May 21, 2013

Deceptive Reference Pricing Can Include Quality Differences That Relate to Pricing

Typical Deceptive Reference Price

The typical example of deceptive reference pricing involves a fake reference price that a seller discounts to pitch an attractive “sale” price.

The deception is that consumers have the false impression they are getting a deep discount with the “sale” price.

The J. Crew Deceptive Reference Pricing Case

On January 10, 2023, class action plaintiffs filed a lawsuit against retailer J. Crew under the California Consumer Legal Remedies Act, which regulates unfair competition and false advertising.

The complaint alleged that J. Crew used false reference pricing to deceive consumers into believing they were purchasing a product of higher value or quality than was actually the case.

So, in this case, the allegation was that there was not a fake reference  “price."

Instead, the allegation was that J.Crew falsely advertised that its branded clothing sold at discounted prices at its factory outlet stores was a “comparable value” to clothes sold at J. Crew's premium outlets.

What Was the Alleged Deception?

The deception was that consumers falsely believed that the lower price was the bargain rather than what (in fact) was a disguised reduction in quality.

The complaint stated that J. Crew products were not offered at a “fictitious” (or fake) reference price, but that the price comparison was “fabricated” to give the appearance of a bargain for a lower price.

Takeaway

False reference prices are illegal under federal law and most state laws.

The J. Crew case represents a different twist on the traditional claim involving false reference prices.

The different twist is that false reference prices can include not only deceptive pricing, but also deceptive quality differences that relate to pricing.