Sale Has to Mean Sale

Bargain-hunting consumers scored a big victory Tuesday.  A company that overstates original prices to falsely claim a “sale” discount may be sued by consumers for false advertising, the 9^th U.S. Circuit Court of Appeals ruled.

Judge Stephen Reinhardt led the panel to reinstate a lawsuit against Kohl’s Department Store alleging it lured consumers into buying things they would not have purchased otherwise by labeling as “sale” discounts on items that allegedly were not really cheaper.

Most consumers have been enticed to buy merchandise that was marketed as being “on sale” at a proffered discount that seemed to good to pass up, Reinhardt said.

Retailers know this and have an incentive to lie to customers claiming an original price that is much higher, he said.

That practice is illegal in California.

Antonio Hinojos sued Kohl’s alleging he bought merchandise based on ads that misled him by an allegedly fictitious “original” prices.  He argued he would not have purchased the items otherwise.  The question for the panel was whether he “lost money or property” and thus had standing to sue Kohl’s for deceptive advertising.

Kohl’s argued he did not lose anything because he bought merchandise he wanted at the price that was advertised, even if it wasn’t a “sale” price.

Reinhardt said he did, based on past precedent in the California Supreme Court.

“Misinformation about a product’s ‘normal’ price, is… significant to many consumers in the same way as a false product label would be,” he wrote.  “It is also why the California legislature has prohibited them from doing so,” he said.

‘In sum, price advertisements matter,” Reinhardt concluded.

Bait and Switch?

He was also none to happy that Kohl’s first removed the case from state court to federal court.  But when oral arguments went badly for Kohl’s, the company applied a month later to have the appeals court certify the legal question to the California Supreme Court, in effect, sending to back to state court, but to the top court for the first time.

“Only after (correctly) perceiving at oral argument that we were not inclined to rule in its favor on the merits did Kohl’s file its motion for certification,” he said.  If Kohl’s wanted to suggest certification to the state’s high court it should have done it prior to oral argument, Reinhardt said.

Case:  Hinojos v. Kohl’s Corp., No. 11-55793