Opinion
No. A141613.
06-02-2017
THE PEOPLE, Plaintiff and Respondent, v. OVERSTOCK.COM, INC., Defendant and Appellant.
Quinn Emanuel Urquhart & Sullivan, Robert Feldman , Daniel Bromberg , Sha Londa Hill-Castanon , Kimball Dean Parker and Meredith Shaw for Defendant and Appellant.
Matthew Beltramo , Alameda County District Attorney, for Plaintiff and Respondent.
Sheldon Jaffe , Deputy Attorney General, as Amicus Curiae for Plaintiff and Respondent.
[CERTIFIED FOR PARTIAL PUBLICATION]
Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is certified for publication with the exception of sections II.A. and II.B.
OPINION
RIVERA, J.
Overstock.Com, Inc. (Overstock), appeals a judgment entered after the trial court found it had engaged in unfair business practices (Bus. & Prof. Code, § 17200 et seq.) and false advertising (§ 17500 et seq.) The court granted injunctive relief and imposed $6,828,000 in civil penalties. In the unpublished portion of this decision, we conclude that the trial court properly applied the four-year limitations period of section 17208 and that there is sufficient evidence to support the trial court's finding that Overstock made false and misleading statements in violation of the laws against unfair business practices and false advertising. In the published portion, we reject Overstock's arguments that the court imposed excessive penalties and improperly ordered injunctive relief.
All undesignated statutory references are to the Business and Professions Code.
I. BACKGROUND
Overstock is an online retailer with a stated goal of being an "extreme value" retailer selling products for the lowest prices on the Internet. Overstock was founded in 1999, and originally offered primarily products from businesses that were liquidating excess inventory. Overstock now obtains most of its goods from third party "fulfillment partners."
The product pages on Overstock's website compared the price at which it offered an item to an advertised reference price (ARP or reference price), which it referred to by various terms during the times at issue in this case. From somewhere before 2003 until September 2007, the product pages showed a "List Price" for the product, with the number stricken through; it then showed the price at which Overstock was offering the product and, below that, was a calculation of the difference, expressed both in dollar amounts and percentages. In September 2007, Overstock changed the "List Price" label to "Compare at," and in April 2011, it changed the term to "Compare." A commercial from 2013 claimed: "We compare prices so you don't have to," and an executive confirmed the commercial was consistent with Overstock's advertising strategy and was intended to instill a sense of confidence that the company offered products at good prices. He also confirmed that advertisement of reference prices gave customers confidence that they were shopping at a site that offered real savings. Overstock's internal research showed in 2007 that "the best predictor of whether a customer returns to our site is whether they feel they have `received a good deal,'" and an employee e-mail from 2008 indicated "compare at" pricing "definitely helps entice the customer to purchase." Products that did not have "compare at" prices suffered reduced sales. Before the fall of 2008, Overstock had no process in place to ensure that all comparison prices were verified. The term "List Price" in Overstock parlance meant "a high street price, a full retail price," and Overstock's policies allowed the list price to be set by finding the highest price for which an item was sold in the marketplace. Overstock did not determine whether other Internet retailers had made any substantial sales at the comparison price. In an internal e-mail from 2007 entitled "List Price," an Overstock manager told employees that they "probably do not want to use Amazon [to set list price] as they will be similar to our price. I need you to find the HIGHEST selling price. We found out it can include freight, which will make it even higher." Another internal e-mail chain, from 2006, discussed the pricing for an electronic item and said, "Oh, I think it's been established that the `List Price' is egregiously overstated. This place has got some balls." An employee in the same e-mail chain noted that the "List Price" for a certain type of rug used to be $500, but had been increased to $800. In other e-mails, an Overstock employee asked a supplier to raise the price for which it offered its goods on its own website so that, in comparison, Overstock's prices would be the lowest available online, and another employee asked a supplier to "bump up" the manufacturer's suggested retail price (MSRP).
For example:
Between 70 percent and 90 percent of Overstock's products carried a list price that came from standard industry data. These items were primarily books, movies, music, and games. They are not at issue in this case, which concerns the products with comparison prices that were not set by the standard industry data.
