Strike-through pricing refers to when a retailer shows a higher price crossed out next to a lower “sale” price. While a popular marketing tactic, these pricing practices have become a major source of litigation for online businesses and retailers in many jurisdictions, including key U.S. states like California.
Here’s what retailers and businesses need to know about the relevant laws, enforcement actions, and how to stay compliant.
Key Federal & State Laws That Apply
At the federal level, the Federal Trade Commission (FTC) prohibits “unfair or deceptive acts or practices,” which can include misleading pricing tactics. The FTC has guidelines outlined in the Guides Against Deceptive Pricing, which can carry significant weight in enforcement actions.
Several states prohibit false discounts, but the most strict law is California’s broader False Advertising Law, as well as statutes like the Consumer Legal Remedies Act (CLRA). These makes it illegal for retailers to advertise a former price unless that price truly reflects what the item was openly and actively offered for, for a reasonably long period, immediately before the sale. Penalties can be severe, inclined up to 6 months in jail or fines of $2,500 per violation.
Other states that have similar laws include:
1. New York’s regulation of “strike-through” or comparison pricing is governed by General Business Law (GBL) 349 and 350, and violations can result in $1,000 penalties.
2. New Jersey’s Consumer Fraud Act prohibits advertisers from using a fictitious former price, meaning one they cannot prove was offered for at least 28 days during the immediately preceding 90 days.
3. Massachusetts 940 CMR 6.00 set specific requirements for advertising former prices, including that the former price must have been charged for 40% of sales in the preceding six months, or offered for over 14 days immediately before the ad.
4. Connecticut has regulations on “price comparisons” (Conn. Agencies Regs.42-110b-19), requiring that advertised former prices must have been the actual price offered for a reasonably substantial period. Comparison pricing is deceptive unless the former price was actually used by the seller in the last 90 days, or the advertisement discloses the time when sales at that former price were made.
5. Illinois Administrative Code 470.110 regulates price comparisons, including requirements for substantiating former prices used in advertising.
6. Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) prohibits misleading price advertising and has been used to challenge false reference pricing. Civil penalties go up to $10,000 per violation.
7. Under Oregon law, products sold at a promotional or sale price must have been sold at the regular price within the preceding 30 days of the advertisement (or the ad must specifically identify a different applicable period).
8.Virginia defines “substantial sales” for comparative pricing as a substantial aggregate volume of sales of the item at or above the advertised former price in the seller’s trade area, meaning the former price must reflect real sales history.
9. Missouri has a rebuttable presumption against compliance unless the seller can show sales of 10% or more of the total sales of the product were at the former price during a specified period (30 days to 12 months).
Enforcement
Many strike-through pricing cases are brought by private law firms on behalf of consumers, but state attorneys general and district attorneys can also pursue companies for deceptive pricing. These class actions can result in significant settlements and civil penalties, with severe examples including settlements with Amazon ($2 million), Walmart, and lawsuits against Kohl’s, Macy’s, J.C. Penney, and Sears.
While nationwide federal prosecutions are rarer, the FTC has authority to investigate deceptive pricing practices, and recently has increased scrutiny of pricing transparency more broadly.
Best Practices for Businesses
- Advertise former prices only if they were real and recent.
- Keep thorough records of pricing history, including when and where a product was sold at its “original” price.
- Avoid referencing prices that were never offered or were only available for a very short period.
- Do not use ambiguous terms like “compare at” unless you can substantiate those prices.
- Educate marketing and sales staff on the legal requirements for reference pricing, especially if you operate in or sell to California.
- When in doubt, consult with legal counsel to ensure your pricing practices are compliant.
Disclaimer: This blog is for informational purposes only and does not constitute legal advice.
EcomBack is not a law firm. Readers should consult a qualified attorney regarding legal obligations related to accessibility compliance.
