Over the past few weeks, we’ve posted about a few cases involving pricing claims, including a post discussing a lawsuit over a grocer’s BOGO offers, a post discussing a lawsuit over major retailer’s frequent sales, and a post discussing an NAD challenge over claims that a smaller retailer made about its sales. If those didn’t catch your attention, today’s post about a $197 million settlement should.
In 2020, online retailer Boohoo – whose brands include PrettyLittleThing, NastyGal, and boohooMAN – was hit with a lawsuit alleging that it frequently ran misleading sales. For example, had you been in the market for a pair of pink peach skin pocket flared pants at this time two year ago, you might have been excited to find this pair for $14, which is 67% off the crossed-out price of $42:
California law generally prohibits a company from advertising a “former price,” unless that price was the prevailing market price within a three-month period preceding the ad. According to the plaintiffs, though, the retailer had not sold items at the advertised crossed-out price during that three-month period. Instead, the crossed-out price was allegedly made up to create the illusion of a discount.
As part of the settlement, each class member will receive a gift card to use toward the purchase of any item on the site from which they’d originally made a purchase. In addition, the retailer agreed to conspicuously disclose that the “original” price advertised on a product page is not intended to indicate a former price. The required disclosure reads:
Our percentage off promotions, discounts, or sale markdowns are customarily based on our own opinion of the value of this product, which is not intended to reflect a former price at which this product has sold in the recent past. This amount represents our opinion of the full retail value of this product today based on our own assessment after considering a number of factors.
It’s likely that these types of lawsuits will continue, so retailers need to pay close attention to these cases and to pricing laws, particularly when they advertise discounts, sales, or other price reductions. Everyone likes a sale (and some people like pink peach skin pocket flared pants), but if you aren’t careful about how you structure your sales, your company could end up paying a high price in the end.