Nike and Lululemon Are Getting Sued Over “Phantom Discounts.” If You Run Strikethrough Pricing, Pay Attention.
Two of the biggest names in athletic apparel are facing lawsuits over the same practice: showing shoppers a crossed-out “original” price next to a sale price, when that original price hasn't actually been charged in months. Lululemon was sued in Los Angeles Superior Court on July 18, and Nike was hit with a nearly identical class action just weeks earlier. Both cases hinge on California's False Advertising Law, and both are part of a broader wave of litigation targeting what's commonly called phantom discount pricing.
If you sell online and use any form of strikethrough pricing, “was $X, now $Y,” this is worth reading closely, not because Nike-level enforcement is coming for small sellers specifically, but because the legal theory behind these suits applies to any retailer using the same tactic.
What the Lululemon Suit Actually Claims
Plaintiff Annette Cody says she bought a pair of Wunder Train high-rise tights in April for $59, shown alongside a struck-through reference price of $98, suggesting a $39 discount. According to her complaint, Lululemon hadn't actually sold those tights for $98 since at least October 2025. Her filing describes the practice directly: “This practice allows defendant to fabricate a fake ‘reference price,' and present the actual price as ‘discounted,' when it is not.” The case is seeking class-action status.
What the Nike Suit Actually Claims
Nike's case, filed in the US District Court for the Southern District of California, makes a similar argument with more specific detail. Plaintiff Pearson claims Nike listed a pair of Killshot 2 sneakers at $54.97 next to a crossed-out reference price of $100 in the app, while the website simultaneously showed a $90 reference price marketed as “38% off” for the same shoes. The suit alleges Nike had advertised sale pricing on the shoes since at least January 2025, well past the 90-day window California law allows before a former price becomes legally stale.
A separate example in the same filing gets more specific: a pair of black Air Max 2017 sneakers carried a $190 reference price from September 2025 through March 2026, but the lawsuit alleges the shoes never actually sold above $171.97 during that entire six-month window. If that's accurate, the “reference price” wasn't a real price the product had recently sold at. It was a number that existed only to make the sale price look bigger.
Why California Is Ground Zero for These Cases
This isn't new legal territory. Phantom markdown lawsuits have targeted TJ Maxx, Marshalls, Macy's, Bloomingdale's, J.Crew, Kohl's, and Michael Kors over the past decade, and California is where nearly all of them get filed. The reason comes down to a specific, unusually strict statute: under California Penal Code Section 17501, it's illegal to advertise a former price unless the product actually sold at that price for at least 28 of the previous 90 days.
That's a genuinely demanding standard. It's not enough that a product was once sold at the higher price at some point in its history. The 90-day lookback window means your reference price needs to reflect recent, sustained selling behavior, not a price you set once and then permanently display as the “before” number every time you run a promotion.
What Legal Experts Say Is Driving the Surge Right Now
Marketing researchers point to a specific dynamic behind the recent spike in filings. Anita Rao, a marketing professor at Georgetown's McDonough School of Business, told Modern Retail that heightened price sensitivity among shoppers right now may be part of what's fueling scrutiny: consumers are already primed to notice pricing that feels manipulative when they're paying closer attention to every dollar than usual.
Rao also offered a more cynical, and probably accurate, read on why retailers keep doing this despite the legal risk: “If companies think these tactics bring in more customers and boost sales, they may consider the risk worth taking.” She noted that tools like price history trackers exist to help shoppers verify whether a discount is real, but most individual buyers never check. The practice persists largely because it works on the majority of shoppers who don't dig into pricing history, even as it becomes increasingly easy for regulators, plaintiffs' attorneys, and a small number of savvy consumers to catch.
Why This Matters Even If You're Nowhere Near Nike's Size
You don't need Nike's ad budget to get caught in this exact legal theory. The statute doesn't have a revenue threshold or a company-size carve-out. Any retailer advertising a former price that doesn't reflect real, recent selling history in California is exposed to the same claim, and plaintiffs' firms that specialize in this area, like the ones representing both the Lululemon and Nike cases, actively look for smaller brands running the same pattern, not just household names.
This also connects directly to a shift already underway on the marketplace side. Amazon's own reference price rules, which took effect earlier this year, now require list prices to be backed by real sales data specifically because inflated “was” prices had become widespread enough to draw regulatory attention. If you've been treating your strikethrough pricing on your own DTC site more loosely than Amazon now requires on its marketplace, that gap is exactly where legal exposure lives.
What to Actually Check on Your Own Store
If you run any kind of “compare at” or strikethrough pricing on your site, the test is straightforward: has the product genuinely sold at that higher price for a meaningful stretch of the past 90 days, not just at some point in its history? If you're running a semi-permanent “sale” that's technically never off, your reference price is functionally fictitious even if it was accurate the first time you set it.
The fix isn't complicated. Track how long each SKU actually sells at its full price before you discount it, and stop treating a reference price as a static number you set once and forget. If a product has been discounted continuously for months, the honest move is to reset what “regular price” means for that item rather than keep the original number alive purely for contrast. Given how actively plaintiffs' firms are pursuing this exact pattern right now, that's a cheaper fix than finding out through a demand letter.
