Factory Outlet Prices Class Action Investigation

This class action investigation focuses on pricing practices at factory outlet or discount retail  stores in California, where state consumer laws provide protections against merchandisers using alleged prior high false or “fake” prices on item labels.

Who is Affected?

Consumers who purchased goods at certain discount retail or factory outlet stores in California may have acquired items with fraudulent previous price labeling that violates state pricing and advertising laws.

Overview of False Pricing Investigation

A recent court opinion (Case No. 11-55793, U.S. Court of Appeals for the Ninth Circuit) described the pervasiveness of the conduct under investigation as follows:

Most consumers have, at some point, purchased merchandise that was marketed as being “on sale” because the proffered discount seemed too good to pass up. Retailers, well aware of consumers’ susceptibility to a bargain, therefore have an incentive to lie to their customers by falsely claiming that their products have previously sold at a far higher “original” price in order to induce customers to purchase merchandise at a purportedly marked-down “sale” price.

California’s Fair Advertising Law provides:

No price shall be advertised as a former price of any advertised thing, unless the alleged former price was the prevailing market price. . . within three months next immediately preceding the publication of the advertisement or unless the date when the alleged former price did prevail is clearly, exactly and conspicuously stated in the advertisement. Cal. Bus. & Prof. Code § 17501

Additionally, California’s Consumer Legal Remedies Act provides a second, overlapping prohibition on advertising non-existent sales specifically forbidding  “[m]aking false or misleading statements of fact concerning reasons for, existence of, or amounts of price reductions.” Cal. Civil Code § 1770(a)(13)

Complicating the issues under review is the common practice of retailers to offer lower quality product lines, referred to in the industry as “made-for-outlets” or “made-for-factories,” in their outlet stores.  These goods are generally coded to refer to items made with materials that are inferior to the quality of the products the retailer stocks in the non-outlet locations.

Outlet stores currently being investigated include:

  • Kenneth Cole Outlet Store
  • Levi’s Outlet Store
  • Disney Outlet Store
  • Coach Factory Store
  • Guess Factory Store
  • Michael Kors Factory Store
  • Neiman Marcus Last Call
  • Nordstrom Rack
  • Polo Ralph Lauren Factory Store
  • Saks Off Fifth
  • Barney’s New York Outlet
  • Bloomingdales Outlet
  • Colombia Outlet
  • DSW Designer Shoe Warehouse
  • Theory Outlet

Consumers who purchased items at various California outlet stores and other discount retailers where advertising and/or labeling indicated the product was on sale by using a fictitious “original” price may have a claim against the merchandiser.






Article Type: Investigation
Topic: News
No case events.
Tags: Deceptive Advertising, Deceptive Discount Offers, Deceptive Labels