California’s Strike-Through Pricing Law: What Companies Should Know to Minimize Their Litigation Exposure

By Colin Higgins and Tony Carucci

Strike-through pricing — showing a higher “original” or “former” price next to a lower current price — is a common and effective marketing tool. In California, however, there is an emerging trend of consumer class actions challenging the practice, along with increased regulatory scrutiny. California’s strike-through pricing law, Business and Professions Code section 17501, regulates how reference (i.e., original or former) prices may be advertised and require businesses to substantiate that advertised discounts are genuine. This article summarizes the law, highlights common enforcement risks, and outlines best practices for compliance.

Overview of Business and Professions Code § 17501

California Business and Professions Code section 17501 governs advertisements that reference a “former,” “original,” “regular,” or “compare at” price (also referred to as a “reference price”). The statute is designed to prevent deceptive pricing practices that mislead consumers into believing they are receiving a discount when, in reality, the reference price was never a bona fide price.

Under section 17501, a former or original price must reflect the actual, prevailing market price of the product. This means that the reference price listed must be one at which the product was openly and actively offered for sale for a reasonably substantial amount of time. Under section 17501, if a product was not offered for sale at the former price within the immediately preceding 90 days, the advertisement must clearly disclose the date when that price was last in effect to avoid a technical violation of the statute. The burden is on the business to prove the truthfulness of the reference price.

Courts and regulators interpret these requirements strictly. Inflated, fabricated, or stale reference prices — even if common in the industry — can trigger liability.

Enforcement Risk and Litigation Exposure

Strike-through pricing claims are a popular target for class action attorneys. Indeed, there have been hundreds of strike-through class action lawsuits filed against California businesses. Allegations generally focus on whether:

Best Practices to Comply With California’s Strike-Through Pricing Law

To reduce litigation and regulatory risk, businesses should consider the following practices:

On the product display page, clearly identify what the strike-through price represents. For example, include a disclaimer stating that it refers to the Manufacturer’s Suggested Retail Price (MSRP). Businesses should also ensure the MSRP is legitimate and not inflated to make discounts appear larger. Companies should also avoid labels such as “original price” unless they can show they sold the product at that price within the prior 90 days.

Any appearance of price manipulation increases a business’ exposure to liability in class actions and undermines potential defenses. As such, companies should not artificially raise a strike-through price to make a deal look better. This is especially true when a company briefly raises a price to establish a higher “former” price.

Because section 17501 focuses on pricing within the last 90 days, businesses should limit promotional or discounted pricing periods to less than 90 days. At the end of the promotion, businesses should return the price to the higher reference price for a meaningful period of time before advertising another discount. Alternatively, businesses can remove the strike-through price for a meaningful period of time before beginning a new promotion. A product that is perpetually on sale is a red flag for potential plaintiffs and regulators.

To defend against potential claims, businesses should maintain detailed records of historical pricing for each SKU. Such records should include start and end dates of all promotional periods. Best practices should include maintaining screenshots or system logs showing prices as displayed to consumers. If you cannot prove the former price, you should not advertise it.

Conclusion

California’s strike-through pricing law imposes strict requirements on how businesses advertise discounts and reference prices. Section 17501 places the burden squarely on advertisers to ensure that former prices are real, recent, and substantiated. With aggressive plaintiffs’ firms and regulators closely watching pricing practices, failure to comply will likely lead to legal woes.

By clearly disclosing the basis for reference prices, limiting promotion durations, maintaining robust pricing records, and avoiding inflated strike-throughs, businesses can significantly reduce the risk of costly litigation while still using comparison pricing effectively.