A Kaufmann's store.

Federated agreed to a $725,000 settlement with New York State over misleading advertising practices and sales promotions at Kaufmann's.

ALBANY, N.Y. — Federated Department Stores Inc. has agreed to pay $725,000 in civil penalties and costs to settle allegations of misleading advertising practices and phony sales promotions at its Kaufmann’s division.

The settlement follows a three-month investigation by New York State Attorney General Eliot Spitzer that stemmed from a consumer complaint against Kaufmann’s, which operates 14 stores around the state.

According to the investigation, Kaufmann’s engaged in misleading practices such as:

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  • Contradicting its savings coupons and store savings passes that promised discounts off every item in the store by using small print to exclude a significant number of items.
  • Promoting extra savings coupons and store savings passes that featured photographs of merchandise not eligible for extra savings.
  • Using vague terms to describe items not eligible for sale events.
  • Misleading in-store signs to promote sales.

In an agreement with the attorney general reached in January 2005, Kaufmann’s agreed to stop promoting fraudulent sales, but the recent investigation revealed the store failed to do so, Spitzer noted.

Spitzer said Kaufmann’s use of advertisements such as “Biggest Sale of the Year,” “Look for Lowest Prices of the Season,” “Lowest Prices of the Year” and “One Day Only Super Sale” were used to convince customers the bargain period was limited when, in fact, the retailer continued to sell the item at the discounted price after the sale was allegedly over.

Federated agreed that its 33 Macy’s and Filene’s stores in New York will comply with the settlement terms.

“Federated cooperated fully in the New York attorney general’s investigation of advertising by Kaufmann’s, which Federated acquired in August in its merger with the May Department Stores Co.,” said a Federated spokeswoman. “We are pleased to have reached a settlement with the attorney general in this matter. Federated believes in accurate and responsible advertising that presents our pricing and merchandise promotions with integrity.”

Spitzer has settled similar investigations into misleading sales, resulting in agreements with Jos. A. Bank Clothiers in September 2004, Bon-Ton Department Stores in 2002 and Metro Mattress in March 2005.

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