People v. Superior Court (J.C. Penney Corp., Inc.)

Filed 5/6/19
Unmodified opinion attached
CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

THE PEOPLE, No. B292416

Petitioner, (Los Angeles County
Super. Ct. No. BC643036)
v.

SUPERIOR COURT OF THE STATE ORDER MODIFYING
OF CALIFORNIA, COUNTY OF LOS OPINION AND DENYING
ANGELES, REHEARING

Respondent;
[NO CHANGE IN
J.C. PENNEY CORPORATION, JUDGMENT]
INC., et al.,

Real Parties in Interest.

THE COURT:*
It is ordered that the opinion filed herein on April 16, 2019 be modified
as follows:
On page 19, line 18, in footnote 13, insert “potentially” after “situation”
On page 19, lines 19 and 20, in footnote 13, delete “is necessarily the
“prevailing” price at which it is sold” and substitute “could be determined to
be the “prevailing” price at which it is sold, upon an adequate factual
showing.”
On page 29, line 16, after “not,” insert “necessarily”
On page 29, line 18, delete “may not” and substitute “must establish why
they may”
On page 29, line 32, in footnote 18, insert “in this writ proceeding” after
“contend”
On page 29, line 33, in footnote 18, after “speech,” insert the following
sentence:
“Nothing in this opinion should be understood to preclude real parties
from litigating that contention in further proceedings.”
On page 36, lines 25 and 26, delete “necessarily constitutes the item’s
prevailing market price at the time the actual price is advertised” and
substitute “may constitute the item’s prevailing market price at the time the
actual price is advertised, as alleged in the complaints.”
On page 36, line 29, between “In our view,” and “that,” insert “on demurrer,”
On page 37, line 5, delete “properly determined on the basis of sales of that
item only” and substitute “potentially determined on the basis of sales of that
item only, as alleged in the complaints.”
On page 37, line 9, following “facts,” insert the following footnote:
“Nothing in this opinion should be understood to resolve whether the
market prices for some or all of real parties’ alleged exclusive in-house
goods are, in fact, properly determined solely by real parties’ prices for
those items.”
Real parties’ petition for rehearing is denied. The modification does not
change the judgment.
_________________________________________________________________
*MANELLA, P.J. WILLHITE, J. CURREY, J.
Filed 4/16/19
Unmodified opinion
CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

THE PEOPLE,

Petitioner, No. B292416

v. (Los Angeles County
Super. Ct. No. BC643036)
SUPERIOR COURT OF THE STATE
OF CALIFORNIA, COUNTY OF LOS
ANGELES,

Respondent;

J.C. PENNEY CORPORATION,
INC., et al.,

Real Parties in Interest.

ORIGINAL PROCEEDINGS in mandate. Carolyn B. Kuhl, Judge.
Petition granted.
Lieff Cabraser Heimann & Bernstein, Michael W. Sobol, Roger N.
Heller, Katherine C. Lubin, Facundo Bouzat; Michael N. Feuer, City
Attorney, Thomas H. Peters, Chief Assistant City Attorney and Michael J.
Bostrom, Assistant City Attorney for Petitioner.
 Nelson & Fraenkel, Gretchen M. Nelson, and Gabriel S. Barenfeld for
Amicus Curiae on behalf of Petitioner.
Gibson, Dunn & Crutcher, Mark A. Perry; Christopher Chorba, Bradley
J. Hamburger, Lauren M. Blas, Ryan S. Appleby; Sheppard, Mullin, Richter
& Hampton, Moe Keshavarzi, Robert H. Philibosian, and A. Alexander Kuljis,
and Fred R. Puglisi for Real Party in Interest, J.C. Penney Corporation, Inc.
Morgan, Lewis & Bockius, Joseph Duffy and Joseph Bias, for Real
Party in Interest, Sears, Roebuck & Co. and Sears Holding Management
Corp.
Arnold & Porter Kaye Scholer, James F. Speyer, and Alex Beroukhim,
for Real Party in Interest, Kohl’s Department Stores, Inc.
Steptoe & Johnson, Stephanie A. Sheridan, Anthony J. Anscombe,
Meegan B. Brooks; Macy’s Law Department and Brian Michael Parsons for
Real Party in Interest, Macy’s, Inc.
Munger, Tolles & Olson, Mark R. Yohalem and Ariel C. Green for
Amicus Curiae on behalf of Real Parties in Interest.
No appearance for Respondent.

