Customer Sues JCPenney for Allegedly Using Fake Discounts
Ever wonder how much money you saved on your last purchase? After buying three blouses at JCPenney for $17.99, Cynthia Spann asked herself that same question.
Unfortunately, upon conducting a little research, she claims she found out that the blouses she had just purchased at 40% off were actually never priced above $17.99. Thus, Spann believes that JCPenney's "40% off" promo was nothing more than a phantom discount.
Now Spann has filed a class-action suit against JCPenney for allegedly running a "massive, years-long, pervasive campaign" designed to deceive shoppers. But if past such lawsuits are any indication, she might have a difficult time proving it.
A History of Experimenting with Prices
JCPenney has had a public history of changing its pricing strategies, some of which have failed while others have worked, according to the company. During ex-CEO Ron Johnson's tenure, the retailer eliminated all sales for what it called everyday low prices. However, the tactic failed miserably and JCPenney began to lose money.
So after Johnson's departure, JCPenney reinstated its "high-low" pricing strategy, wherein they give products higher retail prices, so that they can later discount said items more aggressively. That commonly-used practice is also known as "price anchoring."
Items Must Sell at Retail Price for a 'Reasonable Amount of Time'
According to Reuters, the Federal Trade Commission allows this practice so long as retailers sell items at those original prices for a "reasonable length of time" before marking them down. Basically, if there's evidence that the item was actually that retail price at one point, then the store can advertise as such. However, Spann claims that JCPenney never sold the blouses in question for more than $17.99.
As a result, U.S. District Judge Fernando Olguin has allowed Spann to file a lawsuit claiming that JCPenney made up retail prices in order to trick shoppers into believing they were getting big discounts when said items were on sale. The plaintiffs include consumers who bought private-label or exclusive items from JCPenney in California from November 5, 2010 to January 31, 2012 at discounts of 30% or more.
This Isn't the First Lawsuit of its Kind
JCPenney isn't the only retailer accused of such sales tactics. Kohl's and Jos. A. Bank have been hit with similar lawsuits in the past. In the case of Jos. A. Bank, it was the retailer's exaggerated BOGO sales that got the company in hot water.
However, a judge ultimately dismissed the class action suit on the basis that the plantiffs failed to provide any facts which "demonstrate that the 'sale' price offered is identical to the true regular price of the merchandise and thus a misrepresentation."
Readers, what do you think of this lawsuit against JCPenney? Let us know in the comments below!
Learned my lesson.
There are many pieces to the price puzzle: base price, discounts, rebates, taxes. One has to put the entire picture together in order to make a responsible purchase and sites like DealNews is usually very helpful in this regard.
In the end, you have to ask yourself if the end price is what you are willing to pay for a product. Supply and demand, economics 101.
Are the stores lying to you about their prices? Of course they are! If you think the government is going to protect you against vampire capitalism you will live a miserable life.
If a store says something is off the "regular price", and they don't have actual sales to justify that price, it's a lie. While I am generally not a big fan of the government getting involved in commerce, I don't have a problem with punishing this behavior.
This type of practice cultivates skeptical consumers, and makes it more difficult for honest retailers to convince us that legitimate savings are real.