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Online Discount Pricing Policies Face Increasing Scrutiny

By Andrew B. Lustigman and Scott A. Shaffer

Consumers, particularly online shoppers, are constantly looking for a discount. Given that “nobody pays retail anymore,” online retailers are facing increased challenges when comparing their own discounted prices to original or suggested retail prices. As a result, retailers are being accused with greater frequency of exaggerating discounts in comparison to inflated original prices. Publications such as the New York Times have recently highlighted this phenomenon, which can create a false impression that consumers are getting significant savings. See, “It's Discounted, but Is it a Deal? How List Prices Lost Their Meaning,” New York Times (March 6, 2016). A Times survey concluded that many promoted products were not truly being offered at the advertised list price. Those findings are consistent with a number of lawsuits filed against leading online and brick-and-mortar retailers which challenge such practices.

Retail purchasing and pricing practices have changed dramatically with the Internet, but the law has not always kept pace. In the click of an Enter button, consumers now have the ability to use search engines to scan prices advertised by literally hundreds of online retailers. Yet, when looking for guidance about the legal requirements for establishing and comparing to a suggested retail price, retailers are forced to rely on 50-year old guidelines and a patchwork of similarly outdated and confusing state pricing laws. These requirements, while well meaning, were drafted prior to the existence of the virtual marketplace in which retailers now compete, and consumers now shop. State regulators and class action lawyers are now recognizing the gap between statutory requirements and the current marketplace, and are challenging retailers' pricing practices that they believe violate the governing law.

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