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Kaufmann's, Federated fined for misleading and 'fake' sales Spitzer investigated complaint from shopper

The state attorney general has fined Kaufmann's department stores for the second time for misleading and "fake" sales, such as the promotion for one hot beverage maker that sold almost continuously for three months for the "sale" price of $169.99.

"It encourages you to make a purchase at that moment because you believe the sale may end," said Christine Pritchard, spokeswoman for Attorney General Eliot Spitzer's office. It announced the fine agreement Tuesday saying that the chain, with four of its 14 state stores in Western New York, will pay $725,000 -- higher than the $400,000 it paid in January of 2005.

This time the state broadened its investigation and included the new owner of Kaufmann's in the settlement, said Pritchard.

The Federated Department stores, owners of Macy's, bought the May Company, owners of Kaufmann's, in August. The false sales were investigated in the months that followed, said Pritchard.

Later this year Kaufmann's stores will convert to Macy's. The agreement to stop misleading sales was designed to apply to existing Macy's and the converted stores, Pritchard said.

"We are pleased to have reached a settlement with the attorney general in this matter," said Robin Reibel, spokeswoman for Kaufmann's. "Federated believes in accurate and responsible advertising."

Reibel declined to say more. "We're not making any further comment," she said.

The attorney general's investigation was in response to a complaint from a central New York Kaufmann's shopper. The review found a variety of misleading sales -- including advertising sale photos of items not on sale, said Pritchard.

As one example, the hot beverage maker sold for its allegedly discounted price of $169.99 for three months last year, from Sept. 29 to Dec. 31. Only three of the 521 times the product sold listed another purchase price.

"The retailer continued to sell the item at the sale price after the so-called sale ended," said a press release from the attorney general's office.

Other practices problematic for the attorney general included: statements that indicated a temporary sale -- "One Day Only Super Sale" -- when item prices remained unchanged after the sale ended; using vague terms to describe items not eligible for sales; misleading store signs; using small print for exceptions on coupons that promised storewide discounts.

For one retail marketing specialist, the fine agreement intended to discourage misleading sales was welcome.

"I have experienced the same thing," said Arun Jain, professor of marketing research at the University at Buffalo. He tried to buy a household item at Kaufmann's thinking it was discounted. At the cash register, he learned it was going for the regular price.

"Disgusted, I leave," he said of his reaction to feeling misled. "What are you going to do? Are you going to fight with the person when you see four people standing behind you?"

In Jain's view, it is better to lure people into feeling loyalty, which can lead to greater spending, by treating customers well. Instead local department stores seem caught up in incessant sale offerings and a style of marketing Jain called "churning." Its aim is to attract as many shoppers as possible with low prices, not service.

"This is very sad," said Jain. "I think it's going to backfire."


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