Gap Factory and Banana Republic Factory stores use fake base pricing to offer phantom discounts, or so the complaint for this class action alleges.
The class for this action is all New Jersey citizens who bought any purportedly discounted item from a Gap Factory or Banana Republic Factory store in New Jersey, between October 9, 2011 and the present.
Consumers love bargains. Studies have shown that consumers are much more likely to purchase an item if they believe that it is being offered at a discounted price, because they believe the item is worth more than they’re paying for it.
The complaint quotes several studies, one of which says that “The presence of a higher reference price enhances [consumers’] perceived value and willingness to buy [a] product”; another says that “Consumers are likely to be misled into a willingness to pay a higher price for a product simply because the product has a higher reference price.”
The two stores at issue in this case are both subsidiaries of The Gap, Inc., and the complaint alleges that they provide the impression of large discounts in three ways.
First, the complaint claims that every item in their stores has a fake base price on its price tag. The complaint claims that the fake base prices are created using a uniform set of criteria, and that the items either were never offered at that price or, in a few cases, were offered at that price for only a few days.
Second, the advertising throughout the stores say such things as, “Take an extra 40% off lowest ticketed price” or “Item Discount 40%” or the like. According to the complaint, the purpose of these signs is to create the impression that the customer is receiving a large discount.
Third, the stores’ printed receipts state, “You saved [a specific dollar amount]” or “Item Discount [a specific dollar amount]” to again claim that the customer has “saved” money, a savings that the complaint calls “entirely illusory.”
Federal laws forbid the advertising of fake former prices, phantom discounts, and deceptive claims of discounts based on fictitious “regular” prices, stating, “Where the former price is genuine, the bargain being advertised is a true one. If, on the other hand, the former price being advertised is not bona fide but fictitious … the ‘bargain’ being advertised is a false one; the purchaser is not receiving the unusual value he expects.”
New Jersey laws also forbid deceptive advertising, marketing, and sales practices, including selling items at discounts that do not really exist.