The Sacramento Bee - FTC asked to investigate outlet malls' marketing practices

February 4, 2014
In The News

By Richard Chang

Four members of Congress are calling for a federal investigation into what they called “deceptive marketing practices” by outlet stores across the United States.
 
In a strongly worded letter sent to the Federal Trade Commission on Thursday, Sens. Sheldon Whitehouse, D-R.I., Richard Blumenthal, D-Conn., Ed Markey, D-Mass., and Rep. Anna Eshoo, D-Atherton, asked agency chairwoman Edith Ramirez to examine claims that outlet stores are passing off lesser-quality products as first-rate merchandise once offered in full-line stores.
 
“We are concerned that outlet store consumers are being misled into believing they are purchasing products originally intended for sale at the regular retail store … We believe this practice may be a violation of the FTC’s Guides Against Deceptive Pricing,” the letter said, citing a broad statute that prohibits unfair and deceptive practices in commerce.
 
Whitehouse launched the push for an investigation after he read a Sacramento Bee story that showcased the practices of the outlet industry, said spokesman Seth Larson.
 
“It’s unfairly taking money from the purses and pockets of middle-class Americans,” Blumenthal said by phone Thursday, adding that he would sponsor legislation to address the issue if necessary.
 
FTC spokesman Peter Kaplan confirmed receipt of the letter but declined to comment, citing agency policy.
 
When outlet malls first appeared nearly 40 years ago, they served mostly as a channel to get rid of goods no one wanted. But as the industry grew, outlets became a distribution channel in their own right, with manufacturers creating a new line of lesser-quality goods to keep up with growing demand. Today, there are more than 300 outlet malls in the United States.
 
Outlet mall owners argue the stores are only giving the public what it wants: brand-name goods at bargain-basement prices. Representatives for Premium Outlets, by far the largest player in the industry, referred a request for comment to an outside public-relations agency, which did not respond. Premium owns two outlet centers in the Sacramento region – Folsom and Vacaville.
 
Anthony Dukes, associate professor of marketing at the University of Southern California, said the FTC was unlikely to take action beyond a “slap on the wrist.”
 
“It’s going to be hard to show the extent consumers were manipulated,” he said.