Retailers can be penalized thousands of dollars for failing to post correct prices on their merchandise even if there is no proof they intended to deceive their customers, the Arizona Court of Appeals ruled Thursday.
In a unanimous ruling involving AutoZone, the judges ruled that the simple fact that a price on a shelf is wrong does not, by itself, violate the state’s Consumer Fraud Act. They said there has to be some showing that the mispricing was “voluntary.’’
But the judges said the once the state showed that prices were missing or wrong, then it is up to the retailer to prove it did not voluntarily violate the law.
That conclusion disappointed attorney Tim Berg who represented the Arizona Retailers Association.
“That seems backwards to us,’’ he said. For example, Berg said that puts a company accused of failing to post prices in the position of having to present evidence that a particular store has a perennial problem with customers removing the price tags from the shelves.
Berg said the retailers got involved because of the implications of the fight on all Arizona merchants.
An attorney for AutoZone declined to comment on the ruling.
At the root of the dispute is a 1993 law requiring price posting.
Arizona used to require that prices be stamped on each item. But state legislators, responding to retailer complaints of costs and noting the availability of scanners, agreed to scrap that mandate.
In exchange, however, stores agreed to abide by new laws that require the price of every item to be posted on the shelf or near each display. That law also requires that the prices that are rung up by scanners match those shelf prices.
During a five-year period beginning in 2001, the state Department of Weights and Measures levied fines of $170,000 against AutoZone after finding repeated violations at its more than 90 stores in Arizona.
In 2006, though, then state Attorney General Terry Goddard filed suit. He said the fines apparently have failed to get the firm to comply with the law, with the company considering the penalties a “cost of doing business.’’
His ammunition is the state’s Consumer Fraud Act, which carries penalties of $10,000 per violation. That could add up to real money, with the state alleging 806 incidents of mispriced items and 2,814 items with no price at all, something Goddard called “systematic fraud against the consumer.’’
Attorneys for AutoZone convinced a Maricopa County Superior Court judge to throw out the case based on the failure of the state to prove the company intended to misprice items. But Judge Patricia Norris, writing for the Court of Appeals, said that’s not what the law requires.
On one hand, Norris said a company cannot be found guilty of violating the Consumer Fraud Act simply based simply on the fact that prices were wrong or missing entirely.
But the judge said that once the state offers that evidence, the burden shifts to the retailer to prove that the violation was not voluntary.
In this case, she said, the state met its minimum requirement. Now it is up to AutoZone to prove otherwise, something that requires going to trial.
The judges also rejected the contention by AutoZone that the failure to post a price -- versus posting a wrong one -- cannot be considered fraud.
“When the law imposes a duty to disclose certain information, the failure to disclose the information can constitute an affirmative deception,’’ Norris wrote. In fact, she said that, based on what already has come out in court, the company’s failure to put prices on items was “deceptive as a matter of law.’’
“Ultimately, when a store offers goods for sale without a posted price, consumers cannot know the actual price of the good until they are at the register and thus they will be unable to compare prices while shopping,’’ she said. But Norris said AutoZone will be entitled to prove their acts were not voluntary at trial.
The court also rejected the company’s contention that the fines being sought under the Consumer Fraud Act are duplicative of penalties already levied by Weights and Measures. Norris said the first fines AutoZone paid were for the simple fact of mispriced or unpriced items; this lawsuit is based on willful violations of the law, as shown by a pattern of conduct.