__________________________________________

In the underlying actions, petitioner Los Angeles City Attorney, acting
in the name of the People of the State of California, asserted claims under,
inter alia, Business and Professions Code section 17501 against real parties
in interest, alleging that they sold products online by means of misleading,
deceptive or untrue statements regarding the former prices of those products.
Real parties demurred to the claims, asserting that the statute contravenes
free speech rights and is void for vagueness. After the trial court sustained
real parties’ demurrer without leave to amend on the ground that the statute
was void for vagueness as applied to real parties, petitioner sought relief by
mandamus in this court. We conclude that real parties failed to demonstrate
any constitutional defect in the statute on demurrer, and thus grant the relief
requested.

FACTUAL AND PROCEDURAL BACKGROUND

2
 On October 20, 2017, petitioner filed the first amended complaints in
the four underlying actions, which are directed separately against real
parties J.C. Penney Corporation, Inc. (J.C. Penney), Kohl’s Department
Stores, Inc. (Kohl’s), Macy’s Inc. (Macy’s), and Sears, Roebuck and Co. and
1
Sears Holdings Management Corporation (collectively, Sears). Each
complaint asserted a claim under the Unfair Competition Law (UCL) (Bus. &
Prof. Code, § 17200 et seq.), a claim under the false advertising law
(FAL)(Bus. & Prof. Code, § 17500 et seq.), and a claim under Business and
2
Profession Code section 17501, which is a provision of the FAL. Petitioner
3
sought civil penalties, together with declaratory and injunctive relief.
According to the complaints, real parties engaged in misleading,
deceptive, or false advertising by offering goods for sale online at prices
discounted from so-called “reference prices” that purported to reflect real
parties’ own former prices, but which did not do so. The complaints assert
that each real party “deliberately and artificially sets the false reference
prices higher than its actual former sales prices so that customers are
deceived into believing that they are getting a bargain when purchasing
products.”
Real parties demurred to the complaints, contending, inter alia, that
the section 17501 claims failed because the statute unconstitutionally limits
truthful speech and is void for vagueness. The trial court sustained the
demurrer to the section 17501 claims without leave to amend, on the ground
that the statute is unconstitutionally vague as applied to real parties. The
court denied real parties’ demurrers to the other claims.

1
For simplicity, we treat the action against Sears as involving a single
retail entity.

2
All further statutory citations are to the Business and Professions
Code, unless otherwise indicated.

3
At the request of real parties, the trial court ordered portions of the
complaint be sealed.

3
 On September 4, 2018, the City Attorney filed his petition for writ of
mandate, seeking relief from the ruling regarding the section 17501 claims.
4
We issued an order to show cause why that ruling should not be vacated.
DISCUSSION
Petitioner contends the trial court erred in sustaining the demurrer to
the section 17501 claims. As explained below, we agree.
Regarding real parties’ challenge to section 17501 as an
unconstitutional regulation of free speech, as a preliminary matter we reject
petitioner’s contention that the statute targets only false, misleading or
deceptive commercial speech (see pt.C.2.b., post). We agree with real parties
that the plain language of the statute restricts protected commercial speech
and thus, the statute is subject to the test for constitutional validity set forth
in Central Hudson Gas & Elec. v. Public Serv. Comm’n (1980) 447 U.S. 557,
566 (Central Hudson). Because the undeveloped record before us is
inadequate to apply that test, real parties’ “free speech” challenge necessarily
fails on demurrer (see pt.C.2.b., post).
Regarding real parties’ contention that section 17501 is void for
vagueness, we conclude they have offered neither a successful facial
challenge -- that is, an attack on the general validity of the statute -- nor a
successful challenge based on the statute’s application to them. We reject at
the threshold their contention that a specific rule for evaluating facial
challenges was abrogated in Johnson v. United States (2015) ___ U.S. ___
[135 S.Ct. 2551] (Johnson). Under that rule, as set forth in Village of
Hoffman Estates v. Flipside, Hoffman Estates, Inc. (1982) 455 U.S. 489, 500
(Hoffman Estates) and Holder v. Humanitarian Law Project (2010) 561 U.S.
1, 18 (Holder), a facial challenge fails if the statute clearly applies to some or
all the challenger’s conduct. We conclude that the rule retains its vitality
post-Johnson and is properly employed here (see pt.D.2.a.ii., post).

