News

High-low pricing method gets slammed in court ruling

May 24, 2013

Following a recent ruling in California's 9th Circuit Court of Appeals, retailers following a high-low pricing method (think JC Penney, Kohl's) could be in violation of the law.

According to an article on consumerist.com, a suit against Kohl's alleging it had violated California's Unfair Competition Law and Fair Advertising Law was originally dismissed in 2010, but the decision was reversed this week in the court of appeals.

In its ruling, the panel cited the following from the state's Fair Advertising Law, according to the article:

No price shall be advertised as a 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 this advertisement.

The court's ruling contained the following:

"The district court's 'composition, effects, origin, and substance' test ignores the fact that, to other consumers, a product's 'regular' or 'original' price matters; it provides important information about the product's worth and the prestige that ownership of the product conveys...

"Misrepresentation about a product's 'normal' price is, therefore, significant to many consumers in the same way as a false product label would be... That, of course, is why retailers like Kohl's have an incentive to advertise false 'sales.'... In fact, the deceived bargain hunter suffers a more obvious economic injury as a result of false advertising than the Kwikset consumer who was duped into buying foreign-made goods, because the bargain-hunger's expectations about the product he just purchased is precisely that it has a higher perceived value and therefore a higher resale value."

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