Outlet Stores: Deals and Deception. How They’re Likely Violating the Law and Getting Away With It

Holiday shopping sale

Having many people in our lives that we love is usually a great thing… except when it comes time to buy holiday gifts. To avoid breaking the bank, many people plan to shop on Black Friday (which apparently now starts as Black Thursday Evening at some stores), or at outlet malls or “discount” retailers such as TJ Maxx. But if you think you’re gonna get great deals on designer clothes at outlets or discounters, beware. You might not be getting what you think you are getting.

As profiled on Medium.com, many big retail brands such as Banana Republic, J.Crew, and Calvin Klein may be misleading you into believing that you are getting the same clothes at outlets or “discount” retailers as you would in regular retail stores, just from last season or with slight damage. But this is most often NOT the case, as Jay Hallstein and Katie Doyle explain:

“Despite common belief, outlet clothing often does not enter a “regular” store and is most likely produced in an entirely different factory than the “regular” clothing.”

In fact, upwards of 85% of the merchandise sold in outlet stores is produced specifically for these stores, at lower cost and lower quality. Not only that, but some retailers are not even producing the goods themselves, but are essentially just stamping their name on them! It’s pretty outrageous, and it’s also probably illegal.

In general, it is illegal for retailers in the U.S. to engage in “unfair or deceptive” marketing practices.1Section 5 of the Federal Trade Commission Act (15 U.S.C. Section §45) gives the FTC jurisdiction to bring enforcement actions against deceptive or unfair marketing practices What does this mean? Essentially a business may not make any statements or claims, or leave out any key information in statements or claims, which would mislead a typical consumer. Because the misled consumer may do something or buy something they would not have if they had accurate information, the unfair or deceptive practice harms consumers.

So, when a retailer uses the same brand name on its outlet clothing or for clothes it isn’t even manufacturing, this can mislead consumers to assume the quality is no different from the clothes the retailer normally makes. This likely violates federal laws against deceptive or unfair marketing practices. Based on this information a consumer may buy outlet clothing, but might not have if he or she knew it was of lesser quality.

And about those price tags that say something like “originally priced at $99, marked down to $49.” Ya, those are pretty blatant lies. As Hallstein and Doyle put it, that shirt or pair of pants was intentionally made to cost $49. This kind of price deception is specifically described as an illegal practice.2FTC’s Guides Against Deceptive Pricing (16 CFR 233)

A group of members of Congress has formally requested that the government look into these likely consumer law violations, though apparently no action has been taken against retailers thus far. But you can put pressure on the government to act by submitting a complaint with the Federal Trade Commission. Before you do, go to a store, take some notes and a photo or two of the labels and tags.

And if you still want to shop at the outlets or discount retailers, we’re not judging. Sometimes you just need something cheap that still looks good. But now you know why it’s so cheap. Retailers just need to stop purposely keeping people in the dark about it all.


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