In the relentless battleground of direct-to-consumer (DTC) e-commerce, few sales tactics are as ubiquitous—or as fraught with controversy—as strike-through pricing. The familiar paradigm, where a product’s original price appears crossed out beside a lower sale price, is intended to exemplify savings and entice buyers. Yet recent legal developments highlight the increasing risks and regulatory scrutiny facing retailers who use this tactic.

The Resurgence of Comparative Pricing—and Oversight

Strike-through pricing, also known as “comparison pricing,” has become a mainstay for DTC brands vying for consumer attention in a crowded digital marketplace. The strategy, which visually signals discounts, can drive purchasing urgency and reinforce perceptions of value. But regulators at both the federal and state levels have raised alarms about deceptive comparative pricing, especially when the advertised “original” prices do not reflect bona fide prior offers.

According to a recent article in The National Law Review, “Don’t Let Strike-Through Pricing Strike Out Your DTC Website: Comparison Pricing Risks and Watchouts,” the Federal Trade Commission (FTC) and state attorneys general have taken action against companies whose reference prices were inflated or insufficiently substantiated. The FTC’s guidelines require that the crossed-out price must be the “actual, bona fide price at which the article was openly and honestly offered to the public for a reasonably substantial period of time.”

California, in particular, has emerged as a hotbed for enforcement, brandishing some of the country’s strictest statutes. Under California law, the advertised former price must have been the prevailing market price within the preceding three months, unless the ad clearly states when the previous price was in effect. This requirement, codified in California’s Business & Professions Code Section 17501, has been the basis for class action lawsuits and civil penalties.

Notable Lawsuits and Regulatory Actions

Over the last decade, retailers as prominent as Kohl’s, J.C. Penney, and Overstock.com have faced lawsuits and multi-million dollar settlements over allegedly deceptive strike-through pricing practices. In these cases, plaintiffs often alleged that the retailers’ “original” or “list” prices were artificial, with products rarely, if ever, sold at those prices.

In the Overstock case, the California Court of Appeal affirmed a $6.8 million penalty, finding that the company’s anchor pricing often referred to prices “never actually offered for sale or for an insubstantial period.” The Court emphasized the importance of transparency in reference pricing, noting that consumer reliance on fictitious savings undermines price integrity.

The FTC, meanwhile, has issued warnings and consent orders in several cases, reminding businesses that failure to substantiate reference prices could constitute deceptive advertising under Section 5 of the FTC Act. The Commission’s guidelines stress the necessity of disclosing when a comparison price was last in effect if it falls outside the acceptable period.

Implications for DTC Brands and Ecommerce Sites

For direct-to-consumer startups and established e-commerce operations, these regulatory developments pose complex compliance challenges. The temptation to use generous strike-through discounts is strong, especially given the measurable impact on conversion rates. However, the legal expectation is clear: comparison pricing must be truthful, not manufactured.

Retailers are increasingly investing in pricing compliance programs, maintaining thorough records demonstrating that the reference price reflects an actual prior offer, and that any exceptions (such as clearance or limited-time pricing) are properly documented. Some brands have moved toward more nuanced discount communications, utilizing “up to X% off” language or referencing competitor pricing, with ample disclaimers to avoid misleading consumers.

Ecommerce platforms and marketplaces have also upgraded their advertising policies in response to regulatory action. Amazon, for example, now requires sellers to attest that list prices are the prevailing price offered by competitors, and may remove listings that violate these terms.

Regulatory Uncertainty in a Digital Age

The proliferation of dynamic pricing and targeted promotions in online retail complicates the landscape. Algorithms routinely adjust prices based on demand, user behavior, or inventory. As a result, “regular” pricing can fluctuate, obscuring the basis for many advertised savings.

State lawmakers in Connecticut and New York have proposed legislation echoing California’s three-month rule, while others have pursued requirements for more prominent disclosures. The National Law Review notes that the patchwork of standards “creates significant compliance burdens on e-commerce retailers operating across state lines.”

Recommendations for Retailers

The consensus among legal analysts is to err on the side of caution. Retailers should:

• Substantiate All Price Comparisons: Maintain accessible records proving that reference prices reflect actual prior offers for a significant period.
• Comply with State Laws: Adapt pricing strategies to the strictest applicable standards, particularly in key markets such as California.
• Disclose Timeframes Where Necessary: If a reference price was last in effect outside the three-month window, clearly and conspicuously state the dates.
• Avoid Blanket Strike-Throughs: Only use comparison pricing where the regular price is credible and verifiable for the specific product.
• Audit and Monitor: Periodically review advertising and marketing communications for ongoing compliance.

The Bottom Line

The regulatory tide is turning against loose or creative comparison pricing practices. For DTC brands eager to stand out, transparency and rigorous substantiation are now legal—and competitive—imperatives. As state and federal scrutiny mounts, those who fail to adapt risk both costly litigation and reputational harm in the unforgiving e-commerce arena.