The Case of the Disappearing Discount

Advertising a discount that disappears at point of purchase is a problem. A customer of Hobby Lobby, wanted to buy a picture frame. She believed she was getting a 50 percent discount on a photo frame due to an in-store sign stating "Photo Frames 50% OFF the Marked price.” Hobby Lobby didn’t honor the discount but instead pointed to disclaimer language that said, "DISCOUNTS PROVIDED EVERY DAY; MARKED PRICES REFLECT GENERAL U.S. MARKET VALUE FOR SIMILAR PRODUCTS." The customer brought a class action suit based on false advertising as well as other causes of action. Hobby Lobby’s motion to dismiss was denied. The court held that a reasonable consumer could have been misled despite the disclaimer language. So the suit will proceed.

WHY YOU SHOULD KNOW THIS. This is just one example of recent cases and settlements involving phantom discounts. Federal Trade Commission regulations and state laws govern advertising. The basics of proper advertising are pretty standard. Don’t use unfair, deceptive, untrue or misleading advertising. Advertising a price or a discount and then not honoring it falls squarely within prohibited conduct. Hobby Lobby’s disclaimer language didn’t excuse it from complying with the advertising rules.