‘Sham Markdowns’: Lawsuit Alleges Shutterfly Advertises Products at False Discount Prices [UPDATE]

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A proposed class action claims that Shutterfly, LLC has violated a California law by advertising its products with false reference prices in order to give the impression that customers are receiving a discount.

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The 26-page lawsuit says that although Shutterfly lists purported sale prices for items on its e-commerce website next to a strikethrough price, the photography company never sells items at these advertised “original” prices. The suit alleges that the defendant uses false strikethrough reference prices to artificially inflate the perceived value of its products.

Related Reading: Rivali v. Shutterfly, LLC

As a result, consumers are induced into making purchases they otherwise would not have made and paying more than they otherwise would have paid, the case argues.

“Defendant’s scheme tricks consumers into justifiably believing they are getting a significant deal when in reality consumers are paying the usual retail price for products,” the complaint alleges.

The lawsuit claims that Shutterfly’s alleged scheme violates California law, which prohibits retailers from using outdated or false references to “original” prices.

According to the suit, sellers have long understood that consumers are “vulnerable to perceived bargains,” and that a reference price—i.e., the price at which a product was purportedly sold before being placed on sale—is used as a baseline on which a person perceives a certain product’s value. Thus, consumers are willing to pay more than they otherwise would for products they believe they are buying at a discount, the lawsuit relays.

The case alleges the defendant has used this consumer insight to its benefit by employing false reference pricing on Shutterfly.com. Per the suit, the prices for items on Shutterfly’s website are frequently listed next to a strikethrough price that falsely implies that the items are discounted. The case alleges, however, that these reference prices are merely an “illusion of short-lived bargains,” and that Shutterfly never actually sells the purportedly discounted items at the listed reference prices. 

“The ‘original’ price merely serves as a false reference price Defendant uses as part of a larger scheme to deceptively manufacture false discounts to incentivize consumers to make purchases,” the complaint charges.

Per the suit, Shutterfly fails to disclose anywhere on its website that the reference prices are not former prices or prices at which identical products are sold elsewhere on the market.

According to the case, these reference prices create “a false sense of urgency” in consumers, who are allegedly deceived into buying more of and paying more for Shutterfly’s products as a result.

The lawsuit looks to cover anyone in the U.S. who, within the past four years, purchased from Shutterfly’s e-commerce website one or more products at a discount from an advertised reference price and who has not received a refund or credit for their purchase.

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