Seventh Circuit Reverses Dismissal of Class Action Against Walmart for Deceptive Pricing Practices

The Court of Appeals for the Seventh Circuit recently reversed the dismissal of a class action against Walmart for deceptive and unfair pricing practices, holding that the Northern District of Illinois had incorrectly interpreted and applied reasonable consumer standards for state consumer protection laws in its analysis. The suit claims that Walmart violated the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), the Illinois Uniform Deceptive Trade Practices Act (“UDTPA”) and other states’ consumer protection statutes. Specifically, the complaint alleges that Walmart charges higher prices for products at checkout than the prices advertised on the shelves in stores. According to the Plaintiff, the small discrepancies in the price consumers see when they select an item and the price that consumers are actually charged at the register add up to hundreds of millions of dollars every year.

While the Northern District acknowledged that consumers would undoubtedly be misled by inaccurate shelf prices, the district court determined that any deception was remedied because the actual price is reflected on the receipt that is printed at the register after shoppers conclude their transaction. The district court reasoned that consumers can, as the plaintiff did, compare the prices on the receipt to the prices advertised on store shelves. Because Walmart provides shoppers with a receipt that details the actual prices they have been charged, the Northern District determined that it is “implausible” that Walmart intends to deceive consumers, or that it intends for consumers to rely on the incorrect shelf prices. In providing the receipt, Walmart’s reasoning was that it is adequately empowering customers with the tools needed to reveal any discrepancies, and, the district court determined, this effectively dispels any potential deception.

Plaintiff appealed the dismissal of his complaint, arguing that the Northern District did not correctly apply the standard to assess what constitutes reasonable consumer behavior under state consumer protection laws. Both the ICFA and the UDTPA require plaintiffs to prove that the alleged acts or practices are likely to deceive reasonable customers acting in reasonable circumstances. This reasonable consumer standard looks to the actual behavior of real consumers, taking into account all the information available to consumers, and the context in which that information is provided and used. In its analysis, the appellate court considered reasonable consumer behavior “under the totality of the circumstances”: that the receipt, or the actual price information, is only revealed to consumers after they have completed their shopping and paid for their items, that the average Walmart shopper is unlikely to memorize or record the shelf price of every item selected so that they can do a thorough audit against their receipt after they have paid, and that customers are equally as unlikely to reenter the store to retrace their steps and check the price on the shelf for each item against their receipt. The appellate court found that, taking the behavior of real consumers shopping in Walmart stores into account, the plaintiff had plausibly alleged that Walmart’s practices may be deceptive to reasonable consumers in violation of state consumer protection laws.

The case is Kahn v. Walmart Inc., 2024 U.S. App. LEXIS 16267 (7th Cir. July 3, 2024).