In The Courts: Overstock’s $6MM Hit, a Costly FB Rant and KlearGear Shoots Itself

ouchOverstock Hit With $6.42 Million Fine
From California Court Over Boosted Comparison Pricing

In 2010, six Northern California County District Attorneys filed suit against Overstock for fraudulent price comparisons in Alameda County Superior Court.

In one example cited in the lawsuit, Overstock advertised a patio set for sale for $449.99 and claimed that the “List Price” for the patio set was $999.00 and that the consumer was saving $549.01. When one consumer ordered and received the patio set it came with a price tag from Wal-Mart showing the patio set sold there for $247.00. Overstock claimed the consumer was saving 55% off the “List Price,” when in fact Overstock charged the consumer 82% more than the actual price listed on the product.

The lawsuit alleges that instead of comparing its current selling prices called “Today’s Price” with actual prices charged by other merchants, Overstock often made up a comparison price called “List Price” or “Compare at” price based on arbitrary markups on Overstock’s cost for the product. The lawsuit also alleges that in the case of items purportedly unique to and sold only by Overstock, Overstock fabricated a comparison price. In both instances, Overstock claimed a savings to the consumer off the fictitious comparison price.

The court chided Overstock for its obstructionist tactics and found that they had consistently overstated the list price.  The court assessed a $6.42 million fine for overstating the differences in comparing prices with its competitors in violating of California’s unfair competition and false advertising laws and enjoined Overstock from further violations.  Overstock would have been wise to consult the FTC’s Guide Against Deceptive Pricing.

Facebook Rant Barred Terminated Employee From Recovering UI Benefits

A hospital employee who was terminated as a result of a threatening rant in which she referred to her boss as an “effed up spawn of satan” that she wishes she could “pound . . to unconsciousness” was found to be not entitled to Unemployment Insurance since the rant violated company policy against “threatening, intimidating, coercing, harassing, [and] using abusive language or behavior.”

Kleargear.com’s Amazing Self-Inflicted Wound

In 2008, Jen Palmer ordered gifts online from KlearGear only to have the order cancelled when she called customer service.  When Palmer posted a negative review online, KlearGer invoked the following clause from it terms and conditions and reported Palmer to credit reporting agencies when she did not pay the $3,500

Non-Disparagement Clause
In an effort to ensure fair and honest public feedback, and to prevent the publishing of libelous content in any form, your acceptance of this sales contract prohibits you from taking any action that negatively impacts KlearGear.com, its reputation, products, services, management or employees.

Should you violate this clause, as determined by KlearGear.com in its sole discretion, you will be provided a seventy-two (72) hour opportunity to retract the content in question. If the content remains, in whole or in part, you will immediately be billed $3,500.00 USD for legal fees and court costs until such complete costs are determined in litigation. Should these charges remain unpaid for 30 calendar days from the billing date, your unpaid invoice will be forwarded to our third party collection firm and will be reported to consumer credit reporting agencies until paid.

One minor detail they overlooked – the term was not in place when Palmer made this order. Palmer has since sued the site for $75,000,

Kleargear’s overreach has become a lesson in how to ruin your online reputation in the age of social media.  As reported by Popehat:

From this point forward, due to nothing but its own arrogance, vanity, pettiness and manifest corporate stupidity, KlearGear is synonymous with douchebaggery.  . . . Now let’s look at this situation from a perspective most charitable to KlearGear. . . .  . Here’s what the company should have done:  Suck it up.  Yes — it should try to give Jen and John customer satisfaction, and work on its CRM capabilities to minimize the number of future Jens and Johns. But even if they were demonstrably in the wrong, just chalk it up to isolated unfairness and move on.

Here’s what KlearGear should not have done: try to bully them into submission. Because, duh — there was zero to be gained and everything to lose. In the social-media age, nobody — not e-tailers, not governments, not Vaticans — can suppress speech without backlash exponentially more damaging than the offending speech itself. In the long run, this will be the ruination of the regimes ruling North Korea, Iran and China. In the short run, it will be the ruination of KlearGear.


More Information: Nurse Properly Fired and Denied Unemployment Due to Facebook Rant, Technology & Marketing Law Blog; Overstock Gets Hit With $6.42 Million Fine From California Court Over Boosted Comparison Pricing; The Domains; KlearGear Reaps The Whirlwind, Popehat; Marin County District Attorney Press Release,    Overstock Gets Hit With $6.42 Million Fine From California Court Over Boosted Comparison Pricing. The Domain 

Featured Photo: By Infrogmation, New Orleans (cc).