JCPenney gets slapped with a mega lawsuit
Every retailer knows that the customer loves sales. According to Mark Ellwood, who wrote Bargain Fever: How To Shop In A Discounted World, believes that “we are chemically programmed to respond to sales.”
The problem that arises is whether sale prices are really a discount or not. The Federal Trade Commission (FTC) and each state has laws to prevent retailers from misleading deals.
U.S. District Judge Fernando Olguin certified a class-action lawsuit to go forward against J.C. Penney Company Inc. In Spann v. J.C. Penney Corp et al, U.S. District Court, Central District of California, No. 12-00215, JCP has been accused of marking up prices on their apparel and accessories and then tricking shoppers to buy the items at a discounted price, often considered phantom discounts.
By allowing a class-action lawsuit, the plaintiffs could get more compensation from JCP, which is based out of Plano, Texas.
JCP not the first to be accused of phantom discounts
In the lawsuit, the lead plaintiff purchased three blouses at $17.99 each, which was advertised as a 40 percent discount from the $30 original price. However, Spann learned that the price had not been above $17.99 in the prior three months before the sale.
The FTC guidelines state the regular price has to have been offered to the public on a regular basis for a reasonably substantial period of time. Essentially, the rule is that your business cannot artificially inflate a price to promote a sale.
JCP is not the first retailer to be accused of phantom discounts, as similar lawsuits are pending against Kohls Corp and Jos. A. Bank. None of the retailers are commenting on open lawsuits, but a Jos. A. Bank spokesperson did comment that two similar suits with the same types of allegations were thrown out earlier this year.
Consumers want to see sales, not lies
Price discounting has long been criticized on Black Friday as not really being the deep discounts that are advertised. Often, the actual bargains are “engineered illusions.” The discount is built into the price of the product before it goes on the shelf. The manufacturer sets the list price well above what the product is actually expected to sell for. It’s a competitive market out there.
Retail businesses need to ensure that their organization is following consumer protection laws for your state. Consumers want to see sales, but make sure you meet the rules and don’t offer phantom discounts.