Kohl's False Discounts: Duped Buyers Can Sue Company, Court Rules

Image: Kohl's False Discounts: Duped Buyers Can Sue Company, Court Rules

Wednesday, 22 May 2013 02:20 PM

By Alexandra Ward

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Customers may file class-action lawsuits against Kohl's Department Stores for advertising false discounts, a federal appeals court ruled Tuesday.

Under the ruling, consumers who find out that they paid more than the advertised discount price on something that they thought was on sale can sue the retailer for a sizable payout.

The issue was originally brought up in a lawsuit filed by customer Antonio S. Hinojos, who claimed he would not have bought several items from Kohl's if he had known that the prices did not reflect actual discounts.

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Hinojos said he purchased Samsonite luggage that was advertised as 50 percent off its "original" price of $299.99, Chaps Solid Pique polo shirts that were marked down 39 percent from their "original" price of $36, and other items that were advertised as being substantially reduced in price, according to the Los Angeles Times.

In both cases, those "original" prices were found to be incorrect, so the discount was not a fair reflection given the true full market value.

The case was first dismissed by a lower court but has now been overturned by the U.S. 9th Circuit Court of Appeals, which said that California consumer law does permit such lawsuits.

"Price advertisements matter," Judge Stephen Reinhardt wrote in the opinion on behalf of a three-judge panel. "When a consumer purchases merchandise on the basis of false price information, and when the consumer alleges that he would not have made the purchase but for the misrepresentation, he has standing to sue.

"Here, Hinojos specifically and plausibly alleges that Kohl's falsely markets its products at reduced prices precisely because consumers such as himself reasonably regard price reductions as material information when making purchasing decisions."

The decision hinged on a California Supreme Court precedent that ruled that consumers lose money if they buy a product only because it was falsely advertised as made in the United States.

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Related stories:

Kohl's Sees Full-Year Profit Below View as Net Falls

Kohl's Shares Sink As Forecast Trails Analyst Estimates

Kohl's Works a Tough Retail Angle

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