Nordstrom Rack has recently found itself at the center of an unwelcome suit over its labeling practices. Nordstrom Rack discloses the savings it offers customers by placing “compare at” labels on its price tags which show two prices: the “compare at” price and a lower, actual sale price. A recent class action filed in the Southern District of California alleges that this constitutes false advertising.
The class plaintiff purchased three items from a Nordstrom Rack in 2013, including a pair of cargo shorts for $29.97 that bore a label that read “compare at $49.50.” The Plaintiff, on behalf of himself and a putative class, claimed the savings on these items were purely illusory because Nordstrom never intended to sell the items at a higher price. However, Judge Michael M. Anello ruled that Nordstrom was not obligated to sell or consider selling the items at the higher price for the comparison to be permissible.
Judge Anello looked to the Federal Trade Commission guidelines regarding deceptive pricing and wrote that price comparisons may permissibly suggest that merchandise of like quality is sold by the advertiser or other merchants. The plaintiff did not plead that other merchants were not selling similar items at those prices, that he had actually been deceived into making his purchases (much less that a reasonable consumer would be), or that Nordstrom had intentionally fabricated the prices. Therefore Judge Anello held the plaintiff’s allegation was insufficient to plead false advertising and dismissed that claim as pled.
Judge Anello did give the plaintiffs leave to submit amended pleadings. On May 4, 2015 they did just that.
In a second amended complaint, the plaintiffs submitted bulked up allegations. First, in an attempt to cure the court’s concern about insufficient allegations of Nordstrom’s “intent to deceive,” the plaintiffs cited alleged admissions by Nordstrom that they say show that the “original price” in the comparisons was false and arbitrary. On this point they also included expert testimony from a consumer perception expert who alleged the only logical reason for listing a made up original price is to deceive consumers. Second, the class plaintiffs’ amended complaint contains more detailed factual allegations that the lead plaintiff was actually deceived and expert findings to support the proposition that his reliance on the advertising was reasonable.
Whether these alterations will be sufficient to state a claim under the Lanham Act remains to be seen, but advertisers concerned about comparative pricing on their product labels should watch this space as the situation develops.
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