Discount stores

TCA Explains: How Dollar Tree and Other Discount Stores Can Charge Higher Prices and Avoid Being Sued for False Advertising

Discount store Dollar Tree made headlines in 2021 when it raised the price of its items to more than a dollar, leading many customers to wonder if its name could be considered false advertising .

Why Dollar Tree Changed Its Prices

After 35 years, the distribution chain announced in November 2021 that he was going to raise prices to $1.25 partly because of inflation and so he could expand his supply. The announcement said the change would be implemented in all stores by May 2022.

The company had been testing more expensive items for months, with some items at Dollar Tree Plus costing $3 and $5.

What is false advertising?

For something to be considered false advertising, the store must give false or misleading information to a consumer to trick them into entering the store or purchasing an item. Anyone selling an item must honestly advertise its price.

“So suing a store for calling itself ‘Dollar Tree’ probably doesn’t fit,” Amy Hoffman of Hoffman LLC said. “The store name is not a statement of fact; it is a trade name.

How can someone sue for false advertising?

To sue for false advertising, a plaintiff must prove that an incorrect statement of fact was made about the advertiser’s products.

Hoffman said the statement must mislead or “has the potential to mislead the intended audience” and that “the deception is likely to affect the buying decisions of the public, and the plaintiff has been harmed.”

For example, a customer wants to buy a saucepan and sees it advertised on the shelf for $20. The sticker on the board also says it’s $20, but at checkout the price changes to $25. This could be considered false advertising as the advertised price was incorrect and not the actual cost. That said, if the company can prove that it was simply a mistake, there will be no action because the company was not “misleading”. If it consistently charges more to the register, this practice could show that the company is misleading consumers.

What about a store name?

A store name is not a statement of fact, it is just a name. Thus, the Dollar Tree and 99 Cents Only Store are not necessarily misleading its customers because of its name.

“While someone might argue the name is misleading, they wouldn’t be fooled by seeing the price tags before purchase or at the point of sale,” Hoffman said. “As long as the store correctly advertises the prices of its items, it can charge whatever it wants.”

Either way, stores have been sued because of their names.

In 2015 a Los Angeles Superior Court judge removed a case which indicated that California-based 99 Cents Only stores were engaging in unfair competition and false advertising because they sold items for more than 99 cents. The plaintiff claimed that because of his name, he could not sell items over $1, even though prices were fully disclosed prior to purchase.

However, the judge said the company disclosed the prices of several items and concluded that the customer noticed the prices and was not harmed by the purchases.

“In the 99 Cents Only Store case, the court found that the statement would not affect the public’s buying decisions, since customers could see actual prices, and shoppers were not harmed, because there was no allegation that the product purchased was not worth the price paid,” Hoffman said.

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