Date: 07-15-2024

Case Style:

Michelle Cortez Gomez v. Kohl's Corporation

Case Number: 3:23-CV-678

Judge: James D. Peterson

Court: United States District Court for the Western District of Wisconsin (Kent County)

Plaintiff's Attorney:

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Defendant's Attorney: Matthew M. Wuest, Meredith Slawe, Micahel W. McGigue, Jr., Emma J. Jewell, James Saylor, Lauri A. Mazzuchetti

Description:

Madison, Wisconsin consumer law lawyer represented the Plaintiff who sued on a fraud theory.

The Fraudulent Representations Law (Wisconsin Statutes section 100.18) broadly prohibits advertising or sales claims that are "untrue, deceptive or misleading."

1. This is a class action brought by Plaintiff, individually and on behalf of all others
similarly situated (collectively referred to as “Class Members” or the “Class”), against Kohl’s
Corporation and its wholly-owned operating subsidiary, Kohl’s, Inc. (collectively “Kohl’s” or
“Defendants”).

2. Plaintiff generally alleges that Kohl’s violates Wisconsin law by making false and
misleading price comparisons, and offers of discounts, in connection with the advertisement and
sale of its merchandise.
Case: 3:23-cv-00678 Document #: 1 Filed: 10/02/23 Page 1 of 292

3. The false and misleading price comparisons appear in a variety of places, including
on price tags affixed to items, on signs posted in Kohl’s retails stores, in print advertisements, in
mailing circulars, and on the Kohl’s website—Kohls.com. Through these mediums, Kohl’s
represents that consumers can buy products at a substantial discount from their “Regular” or
“Original” prices. In reality, and as confirmed by an investigation by Plaintiff’s counsel, the
purported “sales” and discounts are illusory, fictitious and in violation of Wisconsin law because
the higher comparison prices are arbitrary and inflated prices that do not reflect the actual prices
at which Kohl’s intends to sell its products, or the actual prices at which Kohl’s has recently and
regularly sold or offered to sell its products in the regular course of its business.

4. As a direct result of Kohl’s false and misleading price comparisons, Plaintiff and
the Class have suffered monetary damages in multiple ways. For example, Plaintiff and the Class
have not received the benefit of the bargain that Kohl’s promises them because the products they
purchased from Kohl’s do not have the higher value and worth that Kohl’s represents they have
through its false and misleading “Regular” and “Original” price comparisons. In addition, the false
and misleading price comparison scheme creates a higher demand for Kohl’s products than would
occur absent the misrepresentations, which in turn has caused Plaintiff and the Class to pay
artificially and inflated prices for Kohl’s products that would not exist absent the false price-
comparison scheme. Kohl’s false price-comparison scheme also caused Plaintiff and the Class to
buy items, and spend money, they would not otherwise buy/spend absent the false price
comparisons.

5. The Federal Trade Commission (“FTC”) describes false former pricing schemes,
similar in all material respects to the scheme employed by Kohl’s, as both deceptive and injurious:
One of the most commonly used forms of bargain advertising is to offer a reduction
from the advertiser's own former price for an article. If the former price is 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, it provides a legitimate basis for the
advertising of a price comparison. Where the former price is genuine, the bargain
being advertised is a true one. If, on the other hand, the former price being
advertised is not bona fide but fictitious—for example, where an artificial, inflated
price was established for the purpose of enabling the subsequent offer of a large
reduction—the “bargain” being advertised is a false one; the purchaser is not
receiving the unusual value he expects.
16 C.F.R. § 233.1(a).

6. The FTC provides the following example of deceptive conduct, which is materially
indistinguishable from Kohl’s conduct:

John Doe is a retailer of Brand X fountain pens, which cost him $5 each. His usual
markup is 50 percent over cost; that is, his regular retail price is $7.50. In order
subsequently to offer an unusual “bargain”, Doe begins offering Brand X at $10
per pen. He realizes that he will be able to sell no, or very few, pens at this inflated
price. But he doesn’t care, for he maintains that price for only a few days. Then he
“cuts” the price to its usual level--$7.50--and advertises: “Terrific Bargain: X Pens,
Were $10, Now Only $7.50!” This is obviously a false claim. The advertised
“bargain” is not genuine.
16 C.F.R. § 233.1(C).

