The business practice described here reminds me of the alternate punchline for every New Yorker cartoon. During 2008 and 2009, Avanza (part of Nash Finch’s range of stores) operated several grocery stores. Prices for goods were posted on the goods, on store shelves or in published ads. Some promotional materials said: “A great way to save—plus 10% at the register!”
The plaintiffs alleged that they understood this claim to mean that the posted price would be reduced 10% at the register. To the contrary, the posted price was increased by 10%.
This terrible idea was apparently applied exclusively or near-exclusively in stores that marketed to Latinos, though apparently the Colorado Department of Agriculture informally requested that the practice stop, which at first only led to Avanza posting a sign disclosing the register surcharge. Given how people process information, this was still misleading. Take a look at this amazing corporate nonanswer to a news organization, which found that 8 shoppers it asked hadn’t noticed the markup, and reported that many consumers it talked to interpreted “plus 10%” to mean an extra discount:
Question 9: Wouldn't it be more honest/up front to just add 10 percent to the price of all of the products–so that people can see the actual price on the shelf and on the sticker?
Answer: The grocery industry is extremely competitive. Stores vie for customers. Customer loyalty is highly valued. Given the need to attract and retain customers, our stores cannot afford to alienate its customers by charging unexplained fees or unanticipated mark-ups. Our pricing is attracting customers–rather than losing them--demonstrating that the pricing policy is in fact fair, obvious, and well-understood by our shoppers.
The industry is competitive, so we need to put prices we don’t actually charge on the shelves. Sure, yeah, I see that. Here’s another summary from a law firm (also the source of the pictures).
Plaintiffs sued for violations of the Colorado Consumer Protection Act, common law fraud, and civil theft (obtaining money by deception). Avanza moved to dismiss.
The CCPA bars, among other things, “mak[ing] false or misleading statements of fact concerning the price of goods” and “advertisi[ing] goods ... with intent not to sell them as advertised.” The court found that the claims sounded in fraud and had to be pled with particularity, but were so pled given that they provided fair notice of the plaintiffs’ claims and their factual grounds. Plaintiffs didn’t need to identify the time, place, and contents of every ad that misrepresented the “plus 10%” policy, especially since part of the claim was that Avanza’s ads were misleading through omission of the disclosure that prices would increase at the register. For omissions, a plaintiff must identify the information that should have been disclosed, the reason why it should have been disclosed, who should’ve disclosed it, and where/when it should’ve been disclosed. This plaintiffs did.
Also, plaintiffs properly alleged affirmative misrepresentations in “A great way to save—plus 10% at the register!” They didn’t identify the time and place of every ad that included the language, but that didn’t deprive Avanza of meaningful notice, given the allegations that it was commonly and systematically used. “Presumably, Avanza itself is aware of the contents of its own advertising materials, and thus, can readily ascertain when and where it used” the ads.
Avanza then argued that “great way to save—plus 10%” was not deceptive as a matter of law. It wasn’t literally false, and at least one of its meanings wasn’t misleading, so plaintiffs’ claim wasn’t plausible under Iqbal.
Rather than expressing disbelief at such chutzpah, the court merely rejected these arguments. “A natural and plausible reading of the ‘great way to save—plus 10%’ language is the interpretation offered by the Plaintiffs: that Avanza was promising an additional 10% savings that would be applied at the time of checkout.” The close proximity of “save” and “10%” suggested that they were related, and the plaintiffs’ understanding that they’d get an extra discount at checkout was “consistent with general retail practice. Most consumers have encountered sales in which a discount is promoted along with the advisement of ‘discount taken at register.” Avanza’s practice of charging higher prices than those disclosed on conspicuous price tags was “far less common.” Apparently, a court in Minnesota granted a motion to dismiss, buying Avanza’s argument, but the court here was unpersuaded; notably, the Minnesota ruling made no mention of the juxtaposition of “great way to save” with “plus 10%.”
Unfortunately, the court then ruled that Colorado had deliberately hamstrung consumers in class actions by barring all damages in CCPA class actions, including actual damages, and barring awards of costs and attorney’s fees. I can see why a statutory damages award might be unavailable, but why actual damages? Because the law was written to say that “Except in a class action, ... any person who, in a private civil action, is found to have [violated the CCPA] shall be liable in an amount equal to the sum of” actual damages (or statutory damages of $500, or trebled damages in certain circumstances) plus costs and attorney's fees. The court found this clearly to exclude any kinds of damages, including actual damages, in a class action. Any large-scale enforcement of the CCPA must come from the AG, who is not limited by this provision. However, assuming that a class would not be certified, the court let plaintiffs’ claims proceed.
The court also found that plaintiffs had properly pled common-law fraud and civil theft. Among other things, “one could reasonably infer from Avanza's use of such an unorthodox pricing model, coupled with promotional language that tends to obscure, rather than highlight, that pricing policy, that Avanza specifically expected and intended that its customers might misunderstand the nature of the policy.” Avanza argued that the allegations of reliance were conclusory, but the court wasn’t willing to require more detail “in the particular circumstances of this case” to put Avanza on notice of the claims. Perhaps discovery might show that plaintiffs couldn’t prove reliance, but that was not for the pleading stage.
Avanza argued that, because the receipts disclosed the 10% surcharge, plaintiffs couldn’t have relied on the ads. But the court wasn’t willing to make that determination as a matter of law. The manner of disclosure and the reasonableness of plaintiffs’ diligence, or lack thereof, in reviewing receipts would bear on reliance. (The reason we have consumer protection laws is to reverse the rule of caveat emptor, which Avanza apparently thinks should extend past purchase.)
Avanza argued that the civil theft claims were untimely because plaintiffs shopped at Avanza from June 2008 to March 2009 and filed suit in June 2011, and there’s a two-year statute of limitations on civil theft. The cause of action accrues when injury or deceit is known or discovered, or should have been by the exercise of reasonable diligence. The complaint indicated that one plaintiff actually discovered the 10% surcharge in January 2009 as a result of examining her receipts. Thus, her civil theft claim was time-barred.
Avanza argued that all plaintiffs had constructive notice based on their receipts by the time they completed their shopping (March 2009 at the latest). Ultimately the disclosure might be sufficient, but the court wasn’t prepared to dismiss the civil theft claims on that ground at such an early stage. “Whether the disclosure of the surcharge is so sufficiently clear and conspicuous that a customer exercising reasonable diligence should be expected to promptly discover it is a question better suited for analysis on a full factual record at the summary judgment stage.”