Hansen v. Newegg.com Americas, Inc., Docket B271477

Competition law: Unfair competition: Advertising: Consumer protection: Price: Origin: Geographic origin: Labeling of origin: Demurrer:

The complaint alleged that Newegg’s website advertised fictitious former price and discount information that was intended to induce customers to purchase its products (…) Hansen further asserted that he would not have purchased the products had he known the “true nature of the discounts.”

Newegg filed a demurrer arguing that Hansen lacked “standing to . . . assert any claim under the FAL, UCL or CLRA” because he had “suffered no loss of money or property as a result of Newegg’s actions.” According to Newegg, Hansen’s complaint showed he had received the “products he wanted for the prices he agreed to pay”; he had not alleged that “the products were different than what he wanted, were unsatisfactory in any way, or were worth less than what he paid for them.” Accordingly, he had suffered no form of “economic injury.”

Summary of Applicable Law:

Unfair competition law (Bus. & Prof. Code, § 17200) (UCL):

“The UCL’s purpose is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.” (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949.) “In service of that purpose, the Legislature framed the UCL’s substantive provisions in “broad, sweeping language” and provided ‘courts with broad equitable powers to remedy violations’.” (Kwikset, 51 Cal.4th at p. 320.)

False advertising law (Bus. & Prof. Code, § 17500 et seq.) (FAL):

“Any violation of the false advertising law . . . necessarily violates the UCL.” (Kasky, supra, 27 Cal.4th at p. 950.) Section 17500 “proscribes not only advertising which is false, but also advertising which, although true, is either actually misleading or which has a capacity, likelihood or tendency to deceive or confuse the public.” (Colgan v. Leatherman Tool Group, Inc. (2006) 135 Cal.App.4th 663, 679.) Section 17501 specifically limits the use of advertisements that purport to convey the former price of a product: “No price shall be advertised as a former price of any advertised thing, unless the alleged former price was the prevailing market price . . . within three months next immediately preceding the publication of the advertisement or unless the date when the alleged former price did prevail is clearly, exactly and conspicuously stated in the advertisement.” As used in section 17501, the term “‘former price’ . . . includes but is not limited to the following words and phrases when used in connection with advertised prices; ‘formerly –,’ ‘regularly –,’ ‘usually –,’ ‘originally –,’ ‘reduced from ___,’ ‘was ___ now ___,’ ‘___% off.’” (4 Cal. Code Regs., § 1301.) (…) Our Legislature has adopted multiple statutes that specifically prohibit the use of deceptive former price information and misleading statements regarding the amount of a price reduction. (See § 17501; Civ. Code, § 1770, subd. (a)(13).) These statutes make clear that, contrary to Newegg’s assertions, our Legislature has concluded “reasonable people can and do attach importance to a product’s former price in their purchasing decisions.” (Kwikset, supra, 51 Cal.4th at p. 333 [statutory prohibition on use of deceitful “Made in U.S.A.” labels shows that reasonable consumers do rely on that form on information]; see also id. at p. 329 [Legislature’s prohibition on deceitful Made in the U.S.A. labels demonstrates “the materiality of this representation”].) As noted in Hinojos, this conclusion is supported by empirical research showing that the presence of a higher original price affects consumers’ perceptions “about the product’s worth,” and increases their willingness to buy the product. (Hinojos, 718 F.3d at p. 1106.)

Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.) (CLRA)

The CLRA makes unlawful . . . various “unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.” The CLRA sets forth 27 proscribed acts or practices. (Civ. Code, § 1770, subd. (a)(1)-(27).) (Veera v. Banana Republic, LLC (2016) 6 Cal.App.5th 907, 915 (Veera).) One of those “proscribed acts” is “making false or misleading statements of fact concerning . . . the existence of, or amounts of, price reductions.” (Civ. Code, § 1770, subd. (a)(13).)

(Examples: are prohibited: To some consumers, processes and places of origin matter.  In particular, to some consumers, the ‘Made in U.S.A.’ label matters. (Kwikset, supra, 51 Cal.4th at pp. 328-329.) The Court noted that the “Legislature had recognized the materiality of this form of representation by specifically outlawing deceptive and fraudulent ‘Made in America’ representations.” (Id. at p. 329 (citing § 17533.7) [prohibiting deceitful representations that a product was “Made in the U.S.A.”] and Civ. Code, § 1770, subd. (a)(4) [prohibiting deceptive representations of geographic origin].) (…) the Legislature has also specifically prohibited false former price advertising, as it did false labeling of origin. (See § 17501, Civ. Code, § 1770, subd. (a).)

(…) Kwikset, however, held that a consumer’s decision to pay more for a product than he or she would have but for the misrepresentation is itself a form of economic injury: In the eyes of the law, a buyer forced to pay more than he or she would have is harmed at the moment of purchase.

