The FTC and most states have long had Guides or laws on their books regulating pricing claims. While there are slight differences, they all share the basic principle that it can be misleading to claim that something is on sale if it’s on sale a lot or you sell a significant amount of the product over time at the sale and not the regular price. Recognizing that low prices are good for consumers and that these rules could be used to chill discounters, the FTC has not brought a deceptive pricing case in over 30 years. Further, these laws seem counterproductive to many, including us, as they can deter price competition and result in consumer harm rather than protection. In other words, most consumers have never seen a sale they did not love, love, love and would rather pay less for a product or service on any given day rather than more. That said, our view is not always in line with enforcement priorities. Some states occasionally bring sale pricing cases, for example, the NY AG has gone after several department stores and a men’s clothing retailer a few years back.
Private plaintiffs have tried to evoke these pricing laws occasionally, as well, but often find significant hurdles as their burdens are typically higher than those faced by a state AG. In Kim v. Carters, Inc., the Seventh Circuit recently provided guidance to private plaintiffs on what “actual damages” means under the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505. In the case, plaintiffs brought a claim under the Illinois consumer protection laws against a retailer selling kid’s clothing under price tags listing a “Suggested Price,” but at the same time, frequently displaying signs in its stores advertising percent discounts off these suggested prices. For example, a children’s T-shirt will have a suggested price of $16.00 with a “30% off” sign next to the item. The purchaser ultimately pays the sales price of $11.20 at the register. Through these advertised percent-off savings, plaintiffs alleged consumers were led to believe they were receiving a substantial savings. Plaintiffs claimed that these savings were a sham because the “Suggested Prices” are substantially higher than what the garments actually sell for on a regular basis and that this practice amounted to a breach of contract and a deceptive sales practice under 815 ILCS 505/2.
In affirming dismissal for failing to state a claim, the court stated that the plaintiffs sufficiently alleged an ICFA claim because the regulations promulgated under the Act “specifically identify this type of comparison between actual and fictitious ‘suggested retail price[s]’ as an ‘unfair or deceptive act.’” The issue that needed to be decided was whether the plaintiffs suffered actual damages to sustain a private action under the ICFA. When individual consumers bring a private action under the ICFA, actual damages may occur when the seller’s deception deprives the plaintiff of “the benefit of her bargain” by causing her to pay “more than the actual value of the property.” The court concluded that the plaintiffs received the benefit of the bargain in this transaction. The plaintiffs agreed to pay a certain price for kids clothing, which they did not allege to be defective or worth less than what they actually paid. Nor did the plaintiffs allege that , but for the alleged deception, they could have shopped around and obtained a better price. As a result, the plaintiffs did not suffer any actual pecuniary damage. The court further stated that it was not enough that the price comparisons deceived the plaintiffs and induced them to buy the sale clothing. To sustain their private ICFA action, the plaintiffs must sufficiently allege actual pecuniary damage, which the court concluded, the plaintiffs failed to do.
As we have reported earlier, the California courts are struggling with very similar issues and the Kwikset case is currently before the California Supreme Court. Which way the law trends on this critical damage issue bears close watching.
