Bay Area Counties Win $6.8 Million False Advertising Ruling Against Overstock.com

OAKLAND (CBS SF) - An Alameda County Superior Court judge has found internet retailer Overstock.com engaged in false advertising and unlawful business practices throughout California since 2006.

After a two-week trial in September, Judge Wynne Carvill ruled Wednesday that Utah-based Overstock.com used formulas to create fictional comparison prices and chose the highest comparison for an item without informing consumers.

"Overstock has consistently used ARPs (advertised reference prices) in a manner designed to overstate the amount of savings to be enjoyed by shopping on the Overstock site," Carvill said.

District Attorneys in Alameda, Monterey, Napa, Santa Clara, Santa Cruz, Sonoma and Marin joined a suit that began in 2007 in Shasta County when a consumer paid $900 for two patio sets and received two patio sets with a Wal-Mart sticker that listed the price of each one at $247, Marin County Deputy District Attorney Andres Perez said. The company, which currently holds the naming rights to the Oakland Coliseum, is based in Salt Lake City.

The counties filed the suit against Overstock.com on Nov. 18, 2010.

Marin County District Attorney Ed Berberian said the court found Overstock's business practice of setting APRs based on the highest price that can be found without regard to prevailing market price and without disclosure to the practice was misleading or had the capacity to mislead.

Judge Carvill ordered Overstock to pay $6.8 million in civil penalties to the eight counties plus the district attorneys' costs of litigation that include fixed costs of taking depositions and producing transcripts but not attorneys' fees, Berberian said.

Carvill's order also prohibits Overstock from advertising reference prices that are not based on actual prices offered in the marketplace at or about the time the advertisement is first placed.

"We are pleased that our law enforcement action has contributed to increasing accuracy and transparency in the use of reference pricing in the internet retail sector which will benefit consumers," Berberian said.

Santa Clara County Deputy District Attorney Tina Nunes-Ober said the ruling "clearly signaled that deceptive advertising is unlawful and will not be tolerated.

"Consumers should always be cautious in all transactions, however they have a right to expect truth in advertising," Nunes-Ober said.

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