The FTC is backing off its lawsuit against JCPenney and Macy’s for allegedly misleading consumers about the benefits of their money-back guarantee. The companies are settling out of court, as a result, admitting no wrongdoing.,
Macy’s, JCPenney, and Kohl’s are being sued by a group of consumers who allege that the retailers duped them into buying counterfeit goods. The lawsuit alleges that Macy’s sold fake Gucci handbags and JCPenney sold fake Louis Vuitton bags.
“If anything sounds too good to be true, it generally is,” as the saying goes.
According to the claims, these department shops posted fake “original pricing” on merchandise in order to give fraudulent discounts.
The city of Los Angeles has filed various lawsuits against JCPenney, Macy’s, Kohl’s, and Sears, saying that the department shops posted bogus “original pricing” on items so that they could cut them and entice consumers with fraudulent discounts.
Kohl’s, for example, had a strapless dress with a “original price” of $50, which went on sale for $35, then $15. The outfit was never sold for $50, according to the complaint.
False reference pricing is a misleading strategy used by businesses because it works. Other purported instances referenced in the complaints include:
- Macy’s allegedly sold a men’s V-neck t-shirt for $19.99, down from a list price of $29.50, which the product was never sold for.
- A Kenmore front-loading washing machine was offered at Sears for $999.99, over $200 less than the “list price” of $1,179.99. The washer was never sold at that amount, and was eventually sold for as little as $650.
- A pregnancy bathing suit top was advertised at JC Penney for $15 off its original price of $46. After then, the price went from $31 to $22, then to $15, less than one-third of the “original price.” One issue: the top is said to have never been sold for $46.
“Customers have the right to be given the truth about the costs they’re paying—and to know whether a deal is really a bargain,” said City Attorney Mike Feuer in a statement.
Unfortunately, it’s more difficult than ever to tell the difference between genuine and fake bargains.
Accountability for Retailers
Stores in brick-and-mortar locations are desperate for sales.
This isn’t the first time these businesses have been sued for deceiving customers. JCPenney and Kohl’s both faced identical accusations in 2015, and both settled for large sums: JCPenney’s complaint was resolved for $50 million, while Kohl’s’ claims were settled for $6 million.
“There is no regular-priced product, particularly at shops like Sears, Kohl’s, or TJ Maxx,” says Ron Friedman, a retail specialist in Los Angeles, to the Los Angeles Times. It’s all about the selling price in this category.”
According to Mr. Friedman, brick-and-mortar businesses are trying to compete with online merchants, so they depend largely on incredible prices and specials to entice people away from Amazon, Wayfair, and Overstock.
According to TruthInAdvertising.org, 24 such cases were brought against shops such as Macy’s, J. Crew, Gymboree, Ann Taylor, and Ralph Lauren in the first half of 2016. (There were 25 similar suits in all in 2015.)
False reference pricing isn’t restricted to brick-and-mortar retailers, as everyone who purchases online knows.
Amazon is starting to phase out list prices.
Almost every product on Amazon seems to be (or was) on sale, with discounts ranging from 75% to hundreds of dollars off the “list price.” What gives that this is possible? Because, much like the “original pricing” at JCPenney and Kohl’s, the item was often never sold with such a large price tag.
Nothing is ever on sale if everything is constantly on sale.
Amazon began phasing down its list prices early this year in response to concerns over its pricing—and maybe to prevent the wave of lawsuits plaguing other firms. Many, if not all, goods now just state “Price” instead of “List Price.” This is most likely (ideally) a more accurate depiction of the product’s price.
Of course, there are still bargains on Amazon. However, since list prices are gradually being phased out, we may not witness the omnipresent, amazing reductions to which we’ve become accustomed—and, maybe, desensitized. According to Bonnie Patten, executive director of TruthInAdvertising, if everything is constantly on sale, then nothing is ever on sale.
Customers may now check whether the price of an item has reduced after it was added to their Amazon Wish Lists, rather than focusing on reductions from original or list pricing. This is an ingenious method for Amazon to have its cake and eat it too: it has figured out how to offer constant “deals” without fooling customers.
If only JCPenney, Macy’s, Sears, and Kohl’s were able to follow suit.