Dive Brief:
- J.C. Penney Co. has settled a class-action lawsuit in which it was accused of marking up items before putting them on sale to increase shoppers’ perceptions of the discount.
- Penney will pay $50 million to California shoppers under the settlement, and defendants will have the option of a cash payment or store credit as payment.
- Federal Trade Commission regulations dictate that retailers must sell products at their original prices for a “reasonable” period before advertising markdowns.
Dive Insight:
J.C. Penney has settled a class-action lawsuit that claims it engaged in a prolonged campaign to mark items up before marking them down again, leading customers to believe that they were getting heavy discounts.
Filed in California federal court, the lawsuit named Penney's exclusive and private-label brands such as Liz Claiborne as products likely to carry misleading prices. Shoppers who bought such items in California between Nov. 5, 2010 and Jan. 31, 2012 at discounts of 30% or more will receive a portion of the $50 million settlement in cash or store credit based on the amount of their purchases.
Penney’s denied wrongdoing in the settlement, but agreed to examine its pricing policies, which depend on numerous discounts and coupons. The chain abandoned its discounting strategy briefly in 2012 under CEO Ron Johnson’s widely vilified experiment with value-based “everyday low” prices, and has struggled to regain its footing in the marketplace since. Kohl’s and Men’s Wearhouse are engaged in similar suits.
