Levitz Furniture Co. agreed Tuesday to pay $1.2 million to settle charges brought in California and seven other states that it misled consumers with phony discounts.
According to the allegations, Levitz duped customers by comparing "sale" prices to "regular" prices that never existed. Authorities said they did not know how many consumers may have been tricked by the promotions.
Prosecutors said that in bringing the unusual multi-state action, they hoped to discourage similar violations while providing retailers with guidelines on what constitutes a legitimate sale.
In the settlement, Levitz agreed not to advertise "regular" prices unless the item is available at that price at least 60% of the time and is sold at that price at least 20% of the time.
The company also agreed to disclose the beginning and ending date of a sale.
"We are hoping these standards will lead people to not engage in as much phony advertising," California Deputy Atty. Gen. Albert Shelden said. "It is a problem we see a lot and we are concerned about."
Boca Raton, Fla.-based Levitz, which owns 105 stores nationwide, 34 of them in California, did not admit any wrongdoing. In a statement, Chairman and Chief Executive Michael Bozic said, "There were clearly some concerns about the way we conducted our advertising."
This is the second time Levitz has faced false-advertising charges in California. The company settled similar allegations in 1973, paying what authorities described as a significantly smaller penalty.
The investigation in California got underway about a year ago, sparked by consumer complaints and a noticeable increase in the number of sale promotions being conducted by Levitz, prosecutors said.
According to authorities, sale prices did not represent discounts, because the regular prices were fictitious. For example, an investigation last spring found that Levitz advertised a love seat at a regular price of $869, although it was always on sale for $669.
In addition, authorities said, sale prices were not marked up as they should have been when special promotions, such as three-day sales, ended.
The California attorney general's office and the Orange County district attorney's office will each receive $101,250 from the settlement. A consumer complaint triggered the Orange County investigation more than a year ago, said Deputy Dist. Atty. Andrea Burke. Levitz has three stores in Orange County.
The remaining amount is to be divided among other states participating in the investigation: Arizona, Connecticut, Maryland, Missouri, Pennsylvania, Texas and Washington.
Shelden said authorities in California conduct three to four such investigations each year. The penalty in the Levitz case is about average for a chain its size, he said.