EmergingGrowth.com, a leading digital financial media company, Reports on Jos. A Bank (NASDAQ: JOSB), Macy’s (NYSE: M), J.C. Penny Company (NYSE: JCP) Kohl’s (NYSE: KSS), and Michaels Stores (NYSE: MLK) and Deceptive sale practices as the lawyers call it.
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When a store’s merchandise seems to be always on sale, is it ever really on sale? Is the retailer just posting fake prices that no one ever pays? Do the prices exist only to make discounts seem tempting? Two customers of Jos. A. Bank Clothiers (NASDAQ: JOSB) contend that the company utilizes these disreputable tactics in order to sell product. They have gone as far as filing a class-action lawsuit against the Maryland based men's apparel chain, accusing the retailer of using misleading advertising by claiming products are on sale when they are in reality being offered at standard price. The lawsuit, which was filed April 5 in U.S. District Court in Newark New Jersey, asserts Jos. A. Bank misrepresents to customers that goods are being promoted at a discounted sale price for a limited time, when the company “rarely, if ever,” in reality sells goods at a higher, regular price. In the litigious world we live in it seems you can sue a store for having too many sales.
The fact of the matter is that many retailers such as Macy’s (NYSE: M), Michaels Stores Inc. (NYSE: MLK) and J.C. Penny Company Inc. (NYSE: JCP) employ or have employed a ‘never ending sale’ strategy in order to boost sales. But is it legal? It seems that depends upon where you live. At least 12 states, other than New Jersey, have laws on the books showing how long a retailer is required to offer an item at a regular price before it can claim it is selling at a cut rate. South Dakota calls for the regular price be in existence for at least seven successive days out of 60 before the sale. In Alaska, establishing an item’s normal price entails offering it at that price for at least six months out of the preceding 12 months. The rest of the states rely on FTC’s Guides Against Deceptive Pricing in order to enforce marketing and advertising standards.
Just last year Michaels was slapped with a $1.8 million dollar settlement in New York after the State Attorney General found that the craft retailer had been utilizing a continual sales strategy. In the settlement, Michaels agreed that it would not make fabricated former price comparisons. Illustrations of fictitious former prices given in the settlement were (1) prices that were not used in the regular course of business; (2) prices that were not used in the recent past but at some remote period in the past without making disclosure of that fact; (3) prices that were not openly offered to the public; (4) prices that were not sustained for a equitable length of time, but were advertised and then instantaneously lowered; (5) prices that were rarely paid by consumers because reductions were offered by sales people; and (6) prices reduced as a result of negotiation. Until recently, retail giant JCPenney used some or all of the strategies described above. The company has admitted that less than 1% of its returns had been coming from full-priced items and is in the process of reworking the way it sets up sales. Retail clothier Kohl’s (NYSE: KSS) has also been accused of advertising reductions that are in fact not deals to consumers.
No matter the retail segment, virtually every major company has used the ‘never ending sale’ technique. From mattresses to clothing and appliances, consumers are complaining in record numbers about sales that are suspect. The bottom line is that never ending sales now lead to never ending litigation woes for many companies. Consumers are also complaining these never ending sales cycles feed never ending shopping addictions. Where do you draw the line on litigation that from the outside appears disingenuous at best and frivolous at worst? Of course there are legitimate complaints. Some companies have practiced deceptive sales advertising and should be made to cease such practices. On the other hand, as with many grievances, it seems to be about a hoped for large payday for the lawyers and litigants. It will be interesting to see what precedent is set by the Jos A Bank lawsuit.
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