4
After issuing the order to show cause, we granted requests from
Consumer Attorneys of California and from the Retail Litigation Center, Inc.,
the National Retail Federation, the California Retailers Assocation, and the
Chamber of Commerce of the United States of America to submit briefs as
amici curiae.

4
 Applying that rule, we conclude the facial challenge fails even if the
statute’s impact on protected speech triggers a higher standard for clarity, as
the statute clearly applies to some of the misconduct alleged in the
complaints, and is not inherently unworkable or devoid of guidance to
retailers (see pt.D.3.b.i., post). For the same reasons, we reject the “as-
applied” challenge, insofar as it pertains to that alleged misconduct. With
respect to the remaining misconduct alleged in the complaints, we conclude
the record is insufficient to support a successful “as-applied” challenge on
demurrer. (see pt.D.3.b.ii., post).
A. Standard of Review
“Because a demurrer both tests the legal sufficiency of the complaint
and involves the trial court’s discretion, an appellate court employs two
separate standards of review on appeal. [Citation.] . . . Appellate courts first
review the complaint de novo to determine whether [the] complaint alleges
facts sufficient to state a cause of action under any legal theory, [citation], or
in other words, to determine whether [] the trial court erroneously sustained
the demurrer as a matter of law. [Citation.]” (Cantu v. Resolution Trust
Corp. (1992) 4 Cal.App.4th 857, 879, fn. omitted (Cantu).) Moreover, “[i]f
another proper ground for sustaining the demurrer exists, this court will still
affirm the demurrer[] even if the trial court relied on an improper
ground . . . .” (Id. at p. 880, fn. 10.)
“When reviewing a demurrer on appeal, appellate courts generally
assume that all facts pleaded in the complaint are true. [Citation.]” (Cantu,
supra, 4 Cal.App.4th at p. 877, fn. omitted.) We also assume the truth of
facts that may be inferred from those pleaded (Mead v. Sanwa Bank
California (1998) 61 Cal.App.4th 561, 564 (Mead)) but disregard unsupported
factual conclusions (id. at p. 568), as well as legal conclusions (Schep v.
Capital One, N.A. (2017) 12 Cal.App.5th 1331, 1336 (Schep)). Furthermore,
“[t]he complaint should be read as containing the judicially noticeable facts,
‘even when the pleading contains an express allegation to the contrary.’”
(Cantu, supra, 4 Cal.App.4th at p. 877, quoting Chavez v. Times-Mirror Co.
(1921) 185 Cal. 20, 23.) An appellate court may take judicial notice of facts
not subject to judicial notice by the trial court. (Taliaferro v. County of
Contra Costa (1960) 182 Cal.App.2d 587, 592.)

