Alameda court rules guilty of false advertising

Internet firm ordered to pay $6.8 million in civil penalties

An Alameda County Superior Court judge has found internet retailer engaged in false advertising and unlawful business practices

throughout California since 2006.

After a two-week trial in September, Judge Wynne Carvill has ruled that Utah-based used formulas to create fictional comparison prices and chose the highest comparison for an item without informing consumers.

"Overstock has consistently used ARPs (advertised reference prices) in a manner designed to overstate the amount of savings to be enjoyed by shopping on the Overstock site," Carvill said.

District Attorneys in Alameda, Monterey, Napa, Santa Clara, Santa Cruz, Sonoma and Marin joined a suit that began in 2007 in Shasta County when a consumer paid $900 for two patio sets and received two patio sets with a Wal-Mart sticker that listed the price of each one at $247, Marin County Deputy District Attorney Andres Perez said.

The counties filed the suit against on Nov. 18, 2010.

Marin County District Attorney Ed Berberian said the court found Overstock's business practice of setting APRs based on the highest price that can be found without regard to prevailing market price and without disclosure to the practice was misleading or had the capacity to mislead.

Judge Carvill ordered Overstock to pay $6.8 million in civil penalties to the eight counties plus the district attorneys' costs of litigation that include fixed costs of taking depositions and producing transcripts but not attorneys' fees, Berberian said.

Carvill's order also prohibits Overstock from advertising reference prices that are not based on actual prices offered in the marketplace at or about the time the advertisement is first placed.

— Bay City News Service


 +   Like this comment
Posted by smart shopper
a resident of Happy Valley
on Feb 26, 2014 at 9:02 am

The shopper the bought the patio table should have been a little smarter in comparing prices from different sites. Things like this only benefit the attorneys, who got paid for several years on this case. The consumer will lose in the long run as will now raise the price on other items to make up the loss.

 +   Like this comment
Posted by Michael L.
a resident of Vineyard Avenue
on Feb 26, 2014 at 9:18 am

I didn't need a court ruling to tell me this. It was pretty obvious from doing some price comparisons. Their stuff isn't "overstock" or close out or anything like that either.

 +   Like this comment
Posted by Arnold
a resident of Another Pleasanton neighborhood
on Feb 26, 2014 at 10:46 am

Classic government overreach. Let the free market work without government interference. If people are stupid enough to be swindled that's their problem. Same with food inspection. Geez!!!

 +   Like this comment
Posted by Mike
a resident of Highland Oaks
on Feb 26, 2014 at 2:59 pm

The Romans said it best some 3,500 years ago:

Caveat Emptor.

That being said, I am always happy when the government investigates these cases because, as someone else said,

"It is the people who can't help themselves that we have the greatest obligation to protect."


 +   Like this comment
Posted by Steve
a resident of Stoneridge
on Feb 27, 2014 at 11:20 am

So the court is saying that Overstock didn't list a correct reference price? Even worse, the court doesn't claim that the price was not real, they just say that it was the highest available. So which price is Overstock supposed to list?

This is probably going to affect any retailer that lists other prices, perhaps including MSRP. What if a manufacturer changes the MSRP? How quickly does a retailer need to update it? How about car dealerships, or how about TrueCar? They provide typical prices too.

This is done everywhere on the net. If you don't comparison shop, then you deserve to overpay.

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