Most consumers like a bargain. Businesses understand that people are more likely to respond to advertisements for products and services that are “on sale.” However, please be aware that, according to California advertising law, the promotional sale price must actually reflect a discount from the original price. This means that the particular item must have been readily available for purchase at the original price before the company advertised the reduced “on sale” price to consumers. California has an array of advertising regulations that offer a variety of consumer protections. Companies seeking to attract new California State customers by advertising a “sale” must be sure to follow its false advertising laws, as well as other marketing regulations.
Specific Requirements Under California’s False Advertising Law
When marketing products in California, companies need to comply with the State’s General Business Regulations. Within these regulations is a provision titled, “False Advertising in General,” also designated as Section 17501. The law is clear that, “[n]o price shall be advertised as a former price of any advertised thing, unless the alleged former price was the prevailing market price as above defined 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.” Simply stated, to be “on sale,” the subject item must have had a higher former price within the last three months. This means that if an item is always on sale, then the seller is engaging in false advertising under California law.
California Lawsuit Alleges Violations of False Advertising Law
Plaintiffs recently filed a class action lawsuit in the Southern District of California against JCPenney for allegedly engaging in “false reference pricing.” Specifically, in Carranza vs. Old Copper Company, Inc. f/k/a J. C. Penney Company, Inc., et al, (“Defendants”), Plaintiffs claimed that Defendants engaged in the deceptive business practice of advertising fictitious “original” prices and corresponding phantom discounts on their website. Plaintiffs argued that Defendants never sold the advertised products at the original referenced price. In addition to multiple California State advertising law violations, Plaintiffs also alleged infringement of the Federal Trade Commission Act (“FTC Act”). The FTC Act provides that when a seller offers a discount from its former original price, the original price is required to have been a price at which the seller actually held that item out for sale for a reasonably substantial period of time. Therefore, not only is false reference pricing illegal under California State law, but it is prohibited under federal law as well.
Compliance with California’s False Advertising Law is Essential
Businesses operating in California are required to comply with various advertising laws and regulations. Notably, companies must be sure to list “sale” items in a manner that complies with applicable regulations. Not only could would-be plaintiffs file individual or class action lawsuits, but regulators may also get involved. One of the best ways to ensure regulatory compliance and to avoid unwelcomed attention is to work with an experienced advertising attorney.
If you need assistance with reviewing your marketing practices to ensure compliance with state and federal laws, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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