(…) The Supreme Court has concluded that to establish standing under California’s UCL and FAL, a consumer need only allege that he or she relied on a misrepresentation when purchasing the product, and that he or she would not have purchased the product but for the representation. (Kwikset, supra, 51 Cal.4th at p. 317.)

(California Court of Appeal, Second Appellate District, July 31, 2018, Hansen v. Newegg.com Americas, Inc., Docket B271477, Certified for Publication, Acting P.J. Zelon)

Le demandeur soutient que le site Internet de l’entreprise défenderesse contenait des prix avant rabais qui ne correspondaient pas à la réalité, dans l’intention d’inciter le consommateur à l’achat. Il allègue en outre que sans cette publicité, il n’aurait pas acheté de produits à la défenderesse.

Celle-ci soutient pour sa part que la demande doit être rejetée d’entrée de cause, le demandeur n’ayant pas subi de dommage économique : les allégués de la demande démontreraient que le demandeur aurait reçu les produits qu’il voulait pour des prix qu’il avait consenti à payer, sans prétendre avoir reçu d’autres produits, des produits défectueux, ou de moindre valeur que la somme effectivement payée.

Cette affaire est jugée en application du droit californien, et les dispositions topiques sont les suivantes :

Loi contre la concurrence déloyale (Bus. & Prof. Code, § 17200) : il est rappelé ici que la loi utilise des formulations non restrictives, attribuant ainsi aux Tribunaux des compétences de décision étendues.

Loi contre la publicité mensongère (Bus. & Prof. Code, § 17500 et seq.) : toute violation de dite loi implique nécessairement violation de la loi contre la concurrence déloyale. Dite loi proscrit non seulement la publicité mensongère, mais aussi la publicité qui ne l’est pas mais qui a la capacité, la possibilité, ou la tendance de tromper ou d’induire en erreur le public. La Section 17501 de la loi limite spécifiquement la publicité d’un ancien prix : un ancien prix ne peut pas apparaître, sauf si cet ancien prix correspondait au prix du marché dans les trois mois antérieurs à la publicité, ou sauf si la publicité indique clairement la date à laquelle l’entreprise pratiquait effectivement cet ancien prix.

Le législateur a considéré que dans sa décision d’achat, le consommateur attachait de l’importance à l’ancien prix.

La loi « consumers legal remedies » (Civ. Code, § 1750 et seq.) : dite loi consacre l’illicéité de diverses méthodes déloyales ou trompeuses, soit avec l’objectif de vendre (biens ou services), soit qui résultent effectivement en une vente (biens ou services). La loi décrit 27 pratiques illicites. L’une de ces pratiques consiste à déclarer de manière fausse ou trompeuse des faits relatifs à l’existence ou au montant d’une réduction de prix. D’autres pratiques consistent notamment à tromper quant à l’origine géographique d’un produit.

Expressions Hair Design v. Schneiderman, Docket 15-1391

First Amendment (commercial speech): Credit cards: Price: Speech: Merchants' speech: Commercial speech: Antitrust:

Each time a customer pays for an item with a credit card, the merchant selling that item must pay a transaction fee to the credit card issuer. Some merchants balk at paying the fees and want to discourage the use of credit cards, or at least pass on the fees to customers who use them. One method of achieving those ends is through differential pricing—charging credit card users more than customers using cash. Merchants who wish to employ differential pricing may do so in two ways relevant here: impose a surcharge for the use of a credit card, or offer a discount for the use of cash. In N. Y. Gen. Bus. Law §518, New York has banned the former practice. The question presented is whether §518 regulates merchants’ speech and—if so—whether the statute violates the First Amendment.

(…) 1974 amendments to the Truth in Lending Act (TILA). The amendments prohibited card issuers from contractually preventing merchants from giving discounts to customers who paid in cash. See §306, 88 Stat. 1515. The law, however, said nothing about surcharges for the use of credit.

In 1981, Congress further delineated the distinction between discounts and surcharges by defining “regular price.” Where a merchant “tagged or posted” a single price, the regular price was that single price. Cash Discount Act, §102(a), 95 Stat. 144. If no price was tagged or posted, or if a merchant employed a two-tag approach—posting one price for credit and another for cash—the regular price was whatever was charged to credit card users. Ibid. Because a surcharge was defined as an increase from the regular price, there could be no credit card surcharge where the regular price was the same as the amount charged to customers using credit cards. The effect of all this was that a merchant could violate the surcharge ban only by posting a single price and charging credit card users more than that posted price.

The federal surcharge ban was short lived. Congress allowed it to expire in 1984 and has not renewed the ban since. The provision preventing credit card issuers from contractually barring discounts for cash, however, remained in place. With the lapse of the federal surcharge ban, several States, New York among them, immediately enacted their own surcharge bans. Passed in 1984, N. Y. Gen. Bus. Law §518 adopted the operative language of the federal ban verbatim, providing that “no seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.” N. Y. Gen. Bus. Law Ann. §518 (West 2012); see also 15 U. S. C. §1666f(a)(2)(1982 ed.).

