Is Kohl’s “Pricing for Idiots” Scheme a Crime?

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Twice in the recent past I have written about the pricing strategy of J.C. Penney and its attempt to shirk the ‘pricing for idiots’ strategy. First, I wrote about how a new CEO, Ron Johnson, chucked the old strategy of deceptive sales pricing and moved toward a model of ‘true value’ pricing. Shortly thereafter, I wrote that Johnson was fired because this strategy failed to appeal to the catatonic masses who insist on being deceived with deceptive pricing strategies. Not that any of that was surprising.

In my first post, I even noted that Kohl’s had the worst deceptive pricing practice on the planet. Back in 2010, a lawsuit was brought against Kohl’s for its price promotions, or “false advertising,” on the part of an ignorant shopper who apparently saw an opportunity to cash in on his ignorance. This blockhead blamed Kohl’s for his excessive purchases.

In the ongoing case in California, Antonio S. Hinojos of West Covina claims that those types of purported savings led him to buy more than $500 worth of luggage, shirts and shorts at a Kohl’s Department Store in suburban Los Angeles in May 2010. In fact, Hinojos alleged, the prices of the items had not been reduced as much as Kohl’s had advertised.

The case was dismissed in 2010 by a U.S. District Court. Last month, the 9th Circuit Court of Appeals reversed the decision, which will allow the wayward spender and his lawyers an opportunity to pursue a class-action claim.

“Price advertisements matter,” Judge Stephen Reinhardt wrote for a three-judge panel. “When a consumer purchases merchandise on the basis of false price information and when the consumer alleges that he would not have made the purchase but for the misrepresentation, he has standing to sue.”

Shoppers chasing deceiving markdowns is, in part, due to the fact that the cheap-and-easy credit era helped to fuel this ignorance because the abuse of credit has been justified by folks who believe that there is an upside to all the debt: they are buying value because goods appear to be listed at bargain prices. In reality, they are overpaying for products and getting sucked into buying things they didn’t plan on buying, and the end result is more stuff, more debt, and a skewed perception of value. Thus the retail marketing folks adjust to the current political-monetary environment and market to the perception of the times.

If consumers perceive they have wealth (debt + stuff = wealth in the bubble era) and that markdowns are bargains, they will spend in order to increase their perceived wealth. Additionally, inflation and artificially low interest rates increase time preferences, thereby feeding the modern culture of instant gratification. Marketing folks are only doing what they have to do to survive in an era of government intervention leading to bubbles, booms, busts, and malinvestments.

Appellate Judge Stephen Reinhardt, who wrote the opinion reversing the decision, stated that a product’s “normal price is significant in the same way a false product label would be.”

But what exactly is a “normal price,” and how is it the same as a false product label, which is akin to fraud? Who can determine what any price should be for any product, knowing that price is subjective to the individual engaging the transaction? There is no objective unit of measurement because prices of goods are subjective to each individual based on his assessment of goods, the value of those goods, and his subjective taste. The fact that the establishment recognizes “normal prices” points to the belief that goods in the marketplace have a value that can be objectively defined and applied to each individual by authoritative measures.

Kohl’s pricing strategy is inane, and the catatonic masses will bite on it. But the strategy aligns with the current times and perceptions, and no one can blame a for-profit business for pursuing profits based on its leaders’ knowledge of the best way to conduct business within the current economic environment. But inane is not criminal, and the scheme can easily be ignored and rejected by savvy consumers whose subjective valuation tells them that a $30 rug marked up to $60 with a “half off” price tag is no markdown. But then again, the buyers of that $30 rug have determined that the rug is more valuable to them than the $30. So where is the “normal,” and where is the crime?

If there’s a crime of perception, the crime is committed by the government-bankster-financial-industrial complex that has defrauded consumers, investors, and entrepreneurs with its sleazy monetary policy and corrupt financial system.

8:39 pm on June 19, 2013