Hidden Exposure: State Pricing Laws Could Be Your Next Legal Risk

Introduction

While federal enforcement of the Robinson-Patman Act (“RPA”) has recently brought attention to wholesale and distributor pricing risks, businesses face additional—and often underappreciated—exposure under state law. Many states have enacted statutes similar to the RPA that prohibit price discrimination. Beyond that, numerous states enforce consumer protection, unfair competition, and antitrust laws that restrict pricing practices deemed false, misleading, unfair to competitors, or anti-competitive.

Though many of these statutes are enforced by the state attorneys general, they frequently allow any person or entity injured to file suit seeking injunctive relief, actual damages, multipliers of damages, class-wide relief, and/or attorneys’ fees. The wide relief available to litigants, the ability to raise class claims, and the potential recovery of attorneys’ fees offer a strong incentive to attorneys and individual litigants to file state class action complaints. And, as recent litigation trends demonstrate, consumer and competitor lawsuits alleging unlawful pricing practices are on the rise. These suits can be difficult to escape via motion to dismiss in the face of a well-pleaded complaint.

This article reviews key provisions of California law that regulate pricing either directly or through broader prohibitions on deceptive or unfair business practices. California law serves as a valuable lens for several reasons. First, California is often a litmus test for a company’s ability to navigate stringent compliance laws, especially those relating to consumer protection. Understanding California law can give attorneys and businesses insight into the practices and policies they should review or adopt to ensure compliance across a broader spectrum of states. Second, in some respects, California law is similar to laws in other states that regulate pricing behaviors. Many states, like California, have broad prohibitions of unfair, misleading, or deceptive commercial conduct and advertising. Finally, many of the practices prohibited by the State of California also run afoul of rules, guides, or other statements issued by the Federal Trade Commission (“FTC”). Therefore, a discussion of California law impacting pricing is also helpful in painting a broad picture of compliance at the multistate or nationwide retail and distribution levels.

Regulation of Pricing Practices in California

California has several statues designed to maintain fair trade practices and competition within the state with some applicability to pricing practices: the Unfair Practices Act (Cal. Bus. & Prof. Code §§ 17000, et seq.), the Cartwright Act (Cal. Bus. & Prof. Code §§ 16700, et seq.), the False Advertising Law (Cal. Bus. & Prof. Code §§ 17500, et seq.), the Consumer Legal Remedies Act (Cal. Civ. Code §§ 1750, et seq.), and the Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200, et seq.).

The Unfair Practices Act: Prohibiting Unfair Pricing Practices

The California Unfair Practices Act (“UPA”) is a powerful tool designed to safeguard fair competition in the marketplace. By targeting a range of predatory pricing tactics and discriminatory practices, the UPA attempts to level the playing field and protect both businesses and consumers from unfair trade conduct. One of the UPA’s central purposes is to encourage fair competition “by prohibiting unfair, dishonest, deceptive, destructive, fraudulent and discriminatory practices” (§ 17001). To achieve this goal, the statute prohibits a broad array of pricing practices, whether committed through collusion or unilaterally, including:

• Below-Cost Sales: Selling articles or products to vendors at less than cost, or giving away articles or products, for the purpose of harming competition (§ 17043);
• Loss Leader Practices: Selling items at less than cost where the purpose is to induce, promote, or encourage the purchase of other merchandise, or where the effect is to injure competition or to mislead or deceive purchasers (§§ 17030, 17044);
• Secret Rebates and Discriminatory Dealings: Giving secret payment, rebates, refunds, commissions, or unearned discounts, or secretly extending special services and privileges not extended to all purchasers upon like terms and conditions, where it harms competition (§17045);
• Locality-Based Price Discrimination: Prohibiting price discrimination based solely on locality to drive out dealers, unless discrimination can be justified based on shipping or other factors (§§ 17031, 17040, 17041); and
• Schemes to Carry Out Improper Pricing: Prohibiting any scheme or devise to carry out below-cost sales or price discrimination that would violate the statute’s spirit and intent (§ 17049).

Enforcement of the UPA is not limited to government action—any person (defined broadly) or trade association may bring suit to enjoin and restrain any violation of the act and, in so doing, recover damages (§ 17040). Plaintiffs may recover three times the actual damages they have suffered, if any, as well as three times the damages suffered by any claims assigned to them by other injured parties. Prevailing plaintiffs are entitled to recover reasonable attorneys’ fees and costs, while prevailing defendants are not (§ 17082).

