5 Highlights From California Judge’s False Advertising Ruling Against Overstock.com

You might remember how earlier this year, a court in California ruled that Overstock.com violates California’s unfair competition and false advertising laws. Simply put: a lot of the “original” prices that they list for items they sell are lies.

Over at Truth in Advertising, they combed through the entire court decision for juicy tidbits from the evidence presented at trial, including internal e-mails. Neat.

1. It ain’t overstock. Overstock.com used to call itself an “online outlet,” but it’s not a closeout store or an “outlet” in the traditional sense. It’s more like the chain outlet malls that dot the landscape, with a little bit of overstock or flawed merchandise from regular stores, and an awful lot of items sent there as a regular old retail channel.

2. You should compare prices. They claim to do the work of comparing prices to other retailers. Maybe they do, but outside analysis shows that the company’s prices don’t reflect the actual current prices at other retailers.

3. Make stuff up so the customer is happy. “Original prices” posted on the site, called Average Reference Prices (ARP) in the biz, are only intended to make you feel like you got a good deal. “Internal research has shown that the best predictor of whether a customer returns to our site is whether they feel they have ‘received a good deal,'” noted one helpful internal e-mail.

4. -400% off. Imagine being the customer who paid $450 for a patio set advertised as having an original price of $1000, only to discover a $247 price sticker from Walmart on it.

5. There, we fixed it. Truth in Advertising notes that based on internal e-mails, Overstock found a solution to this problem: make sure nothing gets shipped out with original price tags on it. Of course!


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