The "List Price" was sometimes derived from that of similar products. This might happen, for instance, if a product was made exclusively for Overstock. Before 2007, Overstock employees were not given any specific guidelines for determining whether an item was similar enough to be considered comparable to the product offered by Overstock. And customers were never informed when a similar, rather than identical, product was used for a comparison price.
Overstock also sometimes used "formulas" to derive list prices; these could be based on a number of methods, such as doubling or tripling the cost to Overstock or the usual wholesale cost. A February 2008 e-mail from an employee suggested that list prices could be derived by multiplying the Overstock price by 1.2, to show a discount of 20 percent off list price. An Overstock manager acknowledged that this method would result in an arbitrary number and stated that she would not have allowed the list price to be derived in that manner because there was no documentation to show that anyone else was selling it at that price. Before September 2007, Overstock's employees did not receive any instruction or training on when to use a formula to set a comparison price for a product. In July 2007, a Shasta County resident, Marc Ecenbarger, bought two identical patio sets that showed a list price of $999 and an Overstock price of $449. Ecenbarger believed the patio sets retailed at the higher price and that, because of that price, they would be of good quality. When the patio sets arrived, however, he found they were poorly made and unstable. One of the tables had a sticker showing it was sold by Walmart for $247. Ecenbarger checked several other Internet sites and found two or three of them selling identical patio sets for $247. He complained to Overstock and received a full refund. Even after his complaint, the patio set remained on Overstock's website, with the same purported list price, for "quite a while," and Overstock sold the sets at the price paid by Ecenbarger through August 2007. Overstock had received a similar complaint about the patio set four months previously but had not changed the pricing. Ecenbarger reported the matter to the district attorney.
Ralph Mondeaux, Overstock's vice-president of marketing, sent a letter to Overstock's fulfillment partners in September 2007 "as a reminder that when you provide a `List Price' associated with a product you sell on our website, it must be in compliance with Overstock.com's policy regarding `List Price.'" The letter set forth the acceptable ways to set a list price, in order of preference: (1) Use the MSRP if there is confirmation of an instance in which the product has been offered for sale at that price. (2) Use the price for the same item offered online or, if the item is not available online, from a storefront retailer. (3) Use the price for a nearly identical item offered online or from a storefront retailer, taking into account "such facts [as] brand name, etc. and not merely the functionality of the product." (4) "[U]se an estimated price derived from standard wholesale and retail markups for [the] type of product." The letter asked the fulfillment partners to prepare documentation of their list prices. Correspondence with Overstock's vendors indicated this request was made in response to the district attorney's investigation.
Overstock changed the term it used for the comparison price from "List Price" to "Compare at" in September 2007. For the first year the "Compare at" term was used instead of "List Price," there was no change in Overstock's policy on how comparison prices were set. Overstock did not have a process in place to verify that a product had been sold at the comparison price. There were instances in which Overstock employees discussed with suppliers the possibility of raising their MSRP so that Overstock could show a higher discount. Overstock continued to use comparison prices that were the highest price at which an item was offered for sale, even if the "street price," or price at which the item could be bought in other stores, was lower.
In July 2008, Overstock conducted a study to determine whether its MSRP prices were inflated in comparison to the market. Among a random selection of 10 of the top 100 selling products from each department, "Compare at" prices were on average 15.30 percent higher than the highest actual selling price online. Among a random selection of 10 products from the top 100 items with the greatest "you save" percentage, the "Compare at" prices were 32.81 percent higher than the highest online selling price. And among a random selection of 10 additional products from each department, the "Compare at" prices were on average 12.96 percent higher than the highest actual online selling price.
In October 2008, Overstock removed the "Compare at" pricing from most of its products and allowed them to be reposted only if the fulfillment partner provided a verified reference price. The result was a drop of 6 percent or more — in some cases up to 20 percent — in sales of products that did not show a "Compare at" price. Overstock saw an increase in "conversion" — or the percentage of site visitors who bought products — of 8.9 percent when "Compare at" prices were added.
