“Strike-through pricing”—where retailers display a higher original price alongside a lower sale price—has been an effective marketing strategy for decades. However, in California, businesses must be cautious when using this strategy to ensure compliance with state laws. Misleading pricing claims can lead to expensive unanticipated legal repercussions, consumer mistrust, and costly class-action lawsuits.
The primary statute governing strike-through pricing in California is California Business and Professions Code § 17501. This law is designed to prevent deceptive pricing practices by ensuring that any advertised former price genuinely reflects the prevailing market price within a recent timeframe.
Key Provisions of California Business and Professions Code § 17501
- Prevailing Market Price Requirement: The former price must accurately reflect the market price at which the product was offered for sale in the recent past.
- 90-Day Rule: The former price must have been the prevailing market price within the 90 days preceding the advertisement. If it was not, the business must clearly disclose the last date the product was sold at that price.
- Truthful Representations: Businesses cannot inflate former prices to create the illusion of a significant discount. The advertised price history must be well-documented and legitimate.
Best Practices for Businesses to Ensure Compliance
To minimize legal risk and build consumer trust, businesses should follow these best practices:
- Keep Detailed Pricing Records: Maintain a log of product prices, including the dates they were in effect and sales, to substantiate any advertised former prices.
- Audit Marketing Materials: Ensure that all promotional content accurately reflects actual pricing history and does not create a misleading impression.
- Implement Written Internal Compliance Policies and Enforce Them: Establish clear guidelines for advertising sale prices and educate employees on California’s pricing laws.
- Use Disclosures When Necessary: If referencing an older price outside the 90-day window, clearly state when that price was last in effect.
- Consult Legal Counsel: Given the complexity of California’s advertising laws, businesses should periodically review pricing strategies with legal professionals to ensure compliance.
- Monitor Competitor Practices: Stay informed about industry standards and competitor pricing strategies to avoid inadvertent violations.
Examples of Compliance and Violation
Compliant Scenario
A retailer sells a designer jacket for $500 from January through March. In April, the retailer advertises the jacket as:
“Now $400, was $500.”
Since the jacket was indeed sold at $500 within the past 90 days, this advertisement complies with § 17501.
Non-Compliant Scenario
A retailer introduces a new sneaker line at an initial price of $200 but never actually sells them at that price. Shortly after, they advertise the sneakers as:
“Now $150, was $200.”
Because the shoes were never sold at $200, this pricing claim could be deemed deceptive under § 17501 and subject the seller to a potential and very expensive class action lawsuit.
Another Potential Violation
A retailer sells a laptop at $1,200 in January, then drops the price to $1,000 in February and March. In April, it advertises:
“Originally $1,200, Now $900!”
Since the most recent price before the discount was $1,000 (not $1,200), the business must disclose that the $1,200 price was last in effect in January. Failure to do so would likely be considered misleading.
Enforcement and Legal Actions
California has seen an increasing number of lawsuits targeting deceptive pricing and advertising practices. Some law firms specialize in this litigation against retailers for alleged violations of § 17501 and/or other consumer protection laws.
- Pacific Trial Attorneys has filed strike-through pricing lawsuits and sent claim letters, including class actions on behalf of California consumers.
- Tauler Smith LLP has filed lawsuits on behalf of consumers against well-known brands accused of deceptive pricing tactics.
- Dovel & Luner LLP has represented plaintiffs in multiple lawsuits challenging false discount claims, often targeting major retailers for misleading representations, but not necessarily strike-through pricing.
- Government Enforcement: In addition to private lawsuits, California’s Attorney General and local district attorneys can enforce false advertising laws, leading to fines and injunctions against businesses engaging in deceptive pricing practices.
Retailers operating in California must exercise caution when using strike-through pricing strategies. Adhering to California Business and Professions Code § 17501 is essential to avoid legal exposure and maintain consumer confidence.
If you are a business owner with questions about your pricing practices, consulting with a legal professional can help safeguard against potential legal challenges. For legal help, please contact Stuart K. Tubis, Esq., partner at Jeffer Mangels Butler & Mitchell LLP, at skt@jmbm.com or 415-984-9622.
This article reflects the author’s professional analysis and does not constitute legal advice. Consult counsel for case-specific guidance.