New York's consumer fraud suit challenging Sears Roebuck & Co.'s pricing strategy may cause the company more than bad publicity - it could trigger similar actions all around the country, analysts and lawyers believe.
A number of state prosecutors - including those in California, Maryland, Minnesota, Missouri and Virginia - are said to be closely watching the legal proceedings in New York State.On Thursday New York Attorney General Robert Abrams announced he had filed suit against Sears alleging its advertised "everyday low prices" are false.
"It (the suit) is clearly part of the new militancy on the part of attorneys general across the country," said Chester Straub, a partner at the prestigious New York law firm Willkie Farr & Gallagher.
"It is alerting other attorneys general to do the same thing. That's my biggest concern," said Walter Loeb, a retail analyst at Morgan Stanley & Co.
The case, filed in state court in Buffalo, is aimed at Sears' marketing strategy launched in March that advertises "everyday low prices." Sears implemented the strategy to cut inventories substantially and boost revenues.
Abrams charged in the suit that the actual prices paid by customers remained largely unchanged. The "everyday low price" campaign was portrayed as a "perpetual sale, creating the false impression that new prices represented cut-rate discounts from Sears' `old' prices," the suit alleges.
The suit is based on items checked by the state prosecutor's office during an 18-month investigation.
Among the items listed in the suit, were a Kenmore canister vaccum, previously sold at $199.99 and now sold for $219.99, a Dearborn 3-piece living room sectional, previously sold for $899.94 and now priced $979.00, and a Saratoga sofa and chair combination, previously priced at $699.96 and now sold for $699.00.
"This area of comparative pricing has attracted a lot of attention of attorneys general across the country," said Dennis Rosen, the state prosecutor who put together the case.
"They have expressed similar concerns and support for what we're doing," said Rosen, who added that he did not know if other states would take similar actions.