Overstock also formed a "pricing validation team" to verify that the items it sold were actually sold elsewhere at "Compare at" prices submitted by buyers or fulfillment partners, and to reverify those prices every 90 days. Fulfillment partners were asked to fill out spreadsheets listing, among other things, the high street price and low street price of each item. Internal communications showed that the team sought to verify the highest street price for the product, which showed the greatest percentage of savings. Jonathan Johnson, an executive who had been with Overstock since 2002, testified that it would not surprise him to learn that members of Overstock's "validation team" had a practice of using the highest price in the marketplace as a comparison.
Under Overstock's new policy, the pricing validation team was not allowed to validate prices based on the sales prices offered by the fulfillment partners themselves. However, there were still instances in which Overstock employees and fulfillment partners discussed the possibility of the partners raising the prices for their products on their own websites or on Amazon.com in order to create a higher comparison price.
The validation team did not use formulas to set reference prices. It sometimes verified a high street price for an item that was similar, rather than identical, to that sold on Overstock. Overstock received numerous complaints from customers that the "Compare at" prices were inflated.
In April 2011, Overstock began using the term "Compare" rather than "Compare at" for its comparison prices. Overstock's guidelines provided that the "Compare" price "must be a bona fide price at which the product is being offered for sale or sold." Overstock also began using the term "MSRP" on its website as the ARP for some items. The guidelines for "Compare" and MSRP pricing stated that "Compare" prices must be revalidated every three months and MSRP prices generally must be revalidated every six months. Overstock continued using comparison prices based on products that were similar but not identical.
At the time the guidelines were issued, Overstock had a policy of charging $2.95 for nonexpedited shipping to most domestic destinations. Overstock's buyers were told they could add the difference between Overstock's shipping charge and the seller's shipping charges to the "Compare" price.
After the People began investigating potential claims against Overstock, the parties entered into an agreement tolling the statute of limitations as of March 24, 2010. The People, through a number of district attorneys, filed this action on November 17, 2010, alleging causes of action for unfair business practices (§ 17200) and for false advertising (§ 17500), i.e., making untrue and misleading statements concerning pricing, price reductions, source of products, and shipping charges (§ 17500). After extensive discovery, a court trial began in September 2013.
The district attorneys named in the operative complaint were Nancy E. O'Malley, District Attorney of Alameda County, Matthew L. Beltramo, Deputy District Attorney; Edward S. Berberian, District Attorney of Marin County, Andres H. Perez, Deputy District Attorney; Dean D. Flippo, District Attorney of Monterey County, James R. Burlison, Deputy District Attorney; Gary Lieberstein, District Attorney of Napa County, Catherine C. Borsetto, Deputy District Attorney; Jeffrey F. Rosen, District Attorney of Santa Clara County, Tina Nunes Ober, Deputy District Attorney; Bob Lee, District Attorney of Santa Cruz County, Kelly J. Walker, Assistant District Attorney; Stephen S. Carlton, District Attorney of Shasta County, Anand "Lucky" Jesrani, Deputy District Attorney; and Jill R. Ravitch, District Attorney of Sonoma County, Matthew T. Cheever, Deputy District Attorney.
At trial, the People adduced the facts already described. In addition, each party presented expert testimony. Dr. Larry Compeau, the People's expert in the field of ARP's, their effects on consumers, and their capacity to deceive consumers, testified that as ARP's increase, "internal reference prices," or the price that a consumer senses something costs, also increase. Likewise, consumers' perception of product quality and the "perceived value" of the product, or "the overall value that the consumer attaches to the product," increase as ARP's increase. As the product's perceived value increases, consumers are less likely to continue comparison shopping and are more likely to decide to purchase the product. These effects are not limited to unsophisticated or gullible consumers; rather, the vast majority of consumers are subject to them. Dr. Compeau did not believe all ARP's were misleading or confusing, and opined that as long as the ARP was "bona fide," it was not deceptive. He described "bona fide" in this context as meaning that the price has "some veracity in the marketplace." This could be done by monitoring the market to compare prices to those of other sellers to determine an average or prevailing market price. An advertiser should be reasonably certain that the higher ARP does not significantly exceed the price at which substantial sales of the article are being made in the area.
Although consumers often discount reference price claims, the ARP's still affected their perceptions. In one study, more than two-thirds of participants did not think ARP's were inflated.