In addition to these state legislative bans, credit card companies—though barred from prohibiting discounts for cash—included provisions in their contracts prohibiting merchants from imposing surcharges for credit card use. For most of its history, the New York law was essentially coextensive with these contractual prohibitions. In recent years, however, merchants have brought antitrust challenges to contractual no-surcharge provisions. Those suits have created uncertainty about the legal validity of such contractual surcharge bans.

(We limit our consideration to the single-sticker pricing regime for present purposes. Petitioners’ affidavits and briefing reference other potential pricing schemes, which may be considered by the Court of Appeals to the extent it deems appropriate).

(…) Where a seller posts a single sticker price, it is reasonable to treat that sticker price as the “usual or normal amount” and conclude, as the court below did, that a merchant imposes a surcharge when he charges a credit card user more than that sticker price.

The law (Section 518) tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer. Sellers are free to charge $10 for cash and $9.70, $10, $10.30, or any other amount for credit. What the law does regulate is how sellers may communicate their prices. A merchant who wants to charge $10 for cash and $10.30 for credit may not convey that price any way he pleases. He is not free to say “$10, with a 3% credit card surcharge” or “$10, plus $0.30 for credit” because both of those displays identify a single sticker price—$10—that is less than the amount credit card users will be charged. Instead, if the merchant wishes to post a single sticker price, he must display $10.30 as his sticker price. Accordingly, while we agree with the Court of Appeals that §518 regulates a relationship between a sticker price and the price charged to credit card users, we cannot accept its conclusion that §518 is nothing more than a mine-run price regulation. In regulating the communication of prices rather than prices themselves, §518 regulates speech. (Because it concluded otherwise, the Court of Appeals had no occasion to conduct a further inquiry into whether §518, as a speech regulation, survived First Amendment scrutiny. On that question, the parties dispute whether §518 is a valid commercial speech regulation under Cen­tral Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of N. Y., 447 U. S. 557 (1980), and whether the law can be upheld as a valid disclosure requirement under Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U. S. 626 (1985).) (To assess the statute’s constitutionality, the Court of Appeals may need to consider a question we need not answer here: whether the statute permits two-sticker pricing schemes like the one petitioner Expressions currently uses. Respondents’ argument that §518 is a constitutionally valid disclosure requirement rests on an interpretation of the statute that allows such two-sticker schemes.)

(U.S.S.C., March 29, 2017, Expressions Hair Design v. Schneiderman, Docket 15-1391, C.J. Roberts, no dissenter).

En promulguant N. Y. Gen. Bus. Law §518, l'état de New York a proscrit l'imposition par les commerçants d'une surcharge en défaveur de ceux qui paient avec une carte de crédit pour décourager l'usage de ce moyen de paiement. La question que pose cette affaire est de savoir si dite loi règle ou non la liberté d'expression des commerçants et dans l'affirmative, si elle porte atteinte au Premier Amendement. La Cour ne tranche que la première de ces deux questions.

(…) Quand un vendeur indique le prix sur la chose proposée à la vente, il est raisonnable de concevoir ce prix comme le montant "usuel", de sorte que le commerçant imposera une surcharge si le prix à payer par l'usager d'une carte de crédit est supérieur à ce prix usuel.

La Section 518 ne donne aucune indication aux commerçants s'agissant des montants qu'ils sont autorisés à percevoir d'un client qui règle en espèce ou d'un client qui règle par carte de crédit. Un vendeur peut facturer $10 contre du cash et $9.70, $10, $10.30, ou tout autre montant, à l'usager d'une carte de crédit. Ce que la loi stipule, c'est comment les vendeurs peuvent communiquer leurs prix. Un commerçant qui entend facturer $10 pour un paiement en espèces et $10.30 pour un paiement par carte ne peut pas communiquer ce prix comme il l'entend. Il ne peut poster "$10, avec une surcharge de 3% en cas de paiement par carte", du fait que ce libellé identifie un prix usuel inférieur au montant que devra payer celui qui utilise une carte. Cependant, si ce commerçant n'entend poster qu'un seul prix, il devra indiquer la somme de $10.30 comme étant le prix de l'article. Dès lors, la Cour convient que la Section 518 règle la relation entre le prix posté sur l'article et le prix facturé à l'usager d'une carte de crédit. Mais en réglant la communication des prix plutôt que les prix eux-mêmes, la Section 518 réglemente la liberté d'expression. Comme la Cour d'appel a jugé différemment cette dernière question, elle n'a pas eu l'occasion de déterminer si la Section 518 violait le Premier Amendement. La cause lui est conséquemment retournée. Pour apprécier la constitutionnalité de la Section 518, l'autorité précédente pourrait devoir examiner une question que la Cour n'a en l'espèce pas besoin de trancher : celle de savoir si dite Section permet à un commerçant de poster deux prix sur un article.