5
 “Second, if a trial court sustains a demurrer without leave to amend,
appellate courts determine whether . . . the plaintiff could amend the
complaint to state a cause of action. [Citation.]” (Cantu, supra,
4 Cal.App.4th at p. 879, fn. 9.)
B. Governing Principles
The key issues here concern the constitutionality and interpretation of
section 17501, which constitute questions of law we resolve de novo.
(Samples v. Brown (2007) 146 Cal.App.4th 787, 799.) Real parties offer both
facial and as-applied constitutional challenges to the statute. A facial
challenge “considers only the text of the measure itself, not its application to
the particular circumstances of an individual.” (Tobe v. City of Santa Ana
(1995) 9 Cal.4th 1069, 1084 (Tobe).) In contrast, an as-applied challenge
“contemplates analysis of the facts of a particular case or cases to determine
the circumstances in which the statute or ordinance has been applied and to
consider whether in those particular circumstances the application deprived
the individual to whom it was applied of a protected right. [Citations].”
(Ibid.)
A party challenging the constitutionality of a statute ordinarily must
carry a heavy burden. “Facial challenges to statutes . . . are disfavored.
Because they often rest on speculation, they may lead to interpreting statutes
prematurely, on the basis of a bare-bones record. [Citation.] . . . [¶]
Accordingly, we start from ‘the strong presumption that the [statute] is
constitutionally valid.’ [Citations.] ‘We resolve all doubts in favor of the
validity of the [statute].’ [Citation.] Unless conflict with a provision of the
state or federal Constitution is clear and unmistakable, we must uphold the
[statute]. [Citations.]” (Building Industry Assn. of Bay Area v. City of San
Ramon (2016) 4 Cal.App.5th 62, 90.) In the case of an as-applied challenge,
the pertinent party “must plead and prove the specific facts giving rise to the
alleged constitutional violation. [Citation.] To prevail, the [party] must
establish the particular application of the statute violates the [party’s]
constitutional rights. [Citation].” (Coffman Specialties, Inc. v. Department of
Transportation (2009) 176 Cal.App.4th 1135, 1145.)
To the extent we must construe section 17501, our inquiry applies
established principles. “The objective of statutory interpretation is to

6
ascertain and effectuate legislative intent. To accomplish that objective,
courts must look first to the words of the statute, giving effect to their plain
meaning,” with an eye to “avoid[ing] a construction making a statutory term
surplusage or meaningless.” (In re Jerry R. (1994) 29 Cal.App.4th 1432,
1437.) However, “the words must be construed in context, and provisions
relating to the same subject matter must be harmonized to the extent
possible. [Citation.]” (Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735.) In
addition, “[b]oth the legislative history of the statute and the wider historical
circumstances of its enactment may be considered in ascertaining the
legislative intent.” (Dyna-Med, Inc. v. Fair Employment & Housing Com.
(1987) 43 Cal.3d 1379,1387.)
Here, the record presented to the trial court contains no legislative
history relating to Business and Professions Code section 17501. On our own
motion, we have taken judicial notice of former Penal Code section 654a -- the
predecessor of Business and Professions Code section 17501 -- and the
legislative acts enacting those statutes. (Boghos v. Certain Underwriters at
Lloyd’s of London (2005) 36 Cal.4th 495, 505, fn. 6.)
The trial court, in sustaining real parties’ demurrer, considered two
documents authorized by the Attorney General of the State of California: a
1957 opinion that interprets aspects of section 17501 (30 Ops.Cal.Atty.Gen.
127 (1957)), and a 1984 committee report that proposed a replacement
statute (Report of the Attorney General’s Committee on Sale and
5
Comparative Price Advertising (April 1984)). Only the 1957 opinion
provides material guidance regarding the issues before us. Generally,
“[o]pinions of the Attorney General, while not binding, are entitled to great
weight.” (Napa Valley Educators’ Assn. v. Napa Valley Unified School Dist.
(1987) 194 Cal.App.3d 243, 399.) That is because an Attorney General

5
The trial court took judicial notice of the 1984 report at the request of
real parties -- which petitioner did not oppose -- and appears to have taken
judicial notice of the 1957 opinion sua sponte. In sustaining real parties’
demurrer to the section 17501 claims, the court placed special emphasis on
the 1984 report as support for its conclusion that the statute is impermissibly
vague.

