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Hobby Lobby sued over promotional price practices

Hobby Lobby CEO on values, new book
Hobby Lobby CEO on values, new book 05:54

Sometimes, advertised deals aren't what they seem to be. And that could be the case at arts and crafts retail chain Hobby Lobby, which was accused in a federal lawsuit filed this week in California of using "sham" deals to entice customers to buy its branded products.

The 60-page suit alleges that the Oklahoma City, Oklahoma, company employed fraudulent business practice by using false reference prices to fool consumers into thinking they're getting a good deal. According to the filing, the "marked" price doesn't represent a "bona fide" price at which Hobby Lobby sold a substantial quantity of merchandise for a "reasonable period of time," as required under Federal Trade Commission rules.

"Retailers, including Hobby Lobby, understand that consumers are susceptible to a good bargain, and therefore, Hobby Lobby has a substantial interest in lying in order to generate sales," the lawsuit said. "A product's 'regular' or 'original'  price matters to consumers because it serves as a baseline upon which consumers perceive a product's value."

The case seeks to stop Hobby Lobby from engaging in allegedly unethical and deceptive practices and to correct the misleading impression that consumers have about its branded products.

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A spokesman for Hobby Lobby declined to comment for this story.

San Diego resident Christina Chase is the lead plaintiff in the case, which is seeking class action status. 

According to the filing, Chase purchased a 5-inch by 7-inch Green Tree Gallery Shadow Box Display Case Photo Frame for about $8.99 around March 1 at a Hobby Lobby store in La Messa, California. A white price tag on the back of the item showed the "marked" price as $17.99. There also was a white placard with the words "Photo Frames 50 percent Off the Marked price" in red and black print.

"However, this product was never offered for sale or sold at the $17.99 price, nor was it offered for sale or sold at that price within the 90-day period immediately preceding Ms. Chase's purchase," the court filing says.

Chase, who also bought a paintbrush that day for $2.34 that allegedly was advertised in a similarly misleading way, is seeking to represent a class that includes anyone in California who bought one or more Hobby Lobby-branded and trademarked products based on bogus discounts. The lawsuit alleges that Hobby Lobby "continually advertises fictitious discounts" using in-store flyers. Lawyers found similar practices at three other Hobby Lobby stores in Southern California.

Hobby Lobby -- owned by the Green Family, which identifies as evangelical Christian -- is the second-largest retailer of arts and crafts supplies, with $4 billion in 2015 sales. It gained notoriety as the plaintiff in a legal challenge to the Affordable Care Act's (ACA) mandate that required employers to cover the cost of contraceptives in their health insurance plans for employees. In 2014, a divided U.S. Supreme Court ruled in Hobby Lobby's favor, arguing that the ACA rule violated a federal law protecting religious freedom in the case of family-owned companies. 

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