Fake sales can cost you

Consumer Reports News: June 22, 2013 10:08 AM

A federal court in California ruled on May 21 that consumers may suffer financial harm if they buy products they're misled to believe are on sale.

The ruling, involving a lawsuit accusing Kohl's department store of running fake sales, underscores why you should be skeptical of advertised price comparisons, especially at stores that continually run sales.

At issue is a 2010 class-action lawsuit by a consumer who said he would not have purchased luggage and clothing at Kohl's that were advertised as having been marked down from 32 to 50 percent had he known that those items routinely were being sold at discounted prices.

Kohl's argued that even if the original prices were misrepresented, the customer didn't suffer a loss because he was able to buy the items at the advertised prices. A lower court agreed, dismissing the case without deciding whether Kohl's had engaged in false advertising.

But in a 21-page decision, the United States Court of Appeals for the Ninth Circuit restored the case, ruling that the customer could claim that he was financially harmed if the "original" prices were indeed bogus and led him to purchase items he would not have otherwise bought.

"Most consumers have, at some point, purchased merchandise that was marketed as being 'on sale' because the proffered discount seemed too good to pass up," says the decision. "Retailers, well aware of consumers' susceptibility to a bargain, therefore have an incentive to lie to their customers by falsely claiming that their products have previously sold at a far higher 'original' price in order to induce customers to purchase merchandise at a purportedly marked-down 'sale' "

The court did not rule on whether Kohl's prices actually were false. That allegation is expected to be decided as the case continues. California and other states have laws prohibiting false advertising. And Federal Trade Commission advertising guidelines say that when merchants inflate prices to create the appearance of a bargain, "the purchaser is not receiving the unusual value he expects."

Consumer Reports' look at Kohl's pricing
Last year, we compared prices of more than a dozen home and kitchen products "on sale" at Kohl's with prices at a handful of online retailers. We easily were able to beat Kohl's deals. For example, a KitchenAid Professional 600 Series mixer on sale at Kohl's for $489.99 was available at Amazon.com for $399.99 and as low as $320 elsewhere. Even the manufacturer's website was selling it for $40 less than Kohl's, whose advertised "regular" price was $549.99.

Concerns about Kohl's sales are not new. In 2003, Edgar Dworsky, the former Massachusetts assistant attorney general who now runs MousePrint.org, a consumer website that reports on fine-print gotchas, followed Kohl's prices on 20 items for 103 consecutive days. He reported that the products were on sale an average of 86 percent of the time and that one out of four items was never offered at the regular or original price. "Looks like little has changed," Dworsky wrote on MousePint.org in reacting to the California decision.

We've seen similar issues with merchant references to manufacturer list prices. For example, while researching a recent story about buying prescription eyeglasses, we found several instances in which eyeglass websites gave different list prices for the exact same frames. We found other cases in 2011, including one website showing an $86 list price for Hewlett-Packett Deskjet 3000 printer with an actual MSRP of $69.99. The site's $66.99 price, purported to be a $19 savings, was in fact a reduction of only $3 off the list price.

Don't be blinded by the sea of "sales" signs you'll see in some stores. And forget references to list price, MSRP, street price, retail price, or a retailer's "regular" or "original" price. Instead, comparison shop to find the best price before buying. Use an Internet search with the exact product name and model number so you're sure you're comparing the same item.

Anthony Giorgianni

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