J.C. Penney Agrees to $50M False Advertising Settlement

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On Tuesday, J.C. Penney agreed to make available $50 million to settle a class action lawsuit that alleged the company engaged in false advertising.

The class action lawsuit was originally filed in 2012 by lead plaintiff Cynthia Spann who alleges that J.C. Penney “engaged in a pervasive false advertising scheme.” She says the company advertised sale prices on their private and exclusively branded apparel and accessories that were substantially lower than the marked original or regular prices.

The implied price savings, Spann alleges, were false and deceptive because the company never intended to actually sell the items at the artificially inflated higher prices.

Thinking she was getting a good deal, Spann alleges that she purchased three blouses, marked with an original price of $30 each, on sale for $17.99 each. She later found out that the blouses had not sold for more than the sale price of $17.99 during the previous three months.

In the retail industry, this pricing method is known as “price anchoring.” Price anchoring itself is not an issue, as long as the retailer’s original price is real. However, when a retailer never sells the item at the listed original price, offering a discount to the false original price is misleading to consumers. The Federal Trade Commission has said retailers must sell items at original prices for a “reasonable amount of time” before they can offer sales or markdowns.

Spann alleges this pricing process was in place before Feb. 1, 2012, and on that day and after, JC Penney initiated a “fair and square” pricing campaign. Spann alleges that “after a significant decline in revenues, it returned to its original scheme, at least for some products, in early 2013.”

J.C. Penney has denied the allegations, saying they entered into the settlement to avoid the uncertainties, burden and expense of litigation.

The settlement Class, if approved, will include shoppers who purchased certain private-label or exclusive items from J.C. Penney in California from Nov. 5, 2010 to Jan. 31, 2012 and between Jan. 1, 2103 and Dec. 21, 2014 at discounts of 30 percent or more off the stated original price.

The settlement money will initially be used to pay costs to notify potential Class Members and for administration costs of the settlement, attorneys’ fees and costs and an enhancement payment to the lead plaintiff. The remainder of the money will be distributed to eligible settlement Class Members who may choose JC Penney store credit or cash. The amount of payment or store credit will depend on the total amount purchased by Class Members during the applicable class period.

In addition to the monetary settlement, J.C. Penney has also agreed to improve their pricing and advertising policies, including the implementation of a compliance program. This program will consist of periodic monitoring, training and auditing to ensure the company’s compliance with California pricing laws.

J.C. Penney is not the only large retailer to be accused of deceptive pricing practices. Kohl’s, Burlington Coat Factory, Men’s Warehouse and T.J. Maxx are facing lawsuits over similar pricing allegations.

More information about how to file a claim for the JCPenney settlement were not immediately available. Keep checking TopClassActions.com or sign up for our free newsletter for the latest updates. You can also mark this article as a “Favorite” using your free Top Class Actions account to receive notifications when this article is updated.

The J.C. Penney False Advertising Class Action Lawsuit is Cynthia E. Spann v. J.C. Penney Corporation Inc., Case No. SACV12-0215 FMO (KESx), in the U.S. District Court for the Central District of California.

UPDATE: On Mar. 1, 2016, the J.C. Penney fake sale class action lawsuit settlement is now open to Class Members. Click here to file a claim or visit www.JCPenneySettlement.com.

UPDATE 2: Top Class Actions viewers who submitted timely and valid claims for the J.C. Penney class action settlement began receiving store vouchers ranging between $87.50 to more than $600! Congratulations to everyone who got PAID!