Michelle Cortez Gomez v. Kohl's Corporation

Madison, Wisconsin consumer law lawyer represented the Plaintiff who sued on a fraud theory.

The Fraudulent Representations Law (Wisconsin Statutes section 100.18) broadly prohibits advertising or sales claims that are "untrue, deceptive or misleading."



1. This is a class action brought by Plaintiff, individually and on behalf of all others

similarly situated (collectively referred to as "Class Members” or the "Class”), against Kohl's

Corporation and its wholly-owned operating subsidiary, Kohl's, Inc. (collectively "Kohl's” or

"Defendants”).



2. Plaintiff generally alleges that Kohl's violates Wisconsin law by making false and

misleading price comparisons, and offers of discounts, in connection with the advertisement and

sale of its merchandise.

Case: 3:23-cv-00678 Document #: 1 Filed: 10/02/23 Page 1 of 292



3. The false and misleading price comparisons appear in a variety of places, including

on price tags affixed to items, on signs posted in Kohl's retails stores, in print advertisements, in

mailing circulars, and on the Kohl's website—Kohls.com. Through these mediums, Kohl's

represents that consumers can buy products at a substantial discount from their "Regular” or

"Original” prices. In reality, and as confirmed by an investigation by Plaintiff's counsel, the

purported "sales” and discounts are illusory, fictitious and in violation of Wisconsin law because

the higher comparison prices are arbitrary and inflated prices that do not reflect the actual prices

at which Kohl's intends to sell its products, or the actual prices at which Kohl's has recently and

regularly sold or offered to sell its products in the regular course of its business.



4. As a direct result of Kohl's false and misleading price comparisons, Plaintiff and

the Class have suffered monetary damages in multiple ways. For example, Plaintiff and the Class

have not received the benefit of the bargain that Kohl's promises them because the products they

purchased from Kohl's do not have the higher value and worth that Kohl's represents they have

through its false and misleading "Regular” and "Original” price comparisons. In addition, the false

and misleading price comparison scheme creates a higher demand for Kohl's products than would

occur absent the misrepresentations, which in turn has caused Plaintiff and the Class to pay

artificially and inflated prices for Kohl's products that would not exist absent the false price-

comparison scheme. Kohl's false price-comparison scheme also caused Plaintiff and the Class to

buy items, and spend money, they would not otherwise buy/spend absent the false price

comparisons.



5. The Federal Trade Commission ("FTC”) describes false former pricing schemes,

similar in all material respects to the scheme employed by Kohl's, as both deceptive and injurious:

One of the most commonly used forms of bargain advertising is to offer a reduction

from the advertiser's own former price for an article. If the former price is the actual,

bona fide price at which the article was offered to the public on a regular basis for

a reasonably substantial period of time, it provides a legitimate basis for the

advertising of a price comparison. Where the former price is genuine, the bargain

being advertised is a true one. If, on the other hand, the former price being

advertised is not bona fide but fictitious—for example, where an artificial, inflated

price was established for the purpose of enabling the subsequent offer of a large

reduction—the "bargain” being advertised is a false one; the purchaser is not

receiving the unusual value he expects.

16 C.F.R. § 233.1(a).



6. The FTC provides the following example of deceptive conduct, which is materially

indistinguishable from Kohl's conduct:



John Doe is a retailer of Brand X fountain pens, which cost him $5 each. His usual

markup is 50 percent over cost; that is, his regular retail price is $7.50. In order

subsequently to offer an unusual "bargain”, Doe begins offering Brand X at $10

per pen. He realizes that he will be able to sell no, or very few, pens at this inflated

price. But he doesn't care, for he maintains that price for only a few days. Then he

"cuts” the price to its usual level--$7.50--and advertises: "Terrific Bargain: X Pens,

Were $10, Now Only $7.50!” This is obviously a false claim. The advertised

"bargain” is not genuine.

16 C.F.R. § 233.1(C).



7. Wisconsin law explicitly forbids such practices. It generally provides that the use

of arbitrary and inflated comparison prices "can only serve to deceive or mislead” consumers and

when used "as an inducement to the sale of [merchandise] is injurious to both the consuming public

and competitors, and is an unfair trade practice and unfair method of competition” as a matter of

law. ATCP 124.01. More specifically, Wisconsin law prohibits a seller, such as Kohl's, from

advertising any price comparison based on a price other than one at which the seller actually sold

the same merchandise in the 90 days immediately preceding the advertisement, or one at which

the seller actually offered the merchandise for sale for at least 4 weeks during the 90 days

immediately preceding the advertisement. ATCP 124.04(1) and 124.05(1). But, the higher

comparison price cannot be based on unusual and sporadic transactions that do not represent the

seller's normal selling price. Instead, Wisconsin law also prohibits retailers from making just a

few or intermittent sales at the higher comparison price in order to create the illusion of a

discount—precisely the conduct that the FTC explains is a "false claim” under 16 C.F.R. §