7
opinion “‘is not a mere “advisory” opinion . . . . ’ [Citation.] Individuals
affected by an Attorney General opinion ‘must regard the authoritative
opinion of the highest law enforcement officer of the state as having a definite
impact’ on their obligations under the subject laws.” (Natkin v. California
Unemployment Ins. Appeals Bd. (2013) 219 Cal.App.4th 997, 1006, quoting
Planned Parenthood Affiliates v. Van de Kamp (1986) 181 Cal.App.3d 245,
263.)
In contrast, little weight may reasonably be assigned to the 1984
report, in which a committee established by the Attorney General proposed a
replacement statute. That recommendation reflected testimony from
individuals -- including prosecutors and retailers -- regarding difficulties they
encountered in attempting to apply section 17501. Ordinarily, in resolving
questions of law, courts do not defer to the opinions of such individuals --
including lawyers -- in determining how a statute is to be construed or
applied. (Woods v. Union Pacific Railroad Co. (2008) 162 Cal.App.4th 571,
579; WRI Opportunity Loans II, LLC v. Cooper (2007) 154 Cal.App.4th 525,
532, fn. 3.) Furthermore, as the Legislature never amended the statute in
response to the 1984 report, it is reasonable to infer that the Legislature did
not view the committee as having identified defects in the statute warranting
curative action. (See Siskiyou County Farm Bureau v. Department of Fish &
Wildlife (2015) 237 Cal.App.4th 411, 431; Ventura v. City of San Jose (1984)
151 Cal.App.3d 1076, 1080.) Accordingly, although the 1984 report may
suggest meritorious questions regarding the statute, it provides little
guidance regarding the resolution of those questions and does not show they
cannot be resolved.
C. Free Speech Rights
Our initial focus is on whether section 17501 implicates free speech
rights under the First Amendment of the United States Constitution and the
free speech provision of the California Constitution (Cal. Const., art. I, § 2,
subd. (a)). Section 17501 consists of two paragraphs, the second of which
contains a prohibition concerning advertisements. The first paragraph sets
forth a standard relating to worth or value: “For the purpose of this
article the worth or value of anything advertised is the prevailing
market price, wholesale if the offer is at wholesale, retail if the offer

8
is at retail, at the time of publication of such advertisement in the
locality wherein the advertisement is published.” The second
paragraph states: “No price shall be advertised as a former price of
any advertised thing, unless the alleged former price was the
prevailing market price as above defined within three months next
immediately preceding the publication of the advertisement or
unless the date when the alleged former price did prevail is clearly,
6
exactly and conspicuously stated in the advertisement.”
Real parties contend the statute is subject to heightened scrutiny for
constitutional vagueness because the prohibition restricts protected
commercial speech, namely, the advertisement of truthful and nonmisleading
former prices; they further contend the prohibition violates the First
Amendment and the free speech provision of the California Constitution.
Although the trial court did not decide whether the statute is an invalid
regulation of free speech, the court ruled that the statute has an impact on
protected commercial speech, and thus applied heightened scrutiny in
evaluating it for vagueness. We therefore examine the extent to which the
statute restricts free speech rights.
1. Protection of Commercial Speech
“Under the First Amendment . . . , commercial speech is entitled to
protection from governmental regulation [citations], although it is entitled to
less protection than other constitutionally guaranteed speech. [Citations.]
[¶] Commercial speech is ‘expression related solely to the economic interests

6
In supplemental briefing, the parties directed our attention to a 1933
magazine article discussing the enactment of Assembly Bill 2384, which
established the original version of section 17501. After characterizing the bill
as a measure “designed to curb depression-born abuses,” the article states
that it “regulates comparative prices. With commodity prices shot to pieces
and last year’s bargains this year’s extravagant memories, unscrupulous
merchants have taken quick and unfair advantage. They advertise either
wholly fictitious values, slashing them to prices that are actually merely
current market prices, or else they compare present prices with figures that
prevailed in 1929, carefully concealing the vintage of the higher price.”
(Gerald J. O’Gara, The legislature goes “new deal” (July 1933) Western
Advertising, p. 20.)

