Are Customers Always Right? Massachusetts’ Chapter 93A Says Yes

Retailers looking to avoid costly litigation that’s on the rise in recent years should remember two simple maxims: “Rule number one: the customer is always right. Rule number two: If the customer is wrong, please refer to rule number one.”

This wisdom rings as true today as it did when Harry Gordon Selfridge uttered it in 1909—especially at the point-of-sale for Massachusetts retailers if their advertising and pricing practices run afoul of Massachusetts law, in particular the Massachusetts Consumer Protection Act, Chapter 93A. That is because unfair pricing and deceptive advertising class actions and governmental investigations are on the rise.

In Massachusetts, these actions and investigations typically are brought under Chapter 93A. These are expensive to defend and expose retailers to monetary and public relations risks, hurting a retailer’s bottom line and, in some cases, its continuing business viability. So, what should Massachusetts retailers do?

First, retailers should make sure their advertising and pricing practices comply with Massachusetts advertising and pricing law, as violations likely trigger concomitant Chapter 93A violations. To be liable under Chapter 93A, a retailer must engage in an unfair act that causes a consumer a separate and distinct injury or harm.

There are many laws governing advertising and pricing. The Massachusetts attorney general’s office—the office responsible for enforcing Chapter 93A through civil investigative demands and enforcement actions—publishes a Massachusetts Consumer Guide to Shopping Rights, which is a helpful resource. For more granular detail, retailers should review the Massachusetts Price Accuracy Laws, Chapter 94, Section 184B and Section 184C, Massachusetts Individual Pricing Regulations (for food stores or stores with food departments), Massachusetts Item Pricing Regulation (general retail), and Massachusetts Retail Advertising Regulations.

Of course, this isn’t an exhaustive list of laws governing retail pricing and advertising. Violating these laws and regulations may trigger a per se violation of Section 2, and Chapter 93A’s concept of “injury” under Section 9 is exceedingly broad. It may include economic injuries or non-economic injuries such as emotional distress and an invasion of privacy. According to the Massachusetts Supreme Judicial Court, so long as the injury is worth more than a penny, a consumer is entitled to $25 in nominal damages and recovery of the consumer’s attorneys’ fees and costs.

That “more than a penny” injury also exposes the retailer to a Chapter 93A class action, which, if brought in state court, enjoys more plaintiff-friendly certification standards than in federal court. Accordingly, retailers should work closely with their compliance employees and outside legal counsel to adopt a comprehensive advertising and pricing compliance program to avoid these claims.

Second, retailers must understand that mistakes inevitably will occur. Although interactions with unhappy customers are taxing on retailers and their employees, following Selfridge’s two rules may be the best approach to prevent a customer complaint from growing into a Chapter 93A class action or attorney general investigation and enforcement action.

For example, if a customer complains the price at the point-of-sale was higher than advertised, it might be worthwhile to resolve the dispute with a refund, even if the retailer has a legitimate belief the customer isn’t correct, because Chapter 93A class actions and attorney general investigations are complaint-driven. A satisfied customer is less likely to complain to the attorney general’s office or a class-action lawyer.

Third, retailers must understand that, despite their best efforts, they won’t be able to satisfy some customers, and those customers will pursue disputes through a Chapter 93A class action. Consequently, retailers should consider taking steps to protect themselves.

Enforceable arbitration agreements governed by the Federal Arbitration Act and class-action waivers in a retailer’s terms and conditions of sale may effectively limit a disgruntled customer’s ability to seek class-wide relief. Importantly, the retailer must obtain a customer’s consent to the arbitration clause and waiver before the sale. Like compliance with advertising and pricing laws, retailers should work closely with their compliance employees or outside legal counsel to make sure their protocols for obtaining consent (and retaining proof of consent) comply with Massachusetts law.

Beyond arbitration clauses and class-action waivers, retailers should also consider implementing an internal customer dispute resolution system, which may include online dispute resolution services. This is particularly true for online retailers.

For instance, eBay implemented an effective education and dispute resolution system that reduced disputes between sellers and buyers dramatically. Fewer disputes mean fewer class-action lawsuits and governmental investigations. Assisting consumers resolve their dispute effectively and efficiently also builds business consumer trust and drives revenues.

Retailers interested in an extensive dispute resolution system should consult a dispute system designer and legal counsel before implementation. Of course, a retailer may implement less formal dispute resolution systems through their terms and conditions of sale, such as requiring a period for informal negotiation and mediation before arbitration. Like other terms and conditions, a retailer must properly obtain a customer’s pre-sale consent to those terms.

Ultimately, with deceptive advertising class actions and governmental investigations on the rise, and the effect Chapter 93A class actions and investigations can have on a retailer’s reputation and bottom line, Massachusetts retailers will be well served by auditing their advertising and pricing practices, as well as their terms and conditions of sale, to minimize disputes and protect against the impact of Chapter 93A litigation.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

David G. Thomas is shareholder at Greenberg Traurig and advises on individual and corporate disputes during the entire dispute-resolution life cycle.

Angela C. Bunnell is an associate at Greenberg Traurig and focuses on defending companies against unfair or deceptive business practices claims in individual and putative class action settings.

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