The Judgment is In: Overstock.com Comes Up Empty

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dollar_sign1As we previously reported, the online merchant Overstock.com, Inc.  (“Overstock”) was sued several years ago in the Superior Court of the State of California by district attorneys from numerous California counties.  On January 3, 2014, the Court issued a tentative ruling and proposed statement of decision, finding that Overstock made untrue and misleading comparative advertising claims in connection with the pricing of its products.  On February 19, 2014, Judgment was entered: Overstock had violated California law to the tune of $6.8 million because its advertised reference prices (“ARPs”) in all of their various names and forms (i.e, “list price,” “compare at,” or “compare”) were false or misleading.

In addition to ordering Overstock to pay civil penalties in the amount of $6,828,000, the Court awarded the Plaintiff its costs and fees that were incurred over the course of the lengthy litigation.  The Court further issued a multi-pronged five year injunction against Overstock and each of its agents, employees and basically anyone acting on behalf of, or in concert with, Overstock.   Each term of the injunction essentially issues rules relating to Overstock’s ARPs (i.e., prohibiting advertising an ARP unless Overstock first verifies that the reference price complies with the Court’s order by taking a screen shot of the product offering and currently advertised price from the third party website that is relied upon to set the ARP).

The Court recognized that the nine separate terms of the injunction were significant and provided Overstock with sixty days to implement them.

Protect Yourself

This significant judgment may lead state and federal regulators to further scrutinize the practices of online retailers who use comparative advertising.  It is therefore critical for retailers and advertisers to conservatively navigate various state and federal laws concerning truth in advertising.  Businesses that advertise comparative online shopping should be cautious about the prices and/or formulae used for such advertising.

If you are interested in learning more about this topic, or if you have been served with legal process relating to deceptive advertising, 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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