233.1(C). Specifically, Wisconsin law prohibits a retailer from advertising a higher comparison

price that "exceeds the seller's cost plus the percentage markup regularly used by the seller in the

actual sale of such property or services, or consumer property or services of similar class or kind,

in the seller's recent and regular course of business.” ATCP 124.04(2) and 124.05(2) (emphasis

added). In short, Wisconsin law demands that a higher comparison price reflect the "regular” price

at which "actual sale[s]” occurred "in the seller's recent and regular course of business.” Id. As

detailed below, Kohl's systematically violates that law because it offers so many discounting

mechanisms that its customers hardly, if ever, pay the full comparative price which, in turn, means

that Kohl's comparison prices are not equal to but, instead, always exceed Kohl's "cost plus . . .

the percentage markup regularly used by [Kohl's] in the actual sale of such property.” Id.

(emphasis added).



8. These laws exist because legislatures know that consumers rely on higher

comparison prices (such as "Regular” and "Original” prices) to convey information about a

product's market value, and that false price comparisons are an effective way to sell products that

consumers would not otherwise buy, and to cause consumers to pay more for a product than they

would normally pay, absent the false price comparison. Indeed, academic research shows that

reasonable consumers infer that a "Regular” or "Original” price is a price at which the item

previously and regularly sold at that retailer. Compeau, Larry, Joan Lindsey-Mullikin, Dhruv

Grewal and Ross Petty, (2004) "Consumers' Interpretations of the Semantic Phrases Found in

Reference Price Advertisements,” Journal of Consumer Affairs, 38 (Summer), 178-187.





9. Numerous other studies show that consumers are much more likely to purchase an

item if they are told that it is being offered at a price less than the price at which the seller or its

competitors have recently sold the product. In other words, consumers are more likely to purchase

an item if they are told that an item normally sells at a higher price (and is therefore worth more)

than what they are currently being asked to pay for it. See, e.g., Dhruv Grewal & Larry D.

Compeau, Comparative Price Advertising: Informative or Deceptive?, 11 J. of Pub. Pol'y & Mktg.

52, 55 (Spring 1992) ("[b]y creating an impression of savings, the presence of a higher reference

price enhances [consumers'] perceived value and willingness to buy [a] product.”); see also

Compeau & Grewal, in Comparative Price Advertising: Believe It Or Not, J. of Consumer Affairs,

Vol. 36, No. 2, at 287 (Winter 2002) (noting that "decades of research support the conclusion that

advertised reference prices do indeed enhance consumers' perceptions of the value of the deal,”

and concluding that "[c]onsumers are influenced by comparison prices even when the stated

reference prices are implausibly high.”); Joan Lindsey-Mullikin & Ross D. Petty, Marketing

Tactics Discouraging Price Search: Deception and Competition, 64 J. of Bus. Research 67 (January

2011) (concluding that "[r]eference price ads strongly influence consumer perceptions of value”);

Praveen K. Kopalle & Joan Lindsey-Mullikin, The Impact of External Reference Price On

Consumer Price Expectations, 79 J. of Retailing 225 (2003) (concluding that "research has shown

that retailer-supplied reference prices clearly enhance buyers' perceptions of value” and "have a

significant impact on consumer purchasing decisions”); Dr. Jerry B. Gotlieb & Dr. Cyndy Thomas

Fitzgerald, An Investigation Into the Effects of Advertised Reference Prices On the Price

Consumers Are Willing To Pay For the Product, 6 J. of App'd Bus. Res. 1 (1990) (concluding that

"consumers are likely to be misled into a willingness to pay a higher price for a product simply

because the product has a higher reference price”).



10. As alleged herein, Kohl's has routinely and systematically violated Wisconsin's

prohibitions against false price comparisons because its "Regular” and "Original” comparison

prices are not the prices at which Kohl's regularly sells its products. Plaintiff and members of the

proposed Class (as defined below) were exposed to and victims of Defendants' false price

comparisons when they purchased products from Kohl's. Plaintiff and the Class did not receive

products worth the amounts reflected by Kohl's higher comparison prices, and therefore did not

receive the benefit of the bargain that Kohl's advertised they would receive through its use of

artificially inflated and fictitious comparison prices. Instead, Plaintiff and members of the Class

received items of lesser value than what Kohl's promised them, while Kohl's was unjustly enriched

by selling more products, and at higher prices, than it otherwise would be able to sell absent the

false price-comparison advertising scheme."

Notice of Appeal, filed by Michelle Cortez Gomez. (voc) (Entered: 07/12/2024)