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Business & Economy

LA sues Macy’s, Kohl’s, Sears, JC Penney over fake price cuts




A shopper waits inside a Macy's store during Black Friday events on November 25, 2016 in New York City.
A shopper waits inside a Macy's store during Black Friday events on November 25, 2016 in New York City.
Eduardo Munoz Alvarez/Getty Images

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A washer discounted from $1,179.99 to $999.99 sounds like a good deal, but what if it never actually sold at $1,179.99? Holiday shopping season is upon us and bargain hunters everywhere rejoice at good deals — 15, 25, even 50 percent off the original price tag — but what if those markdowns are fake? 

This marketing strategy, known as false reference pricing, is the target of four separate lawsuits filed Thursday by the Los Angeles City Attorney’s Office against retailers Macy’s, Sears, Kohl’s and J.C. Penney.

“False reference pricing not only increases a customer's willingness to make a purchase based on false information and influences how much money the consumer is willing to spend and the value they attribute, falsely, to the product, but it also discourages consumers from shopping around to get an authentically better deal,” City Attorney Mike Feuer told “AirTalk’s” Larry Mantle. “This practice also harms business who are marketing accurately the former and current price of their goods.”

California law already bans retailers from marketing a higher original price unless the item was available at that price within three months of the advertisement. 

J.C. Penney and Kohl’s were taken to court over this issue in recent years and had committed to ending the false markdowns, but Feuer said his investigations prove they haven’t followed through. Feuer’s suits seeks penalties, as well as a court order to compel the four retailers to abide by the law.  

"AirTalk" listener Arthur in Calabasas said, “It doesn’t really matter what price a retailer says the item was. At the time of purchase, each individual shopper can look at the price... and make a value decision.” 

But consumer psychologist Kit Yarrow told “AirTalk” that shoppers feel an “emotional zing” when they think they’ve saved, and retailers have learned to capitalize on that feeling. 

“During the recession, it became the only way you could get people to spend money,” Yarrow said. “Bargains are now an expectation, so buying without one means you're being taken for granted.” 

According to Yarrow, false markdowns deteriorate trust between consumers and retailers, which is bad for business in the long run. 

“Consumers tell me that they wouldn't be so concerned about bargains if they had an assurance of value,” she said. 

Her advice to retailers? “Rebuild that trust.”

Feuer had a similar message, asking retailer to hold themselves accountable. 

“We're not going to resolve a case before the holiday season concludes...which is why I'm calling on each of these retailers to do the right thing now,” Feuer said. “Talking about gifts this season, isn't that a gift that every consumer should be entitled to?”

Guests:

Mike Feuer, Los Angeles City Attorney

Kit Yarrow, is consumer psychologist and author of Decoding the New Consumer Mind: How and Why We Shop and Buy; She tweets @GenBuy

Correction: An earlier version of this story misstated the number of lawsuits filed by the L.A. City Attorney's Office. KPCC regrets the error.

This story has been updated.