Lululemon Sued Over Alleged Fake 'Phantom Discounts'
Lululemon faces a lawsuit alleging deceptive 'phantom discount' pricing practices.
Why it matters: This case highlights legal risks and compliance challenges in retail advertising practices, with lessons for in-house counsel and compliance officers on deceptive pricing standards.
- Lululemon is accused of inflating original prices to create false sale discounts.
- Plaintiff claims Lululemon uses fake 'strikethrough' prices to mislead consumers.
- Similar lawsuits targeted retailers like JCPenney, Macy's, and ASICS in recent years.
- FTC guidelines require original prices to be bona fide and offered regularly over time.
Lululemon Athletica is facing a legal challenge accusing the retailer of using so-called 'phantom discounts' — a practice where original prices are artificially inflated to make sale prices look more attractive. According to a recent lawsuit filed against Lululemon, these fake 'strikethrough' prices mislead shoppers by suggesting substantial discounts that do not reflect genuine price reductions.
This lawsuit follows a pattern of increased scrutiny on deceptive pricing tactics within retail. For instance, in 2016, the Los Angeles city attorney's office sued JCPenney, Sears, Kohl’s, and Macy’s for similar false reference price advertising. More recently, ASICS faced a class action lawsuit in January 2024 alleging use of misleading original prices and 'phantom' discounts in outlet stores.
The Federal Trade Commission’s Guides Against Deceptive Pricing stipulate that any 'former price' used in advertising must be "the actual, bona fide price at which the article was offered to the public on a regular basis for a reasonably substantial period of time." If retailers fail to comply, they risk legal liability for deceptive advertising practices.
For legal teams and compliance officers, this case underscores how careful review of promotional pricing strategies is essential. Companies need to ensure sale prices reflect legitimate discounts rather than inflated reference prices that could mislead consumers and invite litigation.
By the numbers:
- 2016 — LA sued four major retailers for false reference pricing
- January 2024 — ASICS sued over phantom discounts in outlet stores
- FTC Guides — Require bona fide former prices offered regularly