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Overstock.com lawsuit could have 'ripple effect' on retail industry

January 8, 2014

In 2010, a group of attorneys brought suit in California against online retailer Overstock.com, claiming the company's price-comparison methods were misleading. Namely, when a customer shops for an item on the site, he is shown that product's price compared to the same product from a single competitor, and the suit alleges that this gives an inflated impression of how much less expensive the Overstock.com item is. The suit also mentioned that the company's name itself is misleading, since it long ago stopped being all overstock or distressed and discontinued merchandise. 

A tentative ruling this past Friday said the price comparison methods are unfair and violate false advertising laws. Total penalties, if an already-promised appeal from the retailer fails, would be about $6.42 million, according to a report in Wired.

Overstock.com is not pleased, and its attorney said that Judge Wynne Carville is "holding it to a higher standard than other e-commerce sites," with the implication that the ruling could "could cause a ripple effect across the rest of the retail world":

According to Overstock CEO Patrick Byrne, if Overstock complies with the court’s rules, the average discount shown by its price comparisons would drop from about 33 percent to 26 percent. But he believes the ruling is unfair, saying that no other retailer is held to this standard. “No one, in history, has ever been asked to do this or [was] sued for not doing it,” he says.

Both he and Griffin argue that the ruling causes a fundamental shift in the way retailers advertise discounts. And though Overstock could accommodate the court’s ruling fairly easily, they say, it could be very difficult for smaller retailers and brick-and-mortar stores to comply with the complicated price comparison rules laid down in Judge Carvill’s 89-page ruling.

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