The UPA allows for expansive injunctive relief. Notably, proof of actual injury or damages is not required to seek injunctive relief. Courts may issue orders to prevent future violations and to address not only the specific goods at issue but also “every article or product” sold by the defendant (§§ 17079, 17080).

In addition to civil remedies, the statute also includes criminal penalties. Each violation of the UPA constitutes a misdemeanor, punishable by a fine of $100 to $1,000, imprisonment of up to six months, or both (§ 17100).

The Cartwright Act: Prohibiting Certain Pricing Arrangements

California’s Cartwright Act (“CCA”) serves as the state’s primary antitrust statute, mirroring the federal Sherman Act, with broader reach in some respects and powerful remedies for injured parties. Like the Sherman Act, it prohibits combinations or agreements that unreasonably restrain trade or commerce (§§ 16700–16770). Specifically, the CCA targets price-fixing, exclusive dealing arrangements, group boycotts, and agreements designed to limit or suppress competition within an industry (§§ 16720–16726). In addition, echoing the federal Robinson-Patman Act, the CCA bans price discrimination between purchasers of goods of like grade and quality when the effect substantially harms competition (§ 16703).

The CCA can be enforced by any individual who has been harmed in their business or property, regardless of whether they dealt directly with the defendant (§ 16750). Injured parties can seek either preliminary or permanent injunctive relief and may recover treble damages, reasonable attorneys’ fees, and interest on actual damages from the date the complaint is served, if warranted. In California, both the state and its political subdivisions, including public agencies, are considered “persons” under the CCA. Additionally, the Attorney General or the district attorney of any county can initiate civil actions or proceedings (§§ 16754, 16761).

Penalties exist for anyone involved in any prohibited practice, including those who aided or advised in the commission of a conspiracy or knowingly participated in activities that assisted a conspiracy. Corporations found guilty can face fines of either one million dollars or twice their gross gain (whichever is higher), or twice the gross loss suffered by a victim. Individual offenders may be imprisoned for up to three years, fined up to two hundred fifty thousand dollars, or face fines double their gross gain or a victim’s gross loss, whichever amount is greater (§ 16755).

An important distinction between the CCA and the Sherman Act is their treatment of vertical pricing fixing. “Typically, a vertical price-fixing arrangement occurs in the context of resale price maintenance (e.g., a supplier controlling product distribution by retailers).” Mach v. Yardi Systems, Inc., No. 24CV063117, 2024 WL 4443986, at *3 (Cal. Super. Aug. 19, 2024). Unlike federal law, which has applied a “rule of reason” test to vertical price fixing since 2007, vertical price fixing is still a per se violation of California antitrust law. Id. “California law holds to the per se rule in this context because a vertical price-fixing or resale price maintenance agreement between supplier and distributor destroys horizontal competition as effectively as would a horizontal agreement among distributors or retailers.”’ Id. at *3.

Given the broad liability, severe penalties, and the scope of enforcement under the CCA, companies operating in California should proactively review their pricing policies, supply agreements, and distribution practices to ensure compliance and mitigate exposure to antitrust litigation. Other states also have their own antitrust laws that do not mirror federal law in all respects, so it’s prudent to regularly review contracts and policies to stay ahead of potential legal trouble wherever your company or client operates.

The False Advertising Law: Prohibiting Certain Pricing Advertising

California’s False Advertising Law (“FAL”) broadly prohibits disseminating “untrue or misleading” statements in advertising. In addition to this general ban, the FAL imposes several specific advertising restrictions related to pricing that are intended to promote transparency and fairness in the marketplace. For example, the FAL prohibits:

• Refusing to sell a product as advertised (§ 17500.5);
• Failing to disclose quantity restrictions on advertised pricing (§ 17500.5); and
• Engaging in unfair promotional pricing practices (§ 17501).

Concerning promotional pricing, when a business advertises a sale by referencing a former price, that price must either (1) have been the prevailing market price within the previous three months or (2) be accompanied by a clear, exact, and conspicuous statement of the date when the former price was in effect (§ 17501).

Retailers who sell goods or services only in multiple units and advertise pricing must disclose the minimum multiple-unit quantity in which the items are sold (§ 17504). They may also list the single-unit price only if the minimum multiple-unit price is prominently disclosed in the same advertisement. Further, advertisements referencing more than one product within the same class of merchandise must clearly and conspicuously identify the corresponding item for any stated price (§ 17507). Disclosures made via footnotes or asterisks generally do not meet this standard unless the product is represented pictorially (§ 17507).