Dr. Joel Steckel testified for Overstock as an expert in statistics, marketing, and consumer behavior. He opined that four conditions would have to be met in order for Overstock's consumers to be misled by the ARP's: the consumer must be aware of the reference price; the consumer must form an expectation of what the reference price means; the consumer must believe that Overstock's use of the reference price conforms to that expectation; and Overstock's use of the reference price must differ from that belief. He concluded that a majority of Overstock's customers did not notice reference prices, did not have well-formed expectations of what the reference prices meant, and thought the ARP reflected a high or nondiscounted price. However, on cross-examination, he acknowledged that ARP's can help increase a customer's sense that he or she derived some value from the sale and increase customer loyalty. He also acknowledged that between 70 percent and 75 percent of participants in a survey he conducted believed such terms as "MSRP," "Compare," and "Compare at" reflected "regular average" prices.
Issuing an exceptionally detailed, 93-page statement of decision, the trial court found Overstock had made untrue and misleading statements regarding pricing in violation of the unfair competition law (§ 17200 et seq.) (UCL) and the false advertising law (§ 17500 et seq.) (FAL). The court imposed civil penalties of $6,828,000 pursuant to sections 17206 and 17536. It also ordered injunctive relief, prohibiting Overstock for five years from advertising an ARP based on a formula, multiplier, or other method that would set it on any basis other than the actual price offered in the marketplace; advertising an ARP based on a similar but nonidentical product without disclosure; advertising an ARP based on the highest price found anywhere without regard to whether the ARP reflected a substantial volume of recent sales, without disclosure; using an unmodified term such as "Compare" as the ARP nomenclature unless the ARP reflected a good faith effort to determine the prevailing market price of the identical product; using the term MSRP or a similar term unless a clear and conspicuous hyperlink defines that term and states that it may not be the prevailing market price or regular retail price; advertising an ARP that was set by adding the cost of shipping, without disclosure; advertising an ARP for longer than 90 days without reverification; advertising an ARP without disclosure of the date of verification; and advertising an ARP without documentation such as a screenshot. The court denied the People's request that customers receive restitution.
The UCL claims were based on Overstock's false advertising, that is, its violation of the FAL. (See Kasky v. Nike, Inc. (2002) , 950-951 [ , ] [violation of FAL necessarily violates UCL].)
II. DISCUSSION
A., B.
See footnote, ante, page 426.
C. Penalties
In the unpublished portion of this opinion, we have concluded the evidence is sufficient to support (1) the findings that Overstock made false and misleading statements when it used the term "List Price" and when it based reference prices on similar products, formulas, and the highest price that could be found and (2) the trial court's finding that Overstock knew or should have known these practices were false or misleading in violation of the UCL and FAL.
(1) Both the UCL and the FAL authorize civil penalties of up to $2,500 for each violation. Each statutory scheme contains an identical directive: "The court shall impose a civil penalty for each violation of this chapter. In assessing the amount of the civil penalty, the court shall consider any one or more of the relevant circumstances presented by any of the parties to the case, including, but not limited to, the following: the nature and seriousness of the misconduct, the number of violations, the persistence of the misconduct, the length of time over which the misconduct occurred, the willfulness of the defendant's misconduct, and the defendant's assets, liabilities, and net worth." (§§ 17206, subd. (b), 17536, subd. (b).)
Section 17206, subdivision (a) provides: "Any person who engages, has engaged, or proposes to engage in unfair competition shall be liable for a civil penalty not to exceed two thousand five hundred dollars ($2,500) for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General, [or] by any district attorney...." Section 17536, subdivision (a) provides: "Any person who violates any provision of this chapter shall be liable for a civil penalty not to exceed two thousand five hundred dollars ($2,500) for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General or by any district attorney, county counsel, or city attorney in any court of competent jurisdiction." The penalties of the UCL and the FAL are cumulative of each other. (§§ 17205, 17534.5; People v. JTH Tax, Inc. (2013) , 1250 [ ].)
