sweater comes with a tag indicating it is a 75% discount from the original price, that same buyer often perceives a “good value,” and will purchase the item even though the so-called original price was, well, a lie.  According to the deceptive pricing actions, the retailers are unjustly enriched by the revenues and profits they would not have otherwise earned absent false, misleading and deceptive conduct.

This false “former price” advertising scheme has been going on for years, and authorities and consumers are finally beginning to take notice.  In January 2014, the Federal Trade Commission was persuaded to investigate these deceptive pricing practices when four senators wrote to FTC Chairwoman Edith Ramirez setting forth details of price anchoring at outlet stores and requested the investigation into “deceptive reference pricing.”

To some, the impact on each individual consumer from this practice  might seem minor, but the benefit to consumers as a whole in stopping this practice is very large.  Retailers are being enriched through their deceptive pricing practices with millions of dollars in unjust profits.  Consumers are bringing these cases not only to be compensated but also to stop these unlawful activities.

To date, class action suits have been filed against Kohls, Burlington Coat Factory, The TJX Companies (T.J. Maxx and Marshalls), Sears Roebuck & Co., Columbia Sportswear Co., Saks Inc., Jos. A. Bank Clothiers, Inc., and DSW Inc alleging deceptive pricing practices.  Most of these cases have been brought in California.

If you believe that you purchased an item based on a false representation regarding the item’s original price, or price anchoring, please contact a GSP attorney to learn more about your rights. Please contact Mark Goldman at goldman@lawgsp.com or Paul Scarlato at scarlato@lawgsp.com or call (484) 342-0700 with any questions you may have.

 

In our legal system, every person is innocent until and unless found guilty by a court of law or a tribunal. Whenever we reference “allegations” or charges that are “alleged,” such allegations or charges have not been proven, and are merely accusations, not findings of fault, as of the date of the blog. We do not have, nor do we undertake, a duty to continue to monitor or follow cases about which we report, and/or to publish subsequent updates regarding various developments that may occur in such cases. Readers are encouraged to conduct their own research regarding any such cases and any developments that may or may not have occurred in such cases. Also, the brokercheck report linked to some of our blogs is the up-to-date version as of the date of posting. Visitors may check the most recent version of each brokercheck report at www.finra.org.

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