The latest company to be hit with a deceptive pricing class action: JCPenney, charged with falsely inflating “original” prices to create a misleading impression of big discounts that don’t actually exist.
Kansas resident Ann Cavlovic claimed that she fell for the tactic when she saw a pair of gold earrings while shopping at a JCPenney store in September 2014. Marked with an “original price” of $524.98, Cavlovic paid $171.66 based on a purported 60 percent sale discount and additional 25 percent promotional discount.
But when she got home and opened the packaging, Cavlovic found a pricing insert listing the original price for the earrings at just $225. Had the store’s original price matched the list price, she would only have paid $73.58 after the applicable discounts, she alleged in her suit. Instead, she paid more than twice that amount because JCPenney falsely inflated the “original” price as part of a company-wide strategy.
She alleged that the company instituted the plan in 2011 to mark up its products “by a significant margin and then immediately offer those products at what it represented to be steep discounts.” It temporarily halted the practice in February 2012, when it switched to a new price advertising strategy known as “fair and square,” where JCPenney offered its products at “everyday low prices,” but when that strategy failed, the company revived the deceptive price advertising scheme in early 2013, Cavlovic said.
“In essence, JCP marked up its products so that its subsequent ‘discounts’ would appear to be a good deal and would induce Kansas’ consumers to purchase the products it was selling,” according to Cavlovic’s complaint.
Cavlovic alleged that in addition to being expressly forbidden by Kansas law, JCPenney’s pricing strategy runs afoul of Federal Trade Commission pricing regulations, which state that if “the former price being advertised is not bona fide but fictitious—for example, where an artificial price, 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.”
To read the complaint in Cavlovic v. J.C. Penney Corp., click here.
Why it matters: Deceptive pricing lawsuits are a hot trend in consumer class actions. Initially filed against outlet stores, the cases now target all types of retailers from online giant Amazon to Kohl’s, which paid $6.15 million to settle a suit over a purportedly false pricing scheme last April.