The trial court considered three possible ways to set the number of violations: by the number of Californians who saw the offending advertisements, by the number of sales made through the offending pages, and by the number of days Overstock violated the statutes. The court rejected the first two, in part because they would result in excessive penalties of at least hundreds of millions of dollars. The court instead chose the third approach. For the period between March 24, 2006, and October 1, 2008, the court imposed a daily penalty of $3,500, calculated as $1,000 for each of the three types of violations (basing ARP's on formulas, nonidentical products, and the highest possible price), with an additional $500 for "the lack of controls that led to various abuses." From October 1, 2008 (when the validation team process was implemented and Overstock no longer used formulas), through the first date of trial, the court imposed a daily penalty of $2,000. In total, the trial court levied $6,828,000 in civil penalties.
The court laid out the factors upon which it relied. It found the "`seriousness of the misconduct'" was moderate in that the misconduct was less egregious than that in other reported cases, Overstock's prices were at or below those of its competitors, and the misconduct affected only some of Overstock's product lines. This factor weighed in Overstock's favor. On the other hand, the offending practices were numerous and persistent in that they occurred daily, on thousands of product pages. The court found Overstock's conduct was willful, in that it was inconsistent with the guidelines of the FTC or the Better Business Bureau, and was based on Overstock's objective to brand itself as an extreme value retailer and exaggerate the savings available on its site. Moreover, the resulting penalty was well within Overstock's ability to pay without damaging its competiveness and was necessary for deterrence purposes. Finally, the court noted that it had declined to order restitution to customers because of the difficulty of identifying an appropriate award or appropriate recipients, and that the lack of restitution was a factor in setting the appropriate penalty. The court found the amount it awarded was "the minimum necessary to vindicate the purposes of the statutes and far below what may be within the bounds of its discretion."
Overstock contends this award was an abuse of the trial court's discretion. It argues that the court found its conduct to be of only moderate seriousness; that it did not sell defective products, charge more than advertised, or charge higher prices than its competitors; that the offending practices affected only a portion of its goods; that reference prices provided valuable information to consumers; and that there is no evidence its practices caused concrete injury to consumers.
We review these penalties for abuse of discretion. "Under this standard, `[w]e do not reweigh the evidence or substitute our notions of fairness for the trial court's. [Citations.] "To merit reversal, both an abuse of discretion by the trial court must be `clear' and the demonstration of it on appeal `strong.'"' [Citation.]" (People v. JTH Tax, Inc., supra, 212 Cal.App.4th at p. 1250.) "[T]he trial court's discretion in setting civil penalties generally will be upheld." (People ex rel. Kennedy v. Beaumont Investment, Ltd. (2003) 111 Cal.App.4th 102, 131 .)
(2) Overstock has not shown an abuse of discretion here. The trial court explained its reasoning clearly. Although one factor — the finding that the seriousness of the conduct was moderate — weighed in Overstock's favor, the other statutory factors all weighed against Overstock. Those included "the number of violations, the persistence of the misconduct, the length of time over which the misconduct occurred, [and] the willfulness of the defendant's misconduct." (§§ 17206, subd. (b), 17536, subd. (b).) The offending conduct took place persistently over a period of years and continued not only after Overstock received customer complaints, but after it became aware its conduct was being investigated and prosecuted. Overstock does not dispute that the penalty falls within its ability to pay.
We also reject Overstock's claim there was no "concrete injury" to consumers. The trial court expressly found that Overstock's deceptive pricing practices not only had the capacity to cause harm but "in fact did so." The fact that Overstock in fact (according to its undisputed evidence) offered the lowest prices in the market does not mean no injury occurred. As the trial court explained, "the most powerful evidence was not that the advertisements led consumers to pay more than they otherwise would have but that there was a reduction in search intentions, an increase in a perception of transaction value and a greater likelihood that the consumers would return to the Overstock webpage." The court declined to order restitution not because there was no harm, but because there was no practical way to determine what might be an appropriate award of restitution or how to identify those who should receive it, short of offering restitution to all customers over the eight-year period — which the court said could be "ruinous."
