Iowa retailers say D.C. law fuels unfair shakedowns
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Two Des Moines retailers say a D.C. law firm and a nonprofit are using consumer protection laws to squeeze thousands of dollars from businesses over online sale prices.
Why it matters: Consumer protection laws are meant to prevent deceptive pricing, but Iowa retailers say private enforcement has created a settlement machine that small businesses can't afford to challenge.
Driving the news: Raygun, the Des Moines-based T-shirt company, has settled a lawsuit brought about this spring in D.C. Superior Court by the Institute for Truth in Marketing, represented by DC Consumer Law Group.
- The lawsuit alleged that Raygun's crossed-out prices were deceptive because the higher prices were not bona fide recent prices.
Catch up quick: D.C.'s Consumer Protection Procedures Act bans deceptive trade practices, including misleading claims about price cuts.
- The law allows private lawsuits, including those brought by certain nonprofits, seeking $1,500 per violation, punitive damages, attorney fees, and injunctions.
Context: FTC guidance also says former prices must be bona fide, not inflated to create the appearance of a deal.
- California and Massachusetts are among the places with similar comparison pricing rules at the state level.
State of play: The institute says it bought six Raygun shirts through its president in D.C. and sought at least $9,000 in statutory penalties, attorney's fees and an injunction.
- Raygun settled for an undisclosed amount, has changed its sales section, and may add software to flag items discounted for 90 days, owner Mike Draper tells Axios.
Zoom in: Soul Flower, a Des Moines clothing retailer, received a similar warning letter from DC Consumer Law Group in 2021, when it was based in Minnesota.
- Owner Peggy Rossi tells Axios the business paid to settle before a lawsuit was filed, without admitting liability.
The big picture: The Institute's actions have attracted national attention.
- ABA Journal reported it has sued dozens of online retailers. The legal blog All About Advertising Law reports that D.C. pricing complaints average about $17,000 per case.
Yes, but: Some state consumer laws require pre-suit notice or cure periods before a damages claim can proceed, including California's 30-day window and Texas' 60-day notice requirement.
What they're saying: Draper published a synopsis of the case online last week, telling Axios that the bigger issue is a system that allows private groups to serve as consumer protection enforcers for their own financial gain.
- He and Rossi say it was cheaper to settle than to pursue a more expensive legal battle.
The other side: Joshua Rose, an attorney at DC Consumer Law Group, rejects the criticism.
- Rose declined to discuss Raygun's case, citing a confidentiality agreement, but tells Axios the firm looks for multiple violations — not a single sale item.
- Fake discounts deceive shoppers because they believe they're getting a bargain even though they're paying the regular price, Rose said.
What we're watching: Whether the dispute prompts D.C. lawmakers to add a notice-and-cure period, allowing businesses to correct pricing mistakes before lawsuits seek damages.