District attorneys in seven Northern California counties claim that Overstock.com, the cost-conscious consumer's mecca, has been making consistently misleading claims about the discounts it offers consumers.
According to the complaint, filed on Wednesday, Overstock "routinely and systematically made untrue and misleading comparative advertising claims about the prices of its products,†conduct that the DAs say goes all the way back to 2006. "Overstock used various misleading measures to inflate the comparative prices, and thus artificially increase the discounts it claimed to be offering consumers."
The misleading statements "accompanied virtually every product listing on its site," according to the suit.
By way of example, the complaint points to a patio set that Overstock claimed had a "list price" of $999. The website offered the set for a seemingly rock-bottom $449.
But a consumer who bought the set on Overstock found a Wal-Mart sticker listing the sale price as $247 -- a full $200 cheaper than the price at which Overstock offered the set.
Overstock fires back
Mark Griffin, Overstock's vice president and general counsel, said in a statement that "no one is perfect†but also that Overstock "[does] deny the allegations and we deny the interpretations."
Griffin said that misrepresenting prices would be devastating for a company that has plenty of competition.
"The bottom line is that people shop our website in large part because of the prices we offer," he said. "So we have to be as accurate as possible because we know that our customers can easily check the prices that are available elsewhere."
As for the patio set, Griffin said it was a misunderstanding between Overstock and its vendor.
"We purchased that product from another vendor and the information we received [from that vendor] just wasn't correct," Griffin said.
Suit just before Black Friday
Overstock, headquartered in Salt Lake City, Utah, was launched in 1999. Its annual revenue has grown from $1.8 million that year to over $876 million in 2009. On its website, Overstock says it provides "the best value and a superior customer experience," and describes itself as "honest, helpful, efficient, accountable and trustworthy, and we are committed to profitability and service."
The suit comes at an inconvenient time for Overstock, just over a week before Black Friday, the unofficial start of the holiday shopping season and typically the busiest shopping day of the year.
The lawsuit covers consumers in the counties of Alameda, Marin, Monterey, Napa, Santa Clara, Shasta, and Sonoma. The complaint seeks $15 million in restitution and penalties.