May Co. to Pay Fine to Settle False Ad Suits
May Co. agreed to pay $363,183 in civil penalties and costs Tuesday to settle two lawsuits charging it with false advertising and unfair competition at its 38 Southern California department stores.
The lawsuits, filed on behalf of the district attorneys’ offices of Los Angeles, Orange and Sacramento counties, claimed that May Co. misled consumers by, among other things, falsely advertising goods as being on sale when they were not, and by publicizing discounts of up to 60% when in fact the real discount was just 10%.
The consumer protection lawsuits were filed against May Co.-California, a division of May Department Stores of St. Louis. Although the company agreed to the settlements and injunctions barring it from false advertising, May Co. did not admit any wrongdoing.
Company officials referred all questions about the suit to Edgar S. Mangiafico, May Co.-California chairman, who was unavailable for comment.
Gay Geiser-Sandoval, a deputy district attorney in Orange County, said consumer fraud investigators are investigating other retailers for similar violations, but declined to name them.
Misrepresented Duration of Sales
The largest settlement against May Co., $295,000, involved complaints brought jointly by the Los Angeles and Orange County district attorneys’ offices in response to complaints about advertising practices. The complaint alleged that the department store company used newspaper ads, mailers and store placards to advertise price reductions of limited durations, when in fact the prices were available for much longer periods.
Some of the newspaper ads appeared in The Times and the Orange County Register.
The second lawsuit, jointly filed by Los Angeles and Sacramento counties, charged May Co. with false advertising and unfair competition for allegedly falsely representing that pillows contained 100% down feathers, when they did not.
In the first complaint, investigators said May Co. falsely advertised the size of some of its discounts. They said that the supposed regular or original prices used to calculate the advertised discounts were bogus.
“What you have is a case where the original price was never used,” explained Geiser-Sandoval. “In some cases, the item was never sold at that original price. It was brought in and immediately marked down. That way you can show a larger discount.”
Geiser-Sandoval said, for example, that a piece of merchandise might be advertised at 60% off the regular price for one day only, when in fact it was marked down only 10% from the previously offered price.
“This creates the illusion of greater savings than the consumer actually receives,” she said.
Another problem, she said, was that the merchandise was advertised as “on sale” for a limited time when there actually was no sale. When the supposed sale ended, the same prices remained in effect.
“People were going in thinking they were getting great big savings, getting a great deal when they weren’t,” Geiser-Sandoval said. “The problem with sale advertising is that the public assumes that if the sale is for one day or a short duration, they feel like they have to get in there and get it.”
Geiser-Sandoval said the investigation into May Co.’s practices began in July, 1987, and centered on “sales” of jewelry, electronics, furniture and bedding.
The court order requires that certain conditions be met before price comparisons can be made between the “regular” or “original” price and a “sale” price. The terms guarantee that all regular or original prices will be at levels that are not artificially high, the basis for inflated markdowns.
The order also requires the company to keep its newspaper ads on file for two years and that they be made available for inspection by the district attorney’s office.
