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A woman looks for shoes at a Macy's store on December 24, 2015 in New York City.
A woman looks for shoes at a Macy's store on December 24, 2015 in New York City. Kena Betancur—Getty Images

More Retailers Accused of Misleading Customers With Fake Price Schemes

Jan 07, 2016

In a retail environment in which 40% to 50% off deals are routine, even the most casual shoppers understand that only suckers pay full price. Increasingly, however, it's become impossible to tell if even 50% off the original price of an item is truly a good deal, because no one ever pays that original, arguably meaningless price.

Shoppers still use "original" and "list" prices as a point of reference in order to help them figure out an item's value, and to gauge how good a sale price is. At the same time, most shoppers are well aware that stores regularly use fake, inflated prices to manipulate customers into thinking the inevitable discounts are more impressive. It's an age-old retail strategy called "price anchoring," and lately it's become so blatant that some customers have launched lawsuits, alleging that the schemes amount to deception and fraud.

A study released last fall shows that the average discounts on Black Friday at J.C. Penney and Kohl's were 68% and 67%, respectively. Given that those are averages, it would seem nearly impossible for a customer to pay full price for anything. By no small coincidence, J.C. Penney and Kohl's were hit with lawsuits in 2015, alleging that the use of inflated original prices is tantamount to a "deceptive, misleading and unlawful pricing scheme" that rips off customers.

Though they may be among the worst offenders, these two stores are hardly the only ones that resort to inflated, arguably deceptive "anchor" pricing. Now, as the Consumerist noted this week, Macy's and Bloomingdale's have also been hit with a class-action suit accusing them of duping customers with sham original prices. The suit accuses the stores of engaging in a "phantom markdown scheme," and of "purporting to offer steep discounts off of fabricated, arbitrary, and false former or purported original, regular or 'compare at' prices." Here's one of the key parts of the suit:

In some instances, they represented that the listed or original price was two or more times the manufacturer’s suggested retail price (“MSRP”), and then offered the item at a purported 50% or more discount price which was in fact the original MSRP.

In other words, a 50% off sale is nothing special whatsoever, assuming the accusation above holds true. In this bizarro-world scenario, 50% off is actually the real price, while the original price is some pie-in-the-sky figure that exists solely to give shoppers a false impression of the item's value.

Even an apparent bargain offering 70% off might not represent good value. In the lawsuit, one of the plaintiffs points to a Lennox ornament purchased in December at Macy's for $17.99, a dramatic discount off the list price of $60. But there's no proof that anyone ever bought such an ornament for $60, and Macy's never even listed the item at $60 during the 90 days prior to the purchase. If the $60 list price is fake—and common sense says it is—then it's impossible for shoppers to really know whether it's worth $40, $20, or $2.

Even though there are some sketchy shenanigans taking place at stores, it's unclear if plaintiffs can win such lawsuits against retailers. One previous suit about deceptive original pricing, filed against Jos. A. Bank, the notorious "buy one, get seven free" men's apparel store, was dismissed because it was apparently impossible to nail down how much shoppers had overpaid for merchandise—and therefore problematic to figure out how much to award in damages.

But perhaps retailers will slowly scale back on deceptive, inflated pricing anyway. Macy's obviously isn't doing so hot--it just announced it's closing 40 stores around the country. Other old-fashioned department stores known for high-low pricing strategies, including Sears and J.C. Penney, are struggling mightily as well. There's an argument to be made that shoppers have grown jaded, rolling their eyes at stores' latest claims about "amazing" discounts.

Jos. A. Bank is the poster child for overreaching on sales and discounts, to the point that it was mocked in a "Saturday Night Live" skit in which people used the store's suits to mop up messes around the house because they were cheaper than paper towels. And this past fall, Jos. A. Bank promised that it was hosting its final "Buy 1, Get 3" sale ever.

Granted, this doesn't mean that Jos. A. Bank is done with fake pricing and big discounting. The retailer's website is currently listing a January clearance even with an "extra 40% off" merchandise. Is this a good deal? Frankly, we have no idea.

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