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Federated Stores Agree to End Fake Sales

March 15, 2006
A settlement has been reached with one of the nation's leading department store chains, resolving an investigation into misleading advertising practices and phony sales promotions.

Federated Department Stores, Inc., the parent company of chains including Kaufmann's, Macy's, and Filene's, has agreed to pay $725,000 in civil penalties and costs to settle the matter, said New York Attorney General Eliot Spitzer.

The investigation, which began three months ago, was the result of a consumer complaint against a Kaufmann's department store.

Kaufmann's operates 14 department stores in New York State on Long Island and in Central New York, the Capital Region, the Rochester area and Western New York. The investigation revealed that Kaufmann's engaged in misleading advertising practices such as:

• Contradicting its saving coupons and store saving passes that promised discounts off every item in the store by using small print to exclude a significant number of items;

• Promoting extra savings coupons and store savings passes that featured photographs of merchandise not eligible for the extra savings;

• Using vague terms to describe items not eligible for sale events; and

• Using misleading in-store signs to promote sales events.

This is the second agreement that Kaufmann's has entered into with the Attorney General's Office. In the first, which was signed in January, 2005, Kaufmann's agreed to stop promoting fake sales. As revealed by the latest investigation, however, Kaufmann's failed to do so.

As an example, a review of Kaufmann's records confirmed that it conducted nearly continuous sales of a high-end hot beverage maker from September 29, 2005 through December 31, 2005.

During that time, Kaufmann's offered the Braun Tassimo Hot Beverage System at a sale price of $169.99, discounted from its regular price of $219.99, for 74 out of 94 days.

Moreover, even on the days the product was offered for sale at its "regular" price, which were typically Mondays and Tuesdays scattered throughout the three-month period, it was more often than not sold at the "sale" or other discounted price.

Indeed, records showed that during this three month period, only three of the 521 sales of this coffee-maker were made at the product's "regular" price. Notably, the manufacturer's suggested retail price for this product is $169.99, and the product was widely available in other retail stores for that price.

In addition, Spitzer's office raised concerns that Kaufmann's use of advertising statements such as "Biggest Sale of the Year," "Look for Lowest prices of the Season," "Lowest Prices of the Year," and "One Day Only Super Sale," created a false sense of urgency to convince consumers to make a purchase during the sale period when, in fact, the retailer continued to sell the item at the sale price after its so-called sale ended.

Federated agreed that, in addition to applying to Kaufmann's advertising practices, all 33 Macy's and Filene's stores in New York State will comply with the settlement's terms.

Spitzer has settled similar investigations into fake sales, resulting in agreements with Jos. A. Banks Clothiers in September of 2004, The Bon-Ton department stores in 2002, and Metro Mattress in March of 2005.

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