Lowe’s Home Improvement, the big-box retail hardware store, paid nearly $1.1 million to settle a civil consumer protection lawsuit brought by several California counties, including Sonoma and Alameda. The retailer was accused of falsely advertising prices lower than the prices consumers were actually charged. In these types of disputes, consumer perception surveys can provide valuable evidence.
Case Background
Multiple district attorneys from counties in California filed a civil complaint in San Diego County, alleging that Lowe’s charged customers prices higher than their lowest advertised or posted price in violation of California’s consumer protection laws. Between 2018 and 2022, more than 4% of its merchandise was charged improperly, with an average overcharge of 19.3%, according to the Los Angeles County District Attorney’s office. The settlement program below was mandated to remain in effect for three years.
The settlement included $1,000,000 in civil penalties distributed among six counties (Alameda, Los Angeles, Orange, San Bernardino, Sonoma, and San Diego), $61,215.90 in restitution to consumer agencies that incurred costs when investigating, a court-ordered injunction prohibiting the chain from charging more than the lowest advertised price, and mandatory changes that affect Lowe’s stores. The changes include enhanced training to Lowe’s staff, more internal audits, a rule against raising prices on the weekend, more employees who are responsible for price accuracy, and periodic audits of prices at the stores.
Consumer Perception Matters
When shoppers see an advertised or shelf price, they reasonably believe they will be charged that price at checkout. If they are charged a different price, they may have a viable false advertising lawsuit. Although the Lowe’s case settled, if it had gone to trial, consumer surveys could have played an essential evidentiary role in such a lawsuit.
Surveys are frequently used in false advertising litigation to measure whether advertising statements are likely to mislead a substantial portion of consumers. A strategy utilizing a false advertising survey could measure whether consumers believe the advertised or posted shelf price represents the final checkout price, whether consumers expect temporary price changes (such as weekend adjustments) to be disclosed, and/or whether the advertised prices were material to the consumers’ decision to purchase the items. This evidence can help courts determine whether the practice is materially misleading to the average consumer.
Lowest Pricing Practices
Regulators and courts enforce consumer protection laws relating to advertising and pricing accuracy. Misalignment between advertised prices and point-of-sale prices can trigger a number of enforcement actions, such as fines and court cases. In addition, the reputational damage from false advertising claims can be damaging to consumer trust and loyalty.
IMS Legal Strategies designs and conducts false advertising and consumer perception surveys that withstand legal scrutiny. Our surveys measure how real consumers interpret advertising, pricing, and promotional claims. Our experts have testified extensively in state and federal courts and regulatory bodies, offering reliable consumer survey evidence in support of, or against, consumer protection claims.
If your organization is facing a false advertising or consumer protection challenge, consumer surveys can provide the insight you need to understand risk and defend your position. Contact IMS today to discuss how we can help.