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Whole Foods in Hot Water Due to Violations of False Advertising and Unfair Competition Laws

July 17, 2014

Posted in Business Litigation, Corporate Law, Product Liability

photo - Whole FoodsOne explanation why the supermarket chain nicknamed “Whole Paycheck” has such high prices is illegal practices. Whole Foods will pay about $800,000 in penalties and fees after an investigation found the grocery retailer was overcharging California customers in violation of state false advertising and unfair competition laws, according to USA Today.

Business owners would be wise to resist the temptation to break these laws to try to pad profit margins. California’s false advertising law prohibits any statement made in connection with the sale or dissemination of goods or services that the maker knew or should have known to be false or misleading.

State and local inspectors found that at Whole Food stores,

  • Purchased foods weighed less than the label advertised,
  • The weight of salad bar containers wasn’t subtracted at checkout, and
  • Prepared foods were sold by the item rather than by the pound as mandated by law.

The pricing discrepancies violated consumer protection laws regarding false advertising and unfair competition, prosecutors said. As part of a five year settlement agreement Whole Foods must,

  • Pay $210,000 to the city attorneys of Santa Monica, Los Angeles and San Diego, who brought the case against the retailer.
  • Reimburse county and state agencies that conducted the investigation and pay $100,000 to a weights and measurements enforcement fund.
  • Appoint state and store level pricing accuracy managers and each of the 74 Whole Foods stores in California will face random quarterly audits.

Whole Foods stated they cooperated with the yearlong investigation and prices were accurate 98% of the time. With 74 stores in California, even if 2% of sales are not accurate, that adds up to a lot of money.

State law sees two victims of false advertising, consumers who don’t get what they paid for and the competition that is losing business because of unfair practices. The law prohibits,

  • Any type of deceptive advertisement that causes a loss of revenue for any competitor, and
  • Businesses from profiting from advertising a product, property, or service in a false or deceptive manner.

A certain amount of “puffery” is allowed in advertisements, as are opinions about a product or service but false factual assertions are another matter. If an advertisement is designed to deceive someone into purchasing a service or product that isn’t as promised, legal actions may be brought by injured consumers and by business competitors to recover lost revenue or payment.

If you have any questions about the legality of your business’ advertising or feel a competitor is gaining an advantage because of illegal practices, contact my office so we can discuss the situation and your potential options moving forward.