Nike, Lululemon hit with lawsuits alleging deceptive ‘phantom discounts’
The retail industry is facing a significant surge in legal scrutiny as “phantom discount” practices come under fire.
In recent weeks, major global brands — including Lululemon and Nike — have been the subject of lawsuits alleging deceptive pricing strategies, where products are marketed with dubious “regular” prices that make sale prices appear more attractive to consumers. Legal and marketing experts note that these types of advertising practices have existed for decades. However, the recent increase in consumer filings suggests a growing trend that could continue to reshape advertising practices in the e-commerce industry.
Last week, Lululemon was sued by a California woman in Los Angeles Superior Court, claiming the company listed products with “fictitious regular prices” and “corresponding phantom discounts.” According to plaintiff Annette Cody, Lululemon has been displaying false original prices, only to strike them through and make the new “sale” prices look more enticing.
Cody alleges that in April she purchased a pair of Lululemon’s Wunder Train high-rise tights, in which the listed price of $59 was accompanied by a strikethrough price of $98, representing a $39 discount. However, Cody says that those tights hadn’t been sold on Lululemon’s website for the full $98 price since October 2025.
The Lululemon news comes just days after Nike was hit with a similar fake advertising lawsuit earlier this month. The new filing alleges Nike implements false strikethrough prices that deceive customers into thinking they’re getting a deeper discount than they actually are. In the filing, the plaintiff’s counsel says that between Sept. 8, 2025 and March 14, 2026, a pair of black Nike Air Max 2017 sneakers were listed for various sale prices alongside an original reference price of $190. In reality, the lawsuit states, the shoes had been continuously marked down for at least that six-month-period.
The filing against Nike claims that the company’s sale alerts have violated California’s False Advertising Law. The law requires that retailers listing the former price must reflect the true market price of the product within the past 90 days, unless the retailer’s ad notes when the product was sold at the listed reference price. The class action lawsuit is attempting to reward every consumer in California who purchased a Nike product through the brand’s DTC website or app at a discount from a higher advertised reference price since July 21, 2022.
A spokesperson for Nike said the company does not comment on pending litigation. Lululemon did not return a request for comment.
Rob Freund, an advertising and e-commerce attorney who has been tracking false discount lawsuits, said these types of class action filings have been around for decades. But they appear to be occurring more frequently.
“There were about twice as many lawsuits filed in 2025 compared to 2024, but they’ve always been very popular,” he said. “One of the first cases I handled in my career back in 2013 was a fake discount case.”
Besides Lululemon and Nike, Freund pointed to gardening brand Vego Garden as one of the most recent brands to be hit with this type of deceptive advertising lawsuit. “I don’t really know what’s responsible for the surge, though,” Freund said.
Anita Rao, associate professor of marketing at Georgetown’s McDonough School of Business, told Modern Retail that “such deceptive practices have been common, resulting in regulations trying to protect consumers from such practices,” Rao said. Some of the strictest regulations are in California, where the advertised strikethrough price is required to be based on the true market price from the past 90 days.
Rao suspects that the recent spike could in part be driven by heightened price sensitivity. “Consumers are seeing increasing prices everywhere, so with everything feeling more expensive, it is likely that all of us are paying closer attention to prices,” she said.
Rao said this wave of litigious backlash won’t necessarily prompt more retailers to rethink their phantom discounts strategies going forward.
“If retailers believe such tactics attract more consumers and increase conversions, they may view the risk as acceptable,” said Rao. She pointed to her recent research showing that even lower “starting from” prices – for example, displaying “from $95”, even when the real price might be $200 or more – can increase engagement. Meanwhile, a higher and more realistic “starting from” price leads to less engagement. “Although our setting does not involve deception per se, it highlights how the perception of a ‘deal’ can strongly influence behavior,” she said.
In recent years, consumers have gained more tools to track a listing’s price history to show whether a retailer is offering phantom discounts. Amazon’s built-in price history feature is one such example. “Such tracking tools can have some effect, but I am not sure they will have a big impact on deceptive discounting practices,” Rao said. “In general, access to information, while possible, is costly.”
In practice, Rao added, these tools are likely most powerful when third parties such as regulators, lawyers or consumer advocates monitor pricing patterns and flag problematic behavior. “But most consumers themselves might not get into such searches, which leads to this practice continuing without third-party intervention or strong public attention,” she said.