When customers see a large discrepancy between an “original price” on an item and the current price, they believe that they are getting a bargain. But this is not always true. The complaint for this class action alleges that Kate Spade & Company put false reference prices on merchandise at its outlet stores to give the false impression of a bargain.
The class for this action is all persons in the US who bought one or more items from Kate Spade outlet stores at discounts from the reference price listed as “Our Price,” during the class period. (The class period has not been defined.) Alternatively, the complaint proposes a California class, for persons within California.
The Federal Trade Commission (FTC) does not permit the use of false reference prices. “Where the former price is genuine, the bargain being advertised is a true one. If … the former price being advertised is not bona fide but fictitious—for example, where an artificial inflated price was established for the purpose of enabling the subsequent offer of a large reduction—the ‘bargain’ being advertised is a false one; the purchaser is not receiving the unusual value he expects.”
California law also forbids the practice: “No price shall be advertised as a former price of any advertised thing unless the alleged former price was the prevailing market price as above defined within three months next immediately preceding the publication of the advertisement…”
Many consumers mistakenly believe that the merchandise in outlet stores for prominent brands is left over from the main stores and therefore of equal quality. But this is not always true. Some brands make a separate—and lower-quality—line of clothing for their outlet stores. They create the false impression that the items are from the main stores through false reference pricing on the tags or signs saying that the clothing on a rack or items in an area is marked down by a certain percentage (for example, “50% off”).
In this case, the complaint says, “Merchandise sold at the Kate Spade outlet stores is created specifically for Kate Spade outlet stores. Accordingly, the only market price for the Kate Spade outlet store merchandise is the price at which the merchandise is sold at the Kate Spade outlet stores.” The “Our Price” marked on the tag, the complaint says, is fictional; the merchandise was never offered at that price.
The complaint alleges that the company has violated California’s Consumer Legal Remedies Act, its False Advertising Law, and its Unfair Competition Law, as well as similar federal laws.