Overstock to appeal court ruling on comparison price advertising

Overstock.com is starting 2014 with plans to appeal the tentative ruling of a California trial court prohibiting it from comparison price advertising unless done in conformity with new court-mandated practices which, according to the online retailer, diverge widely from industry standards.

"Respectfully, I believe this ruling is unjust," said president Stormy Simon, "and I know, because since 2008 I have been an integral part of the process by which we log, verify and advertise 'compare-at' prices. I am aware of the lengths we have gone to get this right on the millions of products that flow through our website. We will follow the ruling, while noting that the effects on our current practices will be small because, as we are the gold standard, we are already fanatic about getting this right. However, if fairly enforced, this ruling will force other retailers to change their processes dramatically, which makes one wonder why we are the ones who were targeted. We are an honest company committed to bringing justice to all our customers and suppliers, and that's a promise. If this tentative ruling becomes final, we will file an appeal as soon as possible."

According to chairman and CEO Dr. Patrick Byrne, the ruling puts smaller suppliers at a disadvantage versus the big players.

“By way of extraordinary example,” explained Byrne, “His Honor's reasoning disproportionately and greatly harms our Worldstock store, where we are providing much needed market access to global artisans, and our Main Street Revolution store, which provides similar market access to small domestic suppliers. The rules His Honor has created are highly impractical for these categories — unlike, for example, our sales of brand-name televisions, which can easily be made to conform with Judge Carvill's ruling. In November of this year Worldstock surpassed the $100 million mark in payments made to our artisan suppliers, we have attempted to run that division at 0% profit, and where there has been a profit we have used it to build 26 schools educating 6,000 kids, mostly female, across Africa and Central Asia: That is the department that is disproportionately harmed by Judge Carvill's reasoning. When we go to Nepal and buy some Tibetan singing bowls from an NGO which serves women-at-risk, bring them home, and sell them with the tiniest markup possible, it can be really, really hard to say what the precise compare-at price is — though as an organization we have bent over backwards to be ethical, and have brought such goods to US markets at prices well below anyone else. Under Judge Carvill's reasoning it becomes highly impractical to market these unique goods in a way that truly reflects the extraordinary values they represent."

Byrne added that the company is not only the gold standard in retail price comparisons but also has been for many years. “We verify each comparison price we use,” he said, “and thoroughly disclose the manner in which we do so. Judge Carvill's decision is a fine example of the principle, 'No good deed goes unpunished.'"

The court imposed a civil penalty on the internet retailer for each day it used price comparisons that were not in accordance with new practices the court outlined. From March 2006 to September 2008, the court imposed a penalty of $3,500 per day and from September 2008 through September 2013, $2,000 per day, amounting to $6,819,000 in total. The court also allowed the people to apply for payment of such fees and costs as are allowed by law. The company will appeal both the injunction and the amount of the penalty.

The court did not order restitution, which the company insists is consistent with its contention that no harm was shown and that it is an online low-price leader.

Among other restrictions, the court's ruling would require more elaborate price comparison disclosures on individual product website pages, depending on the type of comparison made. Assuming that other retailers will have to follow the same rules as Overstock.com, traditional retail stores will have to make lengthy disclosures on paper price tags disclosing their methods of price comparisons. The ruling also could prohibit a retailer from using common reference terms like "compare," without going through a prohibitively difficult and often impossible validation process.



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