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The Federal Trade Commission (FTC) and U.S. Environmental Protection Agency (EPA) are both considering tightening rules governing the advertising of vehicle fuel economy. New federal regulations, however, may not stem the recent tide of consumer class actions alleging that auto manufacturers have misled consumers with inaccurate miles-per-gallon (MPG) claims.

Since 1975, the FTC has published its Fuel Economy Guide, which advises auto manufacturers and dealers to prominently disclose their vehicles’ estimated city and highway MPG whenever they make fuel economy claims 1 . These MPG estimates must be based on EPA-mandated testing procedures. 2 FTC began soliciting comments on revisions to its Fuel Economy Guide in 2009. In May 2014, FTC issued its most specific questions to date, inviting the public to comment on the following issues:

Continue Reading Stricter Rules for Fuel Economy Advertising Are on the Horizon, But Are Unlikely to Put the Brakes on Consumer Class Actions

A California state court recently issued a preliminary ruling proposing to assess a statutory penalty against online discount retailer Overstock.com in the amount of $6.8 million for engaging in allegedly false and misleading discount advertising.1 Overstock.com was alleged to have advertised discounted prices that were pegged to the company’s own uncorroborated estimate of undiscounted retail value, rather than on actual data. The case highlights the risk that both online and brick-and-mortar retailers face if they advertise “discounts” from “regular” prices that have never actually been offered in commerce, in violation of the Federal Trade Commission guidelines against deceptive advertising (“FTC Guides”). The case also signals a major new threat to retailers engaging in these kinds of marketing strategies, which are common in the industry.

The Overstock.com case began in 2010, when a group of California district attorneys filed a private action under California’s False Advertising Law, Unfair Competition Law, and Consumer Legal Remedies Act. Their complaint alleged that Overstock.com “routinely and systematically made untrue and misleading comparative advertising claims” by comparing its retail prices to “advertised reference price(s)” (ARPs) that were not the prevailing market prices for its products. The district attorneys claimed that Overstock.com instead used misleading internal formulas designed to “inflate the comparative prices and artificially increase the discounts it claimed to be offering consumers.” The complaint also alleged that because Overstock.com was no longer merely a reseller of distressed merchandise, but was now actively engaged in original design, production and sale of a wide variety of products, it could not possibly advertise a “discount” for such products that were never sold at an undiscounted price.

Continue Reading California Court Proposes to Assess $6.8 Million Penalty Against Online Discount Retailer For Engaging in Commonly Used Pricing Claims