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Consumer Class Actions Take a Hit: Court Holds Made-For-Outlet Products Not Deceptive

January 18, 2018

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In the face of a growing number of lawsuits against retailers for deceptive sales, advertising and pricing practices, a California court recently affirmed dismissal of a consumer’s false advertising lawsuit against The Gap, holding that it is not false advertising for the retailer to put its brand and trademark on lesser quality goods sold at its outlet stores.

In Rubenstein v. The Gap, Inc., 14 Cal. App. 5th 870 (Cal. App 2d 2017), plaintiff argued that that advertising a Gap Factory or Banana Republic Factory item as “Gap” or “Banana Republic” was deceptive because the item was of lesser quality than a Gap or Banana Republic item. The California Court of Appeals rejected the argument that a brand’s use of its own name for its factory or outlet stores is deceptive. The court stated, “Gap’s use of its own brand name labels on clothing that it manufactures and sells at Gap-owned stores is not deceptive, regardless of the quality of the merchandise or whether it was ever for sale at other Gap-owned stores. Retailers may harm the value of their brands by selling inferior merchandise at factory stores, but doing so does not constitute false advertising.”

The plaintiff also alleged that “reasonable consumers believe outlet stores sell products that were previously available for purchase at retail stores,” but failed to allege any facts showing that this is true. The court held that retailers do not have a duty to disclose the items sold in a factory or outlet store were

Beware of Listing Phantom Prices: Ann Taylor Settles False Discount Class Action

December 28, 2017

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Fashion retailer Ann Taylor has settled a false discounting class action in New York federal court alleging that prices at its outlet stores were listed as “marked down” from prices that never applied to the items. The named plaintiffs claim they were misled into believing they were getting a large discount, and would not have made the purchase if they knew the items were not heavily discounted.

The class action is just one of a growing number of deceptive pricing actions filed against retailers. As we previously reported, retailers can also face an action by the Federal Trade Commission or public prosecutors for such practices. This growing trend and Ann Taylor’s potential $6.1 million exposure should put retailers on notice of the repercussions associated with using phantom prices in an effort to advertise discounts.

The settlement has received preliminary approval from District Judge Paul Oetken, and provides both monetary and injunctive relief to a class of more than a million consumers who purchased one or more items between May 5, 2012, and May 4, 2016, from Ann Taylor Factory and LOFT Outlet stores.

If approved, the settlement would consist of 425,000 vouchers to Ann Inc. stores valuing $5.1 million, $500,000 for class members who opt for a cash award of $5 instead of a voucher worth $12, and $500,000 for administrative costs. Ann Inc. will have 60 days to change the labeling of its merchandise and comply with federal and state laws regarding pricing and advertising. The retailer must also

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