April 25, 2023

The Basis for the Lawsuit for Fake Promotions

Blockbuster class action settlement

On April 10, 2023, plaintiffs in a class action lawsuit filed moved the court to approve a $197 million class action settlement with online fashion retailer Boohoo and its subsidiaries.

The plaintiffs alleged that Boohoo used fake promotions to mislead shoppers.

What is a "reference price" in digital marketing compliance?

Specifically, plaintiffs alleged that Boohoo had advertised almost all of its products based on inflated, “fake” original prices referred to as "reference prices."

The fake reference prices were rarely prior legitimate asking prices; instead, they were fictional prices advertised to create the false impression that consumers were receiving a deep discount.

The FTC provides these examples of fake reference pricing.

• A price that was not used in the regular course of business.
• A price that was used in the recent past but was used in the remote past without disclosing that fact.
• A price that was not openly offered to the public.
• A price that was not maintained for a reasonable time but was immediately reduced.

State laws also have specific rules governing reference pricing.

Takeaway

Recordkeeping is the key to avoiding a fake reference price lawsuit.

Records should show when the reference pricing was introduced, how long the reference pricing was in effect, and when the “sale” or discounted price was offered.