Apparently, the “O” in Overstock.com stands for “Overstating discounts and misleading customers,” at least according to the district attorneys in seven California counties. They’ve filed suit against the online retailer, alleging it made untrue statements about its pricing.

The 33-page complaint filed in Alameda County Superior Court claims that, as early as Jan. 2006, “Overstock routinely and systematically made untrue and misleading comparative advertising claims about the prices of its products… used various misleading measures to inflate the comparative prices, and thus artificially increase the discounts it claimed to be offering consumers.”

Among examples cited in the suit is one in which Overstock advertised a patio set for $449, stating that the next best comparable price listed on the site for the patio set was $999.99. But when the furniture was delivered, it had a Walmart price sticker on it with a price of $247.

“Such misrepresentations were likely to discourage consumers from making the effort to search elsewhere for lower prices,” the complaint reads.

The site’s general counsel calls the patio set example an isolated incident and says the district attorneys are misunderstanding how the site’s price comparison system works.

Here is what pops up when you click on the “What’s this?” link next to the price comparisons on Overstock:

We have provided additional merchant listings to allow you to compare our pricing to that of other merchants. You may visit these sites to verify the pricing information presented. Though we believe the information presented is timely, there may be recent intervening price changes or promotions that are not reflected on our site. We assume no responsibility for the accuracy of the price and shipping information of these other merchants. Also, we have made no effort, nor do we represent, that the retailers listed comprise a comprehensive list of retailers where the identified product is being sold.

“We tell our customers what it means,” the Overstock exec said. “These [the district attorneys] have taken the position that they don’t think our customers understand.”

Over on his personal blog, financial columnist Gary Weiss did a quick search for a book to compare prices. According to Overstock, which was selling the book for $11.06, its “compare” price was $20.55. However Weiss found the same book on sale at Amazon and Barnes & Noble for $9.90.

Is it misleading for Overstock to omit comparable prices from obvious retailers like Amazon and Walmart, or is it an acceptable business practice?

Overstock.com sued by district attorneys [Mercury News]
California Sues Overstock.com on Pricing Scam [Gary Weiss]

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