Dems demand investigation into outlet stores

Democratic lawmakers demanded that the Federal Trade Commission (FTC) investigate reports that outlet stores are ripping off customers.

Sens. Ed Markey (Mass.), Richard Blumenthal (Conn.), Sheldon Whitehouse (R.I.) and Rep. Anna Eshoo (D-Calif.) wrote to FTC Chairwoman Edith Ramirez Thursday asking her investigate potentially misleading marketing practices of outlet stores.

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The lawmakers wrote that some merchants are selling lower quality items produced specifically for outlet stores without properly informing consumers about the difference between those items and the higher-quality products found in regular retail stores.

“Historically, outlets offered excess inventory and slightly damaged goods that retailers were unable to sell at regular retail stores,” the letter stated. “Today, however, some analysts estimate that upwards of 85 percent of the merchandise sold in outlet stores was manufactured exclusively for these stores. While some retailers use different brand names and labels to distinguish merchandise produced exclusively for outlets, others do not.”

The lawmakers said they have no problems with the practice of selling lower quality products in outlet stores, but they are concerned that consumers are being “misled” while shopping.

The Democrats called on the FTC to use its enforcement authority to look into potential unfair marketing practices, especially because outlet malls have dramatically increased in recent years. Outlet malls generated an estimated $25 billion in sales last year.

“We write to urge you to use this authority to investigate deceptive and unfair marketing practices at outlet stores and to punish offenders,” the letter stated. “In addition, we urge you to consider whether it may be necessary to establish standardized definitions for ‘factory outlet,’ ‘outlet store,’ and similar terms, so that consumers can be better informed.”

The lawmakers said they were also concerned about deceptive pricing — something the FTC regulates. They said it is a common for outlet stores to advertise a retail price alongside the outlet store price — even on made-for-outlet merchandise not sold at regular retail locations. The lawmakers argued that because the item was never sold in the regular retail store, the retail price is impossible to substantiate.