Everyone likes a good deal — like a new Patagonia shirt at “half price” or an annual “Going out of Business Sale.” Retail stores know that, so they frequently advertise sale prices. Have you ever been suspicious that the so-called sale price was not really any lower than retail?
Kohl’s ‘Sale’ Price
Antonio Hinojos purchased Samsonite luggage, Chaps polo shirts and other items at a Kohl’s department store. The items were advertised from 39 percent to 50 percent off “original” price, but in fact, the sale prices were more or less Kohl’s regular prices.
Hinojos sued Kohl’s, claiming he had lost money due to the false advertisements which induced him to buy a product he would not have otherwise purchased. Think he should win?
Unfair Competition Law
As always, California has a law protecting consumers, in fact several laws as only California can do, including the Unfair Competition Law, the Fair Advertising Law and the Consumer Legal Remedies Act.
All essentially prohibit advertising a product at a sale price if the sale price is the same as the original price — set in the three months preceding the advertised sale price. Got that?
Because lots of plaintiffs with dubious lawyers sued using those false advertising laws when they hadn’t even purchased a product, California voters passed Prop. 64. Prop 64 requires a buyer to actually purchase a product at the “sale” price.
A purchaser is therefore able to show he “lost money or property” as a result of the misleading sale price. Kohl’s used the Prop. 64 language to argue that Hinojos had not lost money or property — he purchased the products he paid for at the advertised price, i.e. he got what he paid for.
‘Made in U.S.A.’
The leading case in this area of the law is called Kwikset, where a purchaser sued arguing he had been misled by the false labeling “Made in U.S.A.” The California Supreme Court ruled for the purchaser concluding he need not prove he “lost money” to prevail.
In the Honojos v. Kohl’s case, the lower federal court ruled for Kohl’s. The case made it to the federal Ninth Circuit Court of Appeals.
The Court of Appeals concluded, “In sum, price advertisements matter . . . we hold that when a consumer purchases merchandise on the basis of false price information, and when the consumer alleges that he would not have made the purchase but for the misrepresentation, he has standing to sue under the Unfair Competition Law, the False Advertising Law and California Legal Remedies Act because he has suffered an economic injury.” The purchaser must buy a product at the “sale” price but he need not prove he actually “lost money.”
I assume these consumer protection laws have language allowing the prevailing party to recover attorney’s fees. Otherwise, no one would ever bring one of these false advertising cases and the laws would be meaningless.
Jim Porter is an attorney with Porter Simon licensed in California and Nevada, with offices in Truckee and Tahoe City, California, and Reno, Nevada. He may be reached at firstname.lastname@example.org or at the firm’s web site www.portersimon.com.