The FAL’s requirements extend to bundling practices (§ 17509). Any advertisement soliciting the purchase or lease of a product or service—where the purchase is conditioned on acquiring another product or service—must conspicuously disclose the prices of all items involved. The FAL also includes provisions tailored to pricing advertisements in specific industries, reflecting California’s broader effort to regulate deceptive practices across diverse commercial sectors. (e.g. § 17537.7) (motor vehicles).

The FAL is enforceable by the California Attorney General, district attorneys, county counsel, city attorneys or prosecutors, and private individuals who have suffered injury in fact and lost money or property due to a violation (§ 17535). Any breach of the FAL constitutes a misdemeanor, punishable by up to six months in county jail, a fine of up to $2,500, or both (§§ 17500, 17536).

The Consumer Legal Remedies Act: Pricing Considerations in Consumer Transactions

California also enforces penalties for deceptive pricing practices through the Consumer Legal Remedies Act (“CLRA”). The CLRA prohibits unfair methods of competition, and unfair or deceptive acts or practices aimed at consumers in transactions for goods or services. Specifically, the CLRA prohibits the following related to pricing:

• Advertising goods or services with the intent not to sell them as advertised (§1770(a)(9));
• Advertising goods or services with intent not to supply reasonably expectable demand, unless the advertisement discloses a limitation of quantity (§1770(a)(10));
• Making false or misleading statements of fact concerning reasons for, existence of, or amounts of, price reductions (§1770(a)(13));
• Representing that the consumer will receive a rebate, discount, or other economic benefit, if the earning of the benefit is contingent on an event to occur subsequent to the consummation of the transaction (§1770(a)(17)); and
• Advertising that a product is being offered at a specific price plus a specific percentage of that price unless (A) the total price set forth in the advertisement is larger in size than any other price in that advertisement, and (B) the specific price plus a specific percentage of that price represents a markup from the seller’s costs or from the wholesale price of the product (§1770(a)(20)).

Any consumer who suffers damage from an unlawful practice may bring a private action for actual and punitive damages, restitution, class wide relief, and injunctive relief (§1780). A court is required to award attorneys’ fees and costs to a prevailing plaintiff, but a prevailing defendant is only entitled to reasonable attorneys’ fees if the plaintiff’s prosecution was not in good faith (§1780).

The Unfair Competition Law: Prohibiting Unlawful, Unfair, or Fraudulent Business Practices

California’s Unfair Competition Law (“UCL”) provides strictly equitable remedies against unlawful, unfair, or fraudulent business practices. Plaintiffs can seek injunctive relief to stop ongoing misconduct and restitution to recover money or property wrongfully obtained (§ 17203). Because UCL claims are equitable, there is no right to a jury trial, and compensatory or punitive damages are not recoverable. Private plaintiffs typically cannot recover attorneys’ fees unless permitted by another statute or contract. See Hambrick v. Healthcare Partners Med. Grp., Inc., 238 Cal. App. 4th 124, 157 (2015) (while a plaintiff cannot recover attorneys’ fees under the UCL or FAL, a prevailing plaintiff may be able to do so as a private attorney general under CCP § 1021.5). Government enforcers, including the California Attorney General and local district attorneys, may pursue civil penalties of up to $2,500 per violation—and even higher penalties in cases involving vulnerable populations (§§ 17206, 17206.2).

Despite its limitations, the UCL remains a popular tool for consumers and regulators to hold businesses accountable for deceptive or anti-competitive practices.

Conclusion

While the recent resurgence of federal Robinson-Patman Act litigation may ultimately shape national discourse, these California state laws highlight the important role of state-level laws in impacting pricing practices. Below are some practical tips regarding pricing practices:

• Audit Your Pricing Structure: Regularly review wholesale, promotional, and resale pricing to ensure compliance with both federal and state laws, especially those governing below-cost sales and price discrimination.
• Document Former Prices: If referencing past prices in ads, retain proof that the stated “former price” was the prevailing market price in the preceding months or disclose the actual dates used.
• Review Rebate and Discount Offers: Ensure all conditional discounts, bundled pricing, and rebates are clearly disclosed and not misleading.
• Train Sales & Marketing Teams: Make sure employees responsible for setting or promoting prices are aware of allowable and unallowable practices and can alert the legal team with any questions or potential concerns.
• Review Contracts and Agreements: Analyze distribution, resale, and supply agreements for clauses that may facilitate discriminatory pricing, exclusivity, or resale restrictions that could violate state antitrust laws.

Staying ahead of these issues requires more than checking boxes. With growing state-level enforcement and rising class action litigation, companies selling at retail or distribution levels should treat pricing compliance as a cross-functional priority—touching legal, marketing, and sales alike. Proactive actions today may save significant exposure tomorrow.