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Utah's Overstock.com Inc. is under fire from district attorneys in seven northern California counties who claim the online discount retailer regularly made false and misleading claims about the deals it offered consumers.
In a 33-page complaint filed in Alameda County Superior Court, the DAs contend that beginning in 2006 the company regularly made untrue and misleading advertising claims that inflated the discounts available on its products.
"Overstock's misrepresentations about its pricing were likely to mislead consumers into believing that [its] prices would always be significantly lower than the prices offered by other merchants for the identical products," the lawsuit stated.
And such misrepresentations, the lawsuit argues, were likely to discourage consumers from making the effort to search elsewhere for lower prices.
But Mark Griffin, Overstock.com's general counsel, said while the company's pricing processes aren't perfect, it nevertheless does as good a job as anyone.
"The bottom line is that people shop our website in large part because of the prices we offer," he said. "So we have to be as accurate as possible because we know that our customers can easily check the prices that are available elsewhere."
The DAs, however, contend Overstock's allegedly misleading advertised discounts tended to discourage consumers from searching other sites for lower prices.
The lawsuit alleges that in determining its advertised discounts, the company regularly chose the highest price at which a product was selling in the marketplace. It then used that figure as its "list price" in calculating the discount it was offering.
"Overstock's untrue and misleading representations accompanied virtually every product listing on its site beginning no later than Jan. 1, 2006," the lawsuit states.
The complaint offered an example: It claimed that in 2007 Overstock sold a patio set on its website for $449 and claimed the "list price" was $999. A consumer who ordered the set, however, reported that it came in a box with a Wal-Mart sticker showing the sale price to be $247.
Griffin, however, said that example was an exception. "We purchased that product from another vendor and the information we received [from that vendor] just wasn't correct."
In a statement responding to the filing of the lawsuit, Overstock.com President Jonathan Johnson said the company stands by all of its advertising practices, including providing comparison values that are explained on its website.
"We have been singled out for standard industry practices, which we look forward to demonstrating in court," he said.
The lawsuit is seeking $15 million in restitution and penalties.