California’s new “Pink Tax Law,” Cal. Civ. Code § 51.14, which prohibits charging a higher price to one gender vs. another for similar services, takes effect on Jan. 1, 2023. On paper, California’s law resembles a New York law, Gen. Bus. Law § 391-u, that has been on the books for more than two years. In practice, the breadth of California’s Unfair Competition Law is likely to yield a bevy of cases testing the boundaries of the Pink Tax Law, with consumer products companies and retailers as the unfortunate victims of these tests.
The Pink Tax Law prohibits businesses from “charg[ing] a different price for any two goods that are substantially similar if those goods are priced differently based on the gender of the individuals for whom the goods are marketed and intended.” The law considers two items to be “substantially similar” if (1) there are no substantial differences in the materials used to produce them, (2) the intended use is similar, (3) the functional design and features are similar, and (4) the brand is the same or both brands are commonly owned. Defenses that might justify higher prices include the amount of time, effort, and cost involved in manufacturing the two products. As a practical matter, however, at least in many cases, these will not be defenses that companies will be able to invoke at the motion to dismiss stage.
The concept of a “Pink Tax”—charging more for products marketed to women than substantially similar products marketed to men—has been discussed in major media, and highlighted by prominent politicians in California and elsewhere, for years. Most major consumer brands have responded appropriately to these concerns and carefully policed their pricing policies in the obvious product categories (razors, shampoos, deodorants, etc.), and businesses likely have scrutinized their pricing even more closely over the past few months in anticipation of California’s new law taking effect. As with so much else in consumer fraud law, however, the creativity of the plaintiffs’ bar likely will yield cases that businesses could not have predicted before their filing.
Of six reported cases involving “Pink Tax”-related claims filed in the past, five were brought in Missouri and one in California. All of those cases failed, primarily because those states did not have a specific law addressing different prices charged for goods based on the gender to which the goods are marketed. Prior case law, therefore, will be of little help in defending against claims brought under California’s new law.
Importantly, the Pink Tax Law places enforcement authority solely in the hands of the California Attorney General and does not include an express private right of action. Just as importantly, however, the California plaintiffs’ bar has proved adept at convincing courts that violations of many business-practice laws can be prosecuted privately as violations of the Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200, et seq. In KKMB, LLC v. Khader, 2018 WL 6012225 (C.D. Cal. Oct. 4, 2018), for example, after engaging in a detailed analysis and concluding that the California Legislature did not intend to create a private right of action under a particular statute, the judge dropped a footnote explaining that the same conduct “could possibly be a basis for a [UCL] claim.” See id. at *8 n.9 (quoting Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal. 4th 553, 565, for the proposition that “a private plaintiff may bring a UCL action even when ‘the conduct alleged to constitute unfair competition violates a statute for the direct enforcement of which there is no private right of action”). In Yanting Zhang v. Superior Court (2013) 57 Cal. 4th 364, 379-80, the California Supreme Court held that “to bar a UCL action, another statute must absolutely preclude private causes of action.”
Businesses can expect to see putative class action cases filed in state and federal courts in 2023 attempting to press the UCL into service as the basis for private “Pink Tax” lawsuits. Businesses should be ready to argue vigorously that courts should not allow private enforcement given the Legislature’s clearly expressed intent that enforcing the Pink Tax Law is a job for the Attorney General’s Office. The tone set by these early cases, and how they are (inevitably) appealed to the Ninth Circuit and California appellate courts, will be critical. Although the deck in California is stacked against these arguments, and the legislative text does not “absolutely preclude” private causes of action, solid arguments exist against allowing the plaintiffs’ bar to turn this explicitly limited new law into a free-for-all.
Businesses will want to monitor case filings in this space in early 2023, and we will report on developments as they arise.
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