Overstock's argument that the penalties imposed here are larger than those upheld in any published case also does not persuade us that the penalties here were excessive. In People ex rel. Bill Lockyer v. Fremont Life Ins. Co. (2002) 104 Cal.App.4th 508, 512-513, 529-531 , the court upheld a judgment ordering an insurance company that had sold improper annuity policies to pay $2.5 million in civil penalties and to offer restitution to all (nearly 5,000) purchasers. Similarly, in People ex rel. Harris v. Sarpas (2014) 225 Cal.App.4th 1539, 1543 (Sarpas), the court affirmed a judgment ordering the defendants (two individuals and their jointly owned company) to pay penalties of $2,407,581 in addition to up to $2,047,041 in restitution to the victims of a scheme by which the defendants falsely promised customers they would obtain loan modifications and prevent foreclosure of their homes. And in People v. Bestline Products, Inc. (1976) 61 Cal.App.3d 879, 884-885, 903-904, 923-924 , the appellate court upheld a $1 million penalty and the defendants were ordered to pay restitution — which could amount to more than $6 million — to the victims of a fraudulent marketing scheme. Here, in contrast to these cases, the trial court did not order restitution and took that into account when imposing penalties. In any case, none of the cited authorities suggest that the amounts awarded were somehow in the outer limit of penalties that may properly be imposed. Bearing in mind the factors the trial court considered — including the persistence of Overstock's conduct, the number of violations, and the number of years over which the violations took place — we conclude the trial court did not abuse its discretion in calculating the civil penalties.
The court in Sarpas struck the penalties as to another defendant and directed the trial court to recalculate them. ( Sarpas, supra, 225 Cal.App.4th at p. 1567.)
Overstock also argues the penalties were excessive because governmental inaction had allowed them to accumulate over many years. That is, the People did not bring this action until more than three years after the Shasta County District Attorney began investigating it, and it took an additional three years for the matter to proceed to trial. This delay impermissibly led, Overstock argues, to "`ever-mounting penalties.'" For this contention, Overstock cites Hale v. Morgan (1978) 22 Cal.3d 388, 401, 404-405 [149 Cal.Rptr. 375, 584 P.2d 512], which, on its facts, found an award of mandatory, potentially limitless penalties to a tenant constitutionally excessive. (See also People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2005) 37 Cal.4th 707, 713, 731 [36 Cal.Rptr.3d 814, 124 P.3d 408] (R.J. Reynolds) [triable issue of fact as to whether Attorney General delayed filing lawsuit to let statutory penalties for distributing cigarettes at multiple events accumulate]; Walsh v. Kirby (1974) 13 Cal.3d 95, 98, 104 [118 Cal.Rptr. 1, 529 P.2d 33] [state agency accumulated evidence of recurring illegal alcohol sales, without prior notice, before filing accusation].) But Overstock never raised this issue in the trial court, and so it is waived. (People v. JTH Tax, Inc., supra, 212 Cal.App.4th at p. 1232.) Contrary to Overstock's contention, this is not a "purely legal" issue that can be raised for the first time on appeal, but depends on a factual determination, for example, that Overstock had no notice of the People's investigation of the alleged violations or that the People intentionally postponed filing their action in order to accumulate penalties. The argument is, in any case, feckless. Overstock does not contend that the People either delayed or hid their actions for the purpose of accumulating penalties. Overstock has been aware of the investigation since 2007 and negotiated a tolling agreement to delay the commencement of litigation. In the meantime, it chose to continue the offending practices. (3) We also reject Overstock's argument that the penalty is so grossly disproportionate to the gravity of its offense that it violates the prohibitions against excessive fines found in the Eighth Amendment to the United States Constitution and article I, section 17 of the California Constitution. In reviewing this issue, we accept the trial court's factual findings unless clearly erroneous and determine de novo whether the fine is excessive. (United States v. Bajakajian (1998) 524 U.S. 321, 336-337, fn. 10 [141 L.Ed.2d 314, 118 S.Ct. 2028]; see also R.J. Reynolds, supra, 37 Cal.4th at p. 731.) To decide whether the fine was constitutionally disproportionate, we consider "(1) the defendant's culpability; (2) the relationship between the harm and the penalty; (3) the penalties imposed in similar statutes; and (4) the defendant's ability to pay." (R.J. Reynolds, supra, 37 Cal.4th at p. 728.)
