Seventh Circuit Asks (and Answers) “What is Reasonable Consumer Behavior?”

In order to state a claim for deceptive practices, many state consumer protection laws require plaintiffs to prove that the challenged acts or practices are “likely to deceive reasonable consumers.” In an opinion issued today, the Seventh Circuit grappled with the question of what exactly that means.

The opinion comes in a class action brought against Walmart, based on alleged discrepancies between the prices on the store’s shelves and those charged at the cash register. The district court dismissed the complaint for failure to state a claim, finding that the providing a customer with a receipt after payment stating the actual price charged was sufficient,  as a matter of law, to dispel any potential deception or unfairness caused by an inaccurate shelf price.

Reversing, the Seventh Circuit engaged in an extensive discussion of how “reasonable consumer behavior” is to be ascertained, citing numerous academic pieces about consumer behavior, and rejecting a standard that “assume[s] consumer behavior in idealized markets with perfect information, perfect competition, and no transactions costs.”  The court recognized that retailers (and other companies) attempt to influence consumer behavior in various ways that are designed to get consumers behave differently than they would in such idealized markets.  As such, the court held, “When determining reasonable consumer behavior for purposes of consumer protection law, we should consider the behavior of real consumers instead of Adam Smith’s homo economicus with perfect information.”  Under this standard, the plaintiff had adequately pleaded a deceptive act or practice. As the court recognized, many reasonable consumers would not remember the price that was on the shelf tag and cross-reference it with their receipt (and presumably seek a refund of the difference), as Walmart and the district court had suggested.

Judge Hamilton’s reasoning will ring true with many of us:

Even if shoppers somehow retain records of each shelf price, at checkout, many are trying to corral young children, others are skimming the tabloid headlines displayed to entice them, and still others are lending a hand to the baggers or pulling out their wallets. Shoppers can easily miss the split-second display of a price or two at checkout. Even if consumers do notice a price discrepancy on a point-of-sale display or on a receipt, they must then raise the issue to the store’s attention to resolve it. It is reasonable to infer that many consumers in that situation would be concerned about holding up the six shoppers in line behind them, reluctant to trouble a busy store manager over a few pennies per item, or unable to spare the time to track that manager down.

There are other gems in the unanimous opinion, which I encourage both practitioners and theorists to read.

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