November 18, 2010, 4:07 PM

Civil suit charges Overstock with misrepresenting prices

Overstock.com defends its pricing practices.

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A civil lawsuit filed in Superior Court of California in Alameda County yesterday charges Overstock.com Inc. with making “untrue and misleading” claims about its prices. The suit, which was filed by seven Northern California district attorneys, alleges that Overstock’s comparison prices, which the web retailer uses as a basis for setting discounts, are consistently inaccurate.

The suit states that since January 1, 2006, “Overstock routinely and systematically made untrue and misleading comparative advertising claims about the prices of its products.” The complaint charges that prices presented under the labels “List Price and “Compare At (Overstock) Price” were not prevailing market prices and that Overstock “used various misleading measures to inflate the comparative prices, and thus artificially increase the discounts it claimed to be offering customers.”

The suit also charges that Overstock.com’s misleading pricing applied to “virtually every product listing” since January 2006, and seeks at least $15 million in fines and restitution for misleading pricing information published on Overstock.com.

As an example, the complaint cites a set of patio table and chairs that was priced at $449 on Overstock.com, with a list price of $999.99. A consumer who ordered the product said it came in a box with a Wal-Mart sticker showing a sale price of $247. The suit contends that Wal-Mart was offering the patio set for $247 and later marked it down to $218, and charges that the Overstock.com list price was “untrue and misleading.”

Overstock, No. 28 in the Internet Retailer Top 500 Guide, has acknowledged that the list price in the example was a mistake, says Mark Griffin, general counsel. “This is an example of a narrow exception to the general rule,” Griffin says. “We have discussed this since 2007. We told them it was a mistake, nothing more. Our business is highly competitive and we use standard pricing practices. Are we perfect? No, but we do provide pricing comparisons and we think consumers are well aware of what those practices are about. This is not as it is alleged.”

The web-only mass merchant “stands by all our advertising practices, including providing comparison values which we thoroughly explain on our site,” says Jonathan Johnson, president.” We have been singled out for standard industry practices, which we look forward to demonstrating in court.”

The district attorneys listed in the suit represent Alameda, Marin, Monterey, Napa, Santa Clara, Shasta and Sonoma counties in California.

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