How many times have you seen former price information that makes the “discounted” present sales price seem like a real deal? Ever wonder whether those former prices were phony?
The California Second Appellate District has handed consumers a weapon to fight back against fake former price information discount claims. In Hansen v. Newegg.com Americas Inc. the Court held that a plaintiff who makes a purchase in reliance on advertisements containing “fictitious former price information” — and who would not have made the purchase absent the misrepresentation — has standing to pursue false advertising claims under California’s unfair competition and false advertising laws.
In Hansen the Plaintiff alleged that the purported “list price” for various products, which Newegg “displayed in gray, struck-through typeface (e.g. ‘$2099.99’),” was misleading because it was not the “prevailing market price” charged by Newegg in the normal course of business. He also claimed he relied on the false price information in making two purchases from Newegg’s website and that he would not have purchased the items had he known the true nature for former price information and discount figures.
Newegg demurred to the Complaint and claimed Plaintiff had not suffered economic injury sufficient to establish standing as he still received the benefit of his bargain at the price he agreed to pay and had not alleged that the products were different from what he wanted or were in anyway unsatisfactory. The trial court concluded that Plaintiff had not suffered any economic loss due to the advertising and had received the exact product that he had ordered. Therefore, it sustained the demurrer. Plaintiff then appealed.
The Appellate Court concluded that the Plaintiff did have standing under California unfair competition and false advertising laws to continue to pursue his claim against Newegg since those laws restrict use of advertisements that tout the “former price of a product” and prohibit false or misleading statements concerning “price reductions.” The Court also sided with the Plaintiff on the issue of economic injury. The Court concluded all plaintiff had to allege was he or she relied on fictitious former price information in making a purchase and would not have made the purchase but for the misrepresentation, in order to have standing to bring an action under the unfair competition and false advertising laws against Newegg.
The Hansen decision is notable because it rejected a more restrictive interpretation of standing requirements that would have effectively insulated companies from false advertising claims based on deceptive former price or discount information. If your company offers discounts off prior prices it would be prudent to check with your attorney before you decide to tout a former price to lead a consumer to believe he or she is getting a discount.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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