Dive Brief:

• The city of Los Angeles has filed lawsuits against J.C. Penney, Sears, Kohl’s and Macy’s, alleging the companies used “false reference pricing” schemes to mislead customers into believing items were being sold at significant discounts, according to the Los Angeles City Attorney’s office. 

• Under California Law, "retailers are not permitted to advertise a former price of an item unless it was the prevailing market price within three months of the advertisement, or unless the date when the former price did prevail is clearly, exactly and conspicuously stated in the advertisement," according to a notice from Los Angeles City Attorney Mike Feuer.

• JC Penney and Macy’s declined to comment on litigation, Sears declined to comment and Kohl’s did not respond to a request for comment, the Los Angeles Times reports.

Dive Insight:

Consumers seem hardwired to appreciate a deal, and for eons retailers have worked to give them that feeling.

“The experience, where you show a few prices, is called ‘is/was pricing.’ It is this price, it was that price,” Jason Goldberg, who leads commerce and content strategy at interactive digital agency Razorfish, told Retail Dive earlier this year. "That’s a powerful psychological feature, because it automatically makes you feel like you got a good deal. Showing a second-tier price helps all retailers.”

But regulators and courts don’t like it when retailers take the practice too far, because they consider it deceptive. "It’s debatable whether it’s ‘deceptive’ or not, but I think the word I’d prefer to use is ‘manipulative,’” Robert M. Schindler, professor of marketing at Rutgers University business school and author of “Pricing Strategies: A Marketing Approach,” told Retail Dive earlier this year. 

California’s law is particularly explicit in the matter, giving Feuer latitude. But several retailers, including J.C. Penney, TJX and Kohl’s have found themselves the target of class action lawsuits by consumers, too, over the practice. “Customers have the right to be told the truth about the prices they’re paying — and to know if a bargain is really a bargain,” Feuer said in a statement. “My office will fight to hold retailers responsible for their practices and to ensure consumers can make informed choices when spending their hard-earned money.”

They could be busy. A 44-week survey last year by Checkbook.org of national retailers including Best Buy, Costco, Home Depot, Kohl's, Macy's, Sears and Target found that many items listed as on sale rarely, if ever, sold at any other "regular" price. While some of the stores conducted valid sales on selected merchandise, Checkbook executive editor Kevin Brasler called some of the pricing policies “disturbing.”

Earlier this year, Amazon appeared to be experimenting with eliminating “list prices” and price drop notices from its product listings. In early May, about 29% of the products on Amazon were missing details on how much they were reduced from the list price, but now the number is up to about 70%, according to price-comparison startup Rout.