7. Wisconsin law explicitly forbids such practices. It generally provides that the use
of arbitrary and inflated comparison prices “can only serve to deceive or mislead” consumers and
when used “as an inducement to the sale of [merchandise] is injurious to both the consuming public
and competitors, and is an unfair trade practice and unfair method of competition” as a matter of
law. ATCP 124.01. More specifically, Wisconsin law prohibits a seller, such as Kohl’s, from
advertising any price comparison based on a price other than one at which the seller actually sold
the same merchandise in the 90 days immediately preceding the advertisement, or one at which
the seller actually offered the merchandise for sale for at least 4 weeks during the 90 days
immediately preceding the advertisement. ATCP 124.04(1) and 124.05(1). But, the higher
comparison price cannot be based on unusual and sporadic transactions that do not represent the
seller’s normal selling price. Instead, Wisconsin law also prohibits retailers from making just a
few or intermittent sales at the higher comparison price in order to create the illusion of a
discount—precisely the conduct that the FTC explains is a “false claim” under 16 C.F.R. §
233.1(C). Specifically, Wisconsin law prohibits a retailer from advertising a higher comparison
price that “exceeds the seller’s cost plus the percentage markup regularly used by the seller in the
actual sale of such property or services, or consumer property or services of similar class or kind,
in the seller’s recent and regular course of business.” ATCP 124.04(2) and 124.05(2) (emphasis
added). In short, Wisconsin law demands that a higher comparison price reflect the “regular” price
at which “actual sale[s]” occurred “in the seller’s recent and regular course of business.” Id. As
detailed below, Kohl’s systematically violates that law because it offers so many discounting
mechanisms that its customers hardly, if ever, pay the full comparative price which, in turn, means
that Kohl’s comparison prices are not equal to but, instead, always exceed Kohl’s “cost plus . . .
the percentage markup regularly used by [Kohl’s] in the actual sale of such property.” Id.
(emphasis added).

8. These laws exist because legislatures know that consumers rely on higher
comparison prices (such as “Regular” and “Original” prices) to convey information about a
product’s market value, and that false price comparisons are an effective way to sell products that
consumers would not otherwise buy, and to cause consumers to pay more for a product than they
would normally pay, absent the false price comparison. Indeed, academic research shows that
reasonable consumers infer that a “Regular” or “Original” price is a price at which the item
previously and regularly sold at that retailer. Compeau, Larry, Joan Lindsey-Mullikin, Dhruv
Grewal and Ross Petty, (2004) “Consumers’ Interpretations of the Semantic Phrases Found in
Reference Price Advertisements,” Journal of Consumer Affairs, 38 (Summer), 178-187.


9. Numerous other studies show that consumers are much more likely to purchase an
item if they are told that it is being offered at a price less than the price at which the seller or its
competitors have recently sold the product. In other words, consumers are more likely to purchase
an item if they are told that an item normally sells at a higher price (and is therefore worth more)
than what they are currently being asked to pay for it. See, e.g., Dhruv Grewal & Larry D.
Compeau, Comparative Price Advertising: Informative or Deceptive?, 11 J. of Pub. Pol’y & Mktg.
52, 55 (Spring 1992) (“[b]y creating an impression of savings, the presence of a higher reference
price enhances [consumers’] perceived value and willingness to buy [a] product.”); see also
Compeau & Grewal, in Comparative Price Advertising: Believe It Or Not, J. of Consumer Affairs,
Vol. 36, No. 2, at 287 (Winter 2002) (noting that “decades of research support the conclusion that
advertised reference prices do indeed enhance consumers’ perceptions of the value of the deal,”
and concluding that “[c]onsumers are influenced by comparison prices even when the stated
reference prices are implausibly high.”); Joan Lindsey-Mullikin & Ross D. Petty, Marketing
Tactics Discouraging Price Search: Deception and Competition, 64 J. of Bus. Research 67 (January
2011) (concluding that “[r]eference price ads strongly influence consumer perceptions of value”);
Praveen K. Kopalle & Joan Lindsey-Mullikin, The Impact of External Reference Price On
Consumer Price Expectations, 79 J. of Retailing 225 (2003) (concluding that “research has shown
that retailer-supplied reference prices clearly enhance buyers’ perceptions of value” and “have a
significant impact on consumer purchasing decisions”); Dr. Jerry B. Gotlieb & Dr. Cyndy Thomas
Fitzgerald, An Investigation Into the Effects of Advertised Reference Prices On the Price
Consumers Are Willing To Pay For the Product, 6 J. of App’d Bus. Res. 1 (1990) (concluding that
“consumers are likely to be misled into a willingness to pay a higher price for a product simply
because the product has a higher reference price”).

10. As alleged herein, Kohl’s has routinely and systematically violated Wisconsin’s
prohibitions against false price comparisons because its “Regular” and “Original” comparison
prices are not the prices at which Kohl’s regularly sells its products. Plaintiff and members of the
proposed Class (as defined below) were exposed to and victims of Defendants’ false price
comparisons when they purchased products from Kohl’s. Plaintiff and the Class did not receive
products worth the amounts reflected by Kohl’s higher comparison prices, and therefore did not
receive the benefit of the bargain that Kohl’s advertised they would receive through its use of
artificially inflated and fictitious comparison prices. Instead, Plaintiff and members of the Class
received items of lesser value than what Kohl’s promised them, while Kohl’s was unjustly enriched
by selling more products, and at higher prices, than it otherwise would be able to sell absent the
false price-comparison advertising scheme."

Outcome: Notice of Appeal, filed by Michelle Cortez Gomez. (voc) (Entered: 07/12/2024)

Plaintiff's Experts:

Defendant's Experts:

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