Discount pricing, such as “Was $100, now $59.99,” has become a standard marketing tactic across e-commerce and retail. However, behind these eye-catching price tags, there are strict legal rules businesses cannot afford to ignore. Federal regulators and states like California closely monitor how discounts are advertised, especially strike-through pricing. If your pricing creates a misleading impression of savings, you could face investigations, high penalties, and even lawsuits. So, what should you do to stay compliant?

Understanding the FTC’s Rules on Pricing

The Federal Trade Commission (FTC) has rules governing pricing practices through its Guides Against Deceptive Pricing. The main idea behind this is that a business should not mislead consumers about a discount.

If you advertise a product as having its price reduced from a former price, the price must be genuine. The item you are selling must have been offered at a higher price for a meaningful period, and you cannot inflate a price with the intent to claim a discount later. For example, raising a product’s price for a few days, without real sales at that price, then advertising a “sale” based on that inflated price may be considered deceptive. Additionally, the FTC also scrutinizes comparisons to competitors’ prices. Therefore, if you claim your price is lower than the market, you must have a reasonable basis for that claim.

It is also worth noting that promotions like “buy one, get one free” are also regulated. If the base price is increased or the offer comes with hidden conditions, it may still be considered misleading.

California’s Approach to Strike-Through Pricing

California’s Business and Professions Code Section 17501 addresses the concept of prevailing market price. If you advertise a former price, it must reflect the actual price at which the product was commonly sold in the market within the last 90 days. If this isn’t the case, you must clearly disclose when that higher price was last in effect. These laws prevent businesses from creating artificial discounts. If a product is almost always sold at the “sale price,” advertising it as discounted from a higher price can be seen as false advertising under ecommerce law.

How to Stay Compliant

Compliance starts with honesty and documentation. If you advertise a discount on your e-commerce website, be ready to show that the higher price was real and recent. Keep records of your pricing history and ensure your marketing reflects actual business practices.

Another tip is to ensure clear disclosures. If there are any conditions for the discounts, such as limited quantities or bundle purchases, present them clearly near the offer. Avoid fine print that contradicts the main message.

Additionally, stay up to date with the law. Pricing laws vary by state, and what applies in one state may create liability in another. It’s wise to consult with an experienced internet law and compliance attorney to help catch issues before they become a liability.

Finally, train your marketing and sales teams. Many violations occur because teams do not fully understand the legal standards governing promotional pricing.

Contact the Internet Law and Compliance Attorneys at Revision Legal

For more information, contact the experienced Internet Law and Compliance Lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.

The FTC’s Guides Against Deceptive Pricing: The Federal Standard

The Federal Trade Commission’s Guides Against Deceptive Pricing (16 C.F.R. Part 233) establish the federal framework for lawful discount advertising. The foundational rule is that a “former price” used in a strike-through comparison must be a bona fide former price — an actual price at which the item was offered to the public for a substantial period of time in the recent past, at which genuine sales were made or the item was genuinely offered. Inflating a reference price — setting an artificially high “was” price solely to create the appearance of a deep discount — is deceptive advertising under FTC Act § 5 (15 U.S.C. § 45).

The FTC’s guidance specifies that if a seller sets a high “original” price but never actually sells at that price, the discount representation is false. Similarly, if the item was offered at the higher price for only a brief, inconsequential time before being discounted, the comparison is misleading. The FTC has also addressed manufacturer’s suggested retail price (MSRP) comparisons: advertising a discount from MSRP is only lawful if the MSRP reflects actual prices being charged by retailers in the relevant market — not a fictitious ceiling set to amplify the apparent discount. Retailers who use MSRP comparisons without verifying that the MSRP reflects real market prices face deceptive advertising exposure.

California’s Specific Discount Pricing Statutes

California has some of the most aggressive pricing fraud laws in the country. Business and Professions Code § 17501 prohibits advertising a price as a former price unless the goods were actually offered at that price for at least the preceding three months. If the goods were not offered at the higher price for the prior three months, the seller must disclose when and at what price the goods were offered. This three-month rule creates a bright-line compliance requirement that is stricter than the FTC’s more general “substantial period of time” standard.

Violations of § 17501 are actionable under California’s Unfair Competition Law (Bus. & Prof. Code § 17200) and the Consumer Legal Remedies Act (Civ. Code § 1770). Both statutes allow private plaintiffs to bring class actions, and UCL violations permit restitution and injunctive relief without the need to prove individual damages. The CLRA allows recovery of actual damages, punitive damages, and attorney fees. Retailers operating at scale — where misleading price comparisons affect thousands of transactions — face significant class-action exposure under these statutes. Several large retailers, including Kohl’s and J.Crew, have settled class actions in California over fictitious reference pricing practices.

Holiday Sales and Limited-Time Offers: Specific Compliance Traps

Flash sales, holiday promotions, and limited-time offers create specific compliance risks because they often involve rapid price changes and heavy use of countdown timers and urgency cues. A countdown timer that implies a price will increase at midnight — but actually resets to the same “sale” price after midnight — is a deceptive practice. The FTC has specifically called out fake countdown timers and artificial scarcity claims in its enforcement priorities for e-commerce deception.

For retailers who run frequent promotions, the key documentation practice is maintaining a price history log: the dates each SKU was offered at each price point, the volume sold at each price, and the dates any promotional price was active. This log is your primary defense in a regulatory investigation or class action. It demonstrates that the “regular” price you advertised was genuine, that the discount was real, and that the duration of the sale was accurately represented. Without that documentation, your compliance story depends entirely on your ability to reconstruct price history from order management system exports — which may be incomplete or ambiguous under adversarial scrutiny.

Other States With Active Discount Pricing Enforcement

While California is the most aggressive, it is not alone. New York’s General Business Law § 349 prohibits deceptive business practices and has been used by the New York Attorney General to pursue fictitious pricing claims. Illinois’s Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/2) similarly covers misleading price advertising. The Illinois AG has brought enforcement actions against retailers for advertising discounts from inflated “regular” prices that were rarely, if ever, charged.

Washington and Oregon have consumer protection statutes with private rights of action that cover false advertising. Texas’s Deceptive Trade Practices Act (DTPA, Tex. Bus. & Com. Code § 17.41 et seq.) permits consumers to recover actual damages, treble damages for knowing violations, and attorney fees. For a national e-commerce retailer running uniform pricing strategies, a pricing practice that violates California’s § 17501 almost certainly violates the consumer protection laws of several other states as well. Multi-state exposure amplifies the risk of any single deceptive pricing practice.

Building a Legally Defensible Pricing Strategy

A compliant discount pricing strategy requires documented price history, realistic reference prices, and honest representations about the nature and duration of promotional offers. Before running a sale, verify that your “regular” price was actually charged — not just listed — for a meaningful period (three months in California; a reasonable recent period under FTC standards). If you are comparing to a competitor’s price or an industry average, ensure that comparison price is accurate, current, and represents the actual market price in the relevant geographic area.

Train your marketing team on pricing law. Many pricing compliance failures originate in marketing decisions made without legal review — a copywriter who sets an inflated MSRP comparison to make the discount look better, or a developer who resets a countdown timer because the sale was extended. Implement an approval workflow for promotional pricing that includes legal sign-off on reference prices and discount claims. The e-commerce attorneys at Revision Legal advise retailers on FTC and state pricing compliance. Contact us through our contact page or visit our internet law practice to review your current pricing practices.