alleged price bait-and-switch with large “processing fee” suffices to plead Lanham Act false advertising

New Vision Unlimited, LLC v. Glasses USA, Inc., 2023 WL
3535386, No. 22-22534-Civ-Scola (S.D. Fla. May 18, 2023)

New Vision, an eye-care professional and provider of optical
goods and services, including contact lens fittings and contact lens sales with
seven brick-and-mortar locations and two websites, brought a putative class
action against four online contact-lens retailers for Lanham Act false advertising.
The court denied a motion to dismiss.

Defendants promote their lenses through Google and other
search engines, advertising low prices that are allegedly “far lower” than the
prices New Vision and other “honest” retailers advertise. Consumers of contact
lenses are allegedly very price conscious and thus this works, but, New Vision
alleged, “only after a customer has filled out online forms, providing details
about her prescriptions, contact information for her doctor (to verify her
prescription), and certain biographical and payment information, do the
Defendants reveal there is a ‘processing fee’ added to the order” of about
twice the initially advertised cost. This final cost is allegedly “about the
same as the prices honest retailers such as Plaintiff advertise, because this
is the true market price.”

Although New Vision alleged that the processing fee was
hidden enough that, “many times,” “consumers do not even notice that the total
amount they are being charged for the order is about the same as what they
would have paid if they bought from [New Vision],” screenshots in the complaint
show the processing fee presented in plain type, in normal-size font, in the
middle of the secure checkout page. (Those things are not necessarily
incompatible, given that consumers might think there’s nothing more than
ministerial stuff to do to check out, especially given autofill. I wonder what
discovery may show about whether consumers ever complain afterwards.) New
Vision alleged that, even if consumers do notice the fee, sunk costs keep them
at the sites, and they may also mistakenly believe that all contact-lens
retailers charge similar “processing fees.”

Defendants argued that their ads were literally true because
consumers can actually purchase one box of the advertised contact lenses for
the published price, and any conceivable deception was cured by the full
disclosure of the added processing fees prior to final purchase.

Defendants supplied screenshots from each of their websites,
showing that no processing fee is added to a consumer’s purchase when only one
box is selected. But first, there was no way of knowing whether these current
offerings were the same as those during the period at issue in the complaint.
Second, the allegations of the complaint were that the typical orders were
twice as much as advertised, which this didn’t refute. Third, some of the ads
were at least capable of being false even under this interpretation. E.g., one
of the Contact Lens King ads in the complaint offers a “90 Pack” for “Only
$26.22/box.” “While it may be possible to interpret this, as the Defendants
urge, to mean that Contact Lens King will in fact honor the $26.22 price if a
customer’s purchase is limited to one box, that is certainly not the only
interpretation. … [A] reasonable interpretation would be that the advertised
$26.22 price is per box, regardless of how many boxes are ordered.”

Nor did disclosure prior to final checkout solve the
problem, given the sunk costs allegations that “the complained of fees are not
revealed until deep into the purchasing process or at least not until the
consumers have already been lured away.” The court also rejected the argument
that, because the complained-of practices were allegedly commonplace, they
weren’t actionable. There is consumer protection even in the market for lemons!

Along with literal falsity, misleadingness was also
plausible. Even if “consumers won’t notice a processing fee that doubles the
cost” was problematic as an allegation, New Vision offered other deceptiveness
theories, based on bait and switch advertising/sunk costs.

Materiality was also plausible. Defendants argued that, if
consumers didn’t notice the near doubling of the price, then the advertised
prices couldn’t have been material; and if they did notice but buy anyway, that
also showed immateriality. But “the role the initial alleged price deception
played in driving consumers away from New Vision and towards the Defendants”
was also relevant. “It is not the materiality of the processing fees that is at
issue here but, rather, it is the materiality of the deceptive prices published
in the Defendants’ ads that drives consumers to the Defendants’ websites and
then ultimately influences their final purchasing decisions.”
Defendant-favorable cases, including resort fee cases, were distinguishable as
involving more/earlier disclosure (and mostly ignore the sunk costs problem
anyway). Defendants “improperly framed their materiality analysis, focusing
only on the consumers’ ultimate decisions to go through with their purchases of
the Defendants lenses, without any consideration of the separate deceptive
advertisement that got them there.”

Although some of the injury allegations were conclusory, New
Vision alleged sufficient harm. It described a “typical scenario,” in which one
of New Vision’s patients asks for a price for a particular product, compares
New Vision’s price to defendants’ ads, “complains that Plaintiff’s store is
‘overcharging’ and ‘too expensive,’ ” and, despite staff’s attempts to explain,
leaves without buying and ends up “believing that Plaintiff’s prices are not
competitive across the board.” The court was willing to accept that New Vision
was attesting to actual sales it has lost in the manner it describes as a
“typical scenario.”

from Blogger

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