Franchise Group Website False Reference Pricing Class Action

Franchise Group, Inc. sells things like furniture, mattresses, and appliances on its website, americanfreight.com. But the complaint for this class action alleges that the company uses false reference pricing to make consumers think they are getting a bargain—that is, the complaint alleges that the company invents false “original” prices for goods, making consumers think they have a higher value, then offers a lower price as a “discount.”

The class for this action is all persons who, within the applicable statutory period of time, bought from Franchise Group’s e-commerce website americanfreight.com one or more products at discounts against an advertised reference price and who have not received a refund or credit for their purchases.

The complaint describes false reference pricing this way: “False reference pricing occurs when a seller fabricates a false ‘original’ price for a product and then offers that product at a substantially lower price under the guise of a sale.” The false original price makes consumers think the item is worth more than it is and induces them to buy the item at the lower price. These fake discounts are sometimes called phantom discounts.

The complaint alleges that both federal and California law forbid advertising goods at discounts from false original prices. “Under California law,” the complaint alleges, “a seller may only discount an item from its own original price for up to 90 days; or in the alternative, a seller may offer a discount from the original price of an item being offered by a competitor … for up to 90 days.”

Similarly, under the Federal Trade Commission Act (FTCA), the complaint alleges, when a seller offers a discount from its own, former original price, the original price is required to have been a price at which the seller held that item out for sale on a regular basis, for a commercially reasonable period of time.”

In this case, the complaint claims, the company lists products with a higher, “original” price with a strikethrough and a lower “sale” price, and may even specify, “You Save $___,” with the difference between the two prices. The complaint asserts that the company is deceiving consumers because the items were never sold at the original price and so are not actually discounted.

The complaint claims, “The only plausible explanation for [the company’s] above illustrated practice is to drive sales, artificially inflate the perceived value of its products, and, as a result, artificially inflate the price at which consumers are willing to buy its products.”

Article Type: Lawsuit
Topic: Consumer
Tags: Deceptive Advertising, Deceptive Discount Offers, Deceptive Labels, False Reference Pricing