Should Balenciaga Honor Customers' Orders for Super-Cheap Bags?

Balenciaga made headlines last week for a glitch in its system that allowed e-commerce shoppers to purchase an array of its bags that usually retail for upwards of $2,000 for $200 to $300. Rather unsprisingly, shoppers frantically swooped in before the company shut down the site late on Thursday. According to our friends over at the New York Post, buyers who purchased bags during the glitch received email confirmations for their purchases. However, on Saturday, Balenciaga notified the shoopers that their orders will not be honored, stating: “Due to an issue that listed incorrect pricing for Balenciaga products, we are sorry to inform you that your purchase . . . has been canceled." Instead, customers were told Balenciaga will issue gift certificates for use at its stores, but didn’t say how much they’d be worth.

The full email from Balenciaga reads as follows:

Due to an issue with Balenciaga.com for orders placed within the United States, signature Balenciaga products were made available for a limited time with incorrectly listed prices. Balenciaga will not be able to fulfill orders placed through our e-commerce platform during the time of the pricing error. Balenciaga regrets any inconvenience that this may have caused to its valued clients. Because Balenciaga values their patronage, clients who have been affected by the error will be reimbursed for their purchases and will be issued a gift certificate that will be redeemable at Balenciaga retail locations within the United States. Balenciaga customer service will contact each person individually with information on the gift certificate process.

So, do angry customers have any backing to claim that the Paris-based design house should honor their lower-priced purchases? Maybe, if we take previous instances in the airline industry into account. You may recall that this past February, United Airlines experienced a similar dilemma when an error with a third-party software provider resulted in international first class fares being sold for as low at $69 online. In that case, thousands of tickets were sold and the U.S. Department of Transportation ultimately found that the airline did not have to honor the fares, holding, in part, that customers "had to manipulate the search process" to produce a "conversion error" to get the absurdly low fares. In past instances, however, several airlines, including United, have honored "mistake fares" that offered tickets for as little as $5. Delta also honored a similar fare in 2013. Since there has been no talk of manipulation of the Balenciaga website in order to receive the price glitch deals and because the Federal Trade Commission ("FTC") regulates spending for such purchases and not the Department of Transportation, this doesn’t appear to provide a sufficient answer our inquiry.

What we do know is this: Customers are being refunded and offered an additional gift certificate. In terms of cancelling the orders, chances are, somewhere in the fine print of Balenciaga’s website "terms of use", there is a clearly worded provision stating that the company can cancel orders and refund customers' money because of pricing errors (or for any reason). It may even state that such “refunds” may come in the form of gift certificates. This is an implied contract, and by purchasing anything on Balenciaga’s site, you are assumed to agree to these terms. As a result, you cannot really fight them.

But what about the gift certificates? I am assuming that since Balenciaga is not honoring the $200 price tags for its $2000 bags, the gift certificates will not be for $2000, but instead, for $200. This would likely be problematic IF the customers were not being refunded seprately, as it is not uncommon to see consumers, who seize upon a fantastic advertised offer only to have their orders cancelled, to cry "bait and switch."

If we were to assume that shoppers were only being given $200 gift certificates, the bait and switch argument may seem like the perfect solution, but even then, it may not be the answer. The FTC, the governmental body tasked with the promotion of consumer protection and the elimination and prevention of anticompetitive business practices, has a very specific definition of illegal bait-and-switch schemes. In a bait-and-switch scam, a company intentionally advertises a specific item at a specific price simply to get customers into the store (or onto their website, in the case at hand). At that point, the company tries to sell them a different product at a higher price or on terms "more advantageous to the advertiser."

It may seem like Balenciaga, hypothetically in offering a $200 gift certificate in lieu of a $2000 gift certificate or a credit card refund,  is pulling a bait-and-switch in handing out $200 gift certificates, which will not buy you much – if anything – at Balenciaga, where tops retail for upwards of $400. Given the fact that consumers will likely have to spend more than their allotted $200 to purchase just about anything in Balenciaga, the bait-and-switch definition does appear to apply. The only missing element: intent; and this is an important one. According to the definition, a company must INTENTIONALLY advertise a specific item at a specific price simply to get customers into the store. Here, I’m not sure if we can prove that the so-called price glitch was intentional. With this element missing from the equation, it seems that consumers don’t have a very strong claim against Balenciaga.

Before we put this topic to bed, let’s think back to the airlines instances for one moment, as it is worth noting that Balenciaga is in a much stronger position to remain strong and NOT honor the low-price purchases – at least from a PR perspective. Here’s why: airlines have a lot of competition for roughly the same service. In fact, most airlines offer relatively similar prices, travel to the same destinations and very few offer any significantly amazing services that differentiate them from others. As such, the companies stand to lose customers to competitors over such price glitches and the massive PR campaigns that follow if they do not honor such low fares.

Balenciaga is in a bit of a different boat because, while it does have competitors, its goods differ. Balenciaga's 'Le Dix' shoulder bag may technically compete with the Saint Laurent duffle or the Chanel 2.55 but it is a completely different bag. As such, if you want a Balenciaga bag, you want a Balenciaga bag. In case that’s not enough, the simple fact is likely that Balenciaga doesn’t care if you take your $200 refund elsewhere. As I mentioned above, $200 won’t get you much in a Balenciaga store and so, that’s pocket change to the brand.