The trial court carefully considered Overstock's culpability, explaining that the seriousness of the misconduct was moderate, but that the offending practices were numerous, persistent, and willful, and the record fully supports these findings. The penalty the court set was both far below the maximum allowed by statute and well within Overstock's ability to pay. The penalty was not constitutionally disproportionate.
D. Injunctive Relief
Overstock makes several challenges to the injunctive relief ordered by the trial court. It first challenges the injunction as a whole on the ground that there was no substantial evidence that its practices violated the FAL and UCL. Because we conclude the trial court's findings are supported by substantial evidence, we necessarily reject this challenge to the injunction. As a fallback, Overstock challenges three specific aspects of the injunction.
In its opening brief, Overstock challenged a fourth aspect of the injunction, relating to adding the costs of shipping to the price identified by the validation process. In its reply brief, Overstock abandons this challenge.
(4) "Section 17203, part of the UCL, and section 17535, part of the FAL, authorize the court to enjoin persons who have engaged in unfair competition. They provide that `[t]he court may make such orders or judgments ... as may be necessary to prevent the use or employment by any person' of practices which violate their respective chapters. (§§ 17203, 17535.) ... `[T]he court's discretion is very broad' and ... this language `is ... a grant of broad equitable power.' [Citation.] ... `The remedial power granted under these sections is extraordinarily broad. Probably because false advertising and unfair business practices can take many forms, the Legislature has given the courts the power to fashion remedies to prevent their "use or employment" in whatever context they may occur.' [Citation.] Accordingly, we review the court's injunction for abuse of discretion." (People v. JTH Tax, Inc., supra, 212 Cal.App.4th at p. 1257.)
Overstock argues the trial court acted improperly in enjoining the use of formulas to set ARP's because it discontinued that practice in 2008, several years before trial. It points out that injunctive relief "`has no application to wrongs which have been completed [citation], absent a showing that past violations will probably recur. [Citation.]' [Citation.]" (Madrid v. Perot Systems Corp. (2005) 130 Cal.App.4th 440, 465 ; see also People ex rel. Herrera v. Stender (2012) 212 Cal.App.4th 614, 631 .) While this is a close issue, we conclude the trial court acted within its discretion in enjoining the use of formulas. Overstock continued to take the position that the use of formulas was proper; in its posttrial brief it argued that formulas in fact matched the actual selling price of retailers who used the same formulas to set their selling prices. Even after ceasing the use of formulas, it continued to use other misleading practices, such as basing ARP's on nonidentical products. On these facts, the trial court acted within its discretion in rejecting Overstock's argument that it could not properly enjoin the use of formulas. (See Robinson v. U-Haul Co. of California (2016) 4 Cal.App.5th 304, 314-317 .)
Overstock also challenges the portion of the judgment enjoining it from "[u]sing the ARP nomenclature `MSRP' or some other marketing term or acronym unless a clear and conspicuous hyperlink defines that term or acronym ... and state[s] that that term or acronym may not be the prevailing market price (or, alternatively, may not be the regular retail price)." According to Overstock, the People never claimed this label was misleading. However, the record contains evidence that some MSRP's were inflated or higher than the "street price." The court could properly enjoin the unqualified use of the term.
Finally, Overstock contends the trial court acted improperly in enjoining it from "[a]dvertising an ARP for longer than 90 days from the date on which the ARP was verified as a posted price, unless the ARP is re-verified after that period." Overstock argues, again, that the injunction is unnecessary because it already employs a 90-day validation period. But this practice was instituted only in 2011, after this litigation was commenced. In the absence of an injunction, Overstock retains the ability to abandon that practice, and an injunction is appropriate irrespective of Overstock's stated intent. (People ex rel. Feuer v. Superior Court (Cahuenga's the Spot) (2015) 234 Cal.App.4th 1360, 1385 ; Dept. of Agriculture v. Tide Oil Co. (1969) 269 Cal.App.2d 145, 150 .) We see no abuse of discretion in requiring Overstock to apply its current practice of revalidating prices every 90 days under the new requirements imposed by the injunction. III. DISPOSITION
The judgment is affirmed.
Ruvolo, P.J., and Reardon, J., concurred.
List Price : $999.00 Today's Price: $449.99 You Save : $549.01 (55%)