Reference Pricing Claims Are Once Again Rearing Their Ugly Head
By: John Allaire
Online retailer Boohoo, and its subsidiaries Nasty Gal and PrettyLittleThing, have reached an agreement to distribute gift cards worth $197 million to over 9 million customers worldwide, as part of a settlement reached over alleged claims that the retailer falsely advertised discounts on their website. Customers alleged that the reference prices for certain items were significantly discounted on a near-daily basis through sitewide promotional sales, allegedly misleading them into believing they were actually receiving deep discounts and inducing them to purchase.
The Settlement provides for each Class Member to receive a $10 Gift Card (along with free shipping) to use towards the purchase of any item on the site from which the customer made a purchase. This is not the first time an advertiser has opted to settle class action lawsuits using gift cards instead of paying money damages to consumers, but we don’t often see a gift card settlement of this size and scale. A $197M settlement is likely to re-open the floodgates for these types of alleged deceptive pricing cases after several years of comparatively small settlements.
The particular allegations were that these brands had near daily sitewide %-off promotions, and thus the regular or “reference” prices shown on the website were not real prices that were charged to consumers. When it comes to promotional pricing strategies, transparency, documentation and follow through are key, and this case serves as another important reminder of that.
It is important for advertisers to be transparent about the terms and conditions of any discounts or promotions. Like many retailers, it appears that a key part of Boohoo’s marketing strategy was to convince consumers that they were getting a significantly better deal when they made their purchases. To avoid problems, retailers need to develop and maintain a process to track both the timing that products were offered at the regular/reference price, along with how many days the products have been on sale. And once that policy is set, they need to follow it and keep record of those prices and accompanying timelines, and routinely audit for compliance with the policy.
Our firm regularly counsels retailers of all sizes on ways to navigate this complex labyrinth of state reference pricing laws and helps them develop and maintain compliant strategies that suit their business needs. If you are dealing with any promotional pricing related issues or just have questions, please feel free to contact us. We’ll be happy to help.
(The case is Laura Habberfield et al. v. Boohoo.com Inc. et al., case number 2:22-cv-03899, in the U.S. District Court for the Central District of California.)
Originally published by InfoLawGroup LLP. If you would like to receive regular emails from us, in which we share updates and our take on current legal news, please subscribe to InfoLawGroup’s Insights HERE.