9
of the speaker and its audience’ [citation] and ‘does no more than propose a
commercial transaction . . . .’ [Citation.] To that end, it serves the economic
interests of the speaker, while assisting consumers and furthering the
societal interest in the free flow of commercial information. [Citation.]”
(Bronco Wine Co. v. Jolly (2005) 129 Cal.App.4th 988, 1003-1004, fn. omitted
(Bronco Wine).) Generally, commercial speech that is false or “inherently
misleading” is not protected under the First Amendment. (Kasky v. Nike, Inc.
(2002) 27 Cal.4th 939, 954 (Kasky).)
Here, the prohibition in section 17501 is directed at commercial speech,
and relates to the content of advertising. Under the First Amendment, the
validity of a content-based restriction of commercial speech is subject to the
multi-stage test set forth in Central Hudson, in which the court stated: “At
the outset, we must determine whether the expression is protected by the
First Amendment. For commercial speech to come within that provision, it at
least must concern lawful activity and not be misleading. Next, we ask
whether the asserted governmental interest is substantial. If both inquiries
yield positive answers, we must determine whether the regulation directly
advances the governmental interest asserted, and whether it is not more
extensive than is necessary to serve that interest.” (Central Hudson, supra,
447 U.S. at p. 566.)
The free speech provision of the California Constitution also protects
truthful and nonmisleading commercial advertising while permitting the
imposition of sanctions for misleading commercial advertising. (Kasky,
supra, 27 Cal.4th at p. 959.) Absent exceptional circumstances, the
protection afforded commercial speech under the free speech provision is at
least as broad as the protection provided by the First Amendment. (Gerawan
Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 490-497.) In construing the
free speech provision, California courts have usually drawn the boundaries
between noncommercial speech and commercial speech, and between
protected and nonprotected commercial speech, with an eye to the analogous
boundaries under the First Amendment. (Kasky, supra, 27 Cal.4th at pp.
959, 969-970; see Beeman v. Anthem Prescription Management, LLC (2013)
58 Cal.4th 329, 341 (Beeman); People v. Superior Court (Olson) (1979) 96
Cal.App.3d 181, 192-195 (Olson).) In Olson, the appellate court examined

10
section 17500, the key provision of the FAL which -- as discussed further
below (see p. C.2., post), prohibits misleading or deceptive advertising, even if
true -- and concluded that section 17500 bars only commercial speech
unprotected under the First Amendment and the free speech provision of the
state Constitution. (Olson, supra, at p. 195; see also Keimer v. Buena Vista
Books, Inc. (1999) 75 Cal.App.4th 1220, 1230, fn. 10 (Keimer).)
Here, the key question is whether section 17501 regulates unprotected
commercial speech. Generally, “[w]ith regard to misleading commercial
speech, the United States Supreme Court has drawn a distinction between,
on the one hand, speech that is actually or inherently misleading, and, on the
other hand, speech that is only potentially misleading. Actually or inherently
misleading commercial speech is treated the same as false commercial
speech, which the state may prohibit entirely. [Citations.] By comparison,
‘[s]tates may not completely ban potentially misleading speech if narrower
limitations can ensure that the information is presented in a nonmisleading
manner.’ [Citations.]” (Kasky, supra, 27 Cal.4th at p. 954.) The
distinguishing mark of unprotected commercial speech is that it is “‘more
likely to deceive the public than to inform it.’” (Bronco Wine, supra, 129
Cal.App.4th at p. 1004, quoting Central Hudson, supra, 447 U.S. at p. 563,
italics omitted.)
2. Analysis
The crux of real parties’ “free speech” contention is that section 17501
restricts protected commercial speech because it “bans vast amounts of
truthful speech about former prices.” Petitioner counters that the statute,
properly construed, applies only to false, misleading, or deceptive advertising
of former prices. As explained below, we conclude that by its plain terms, the
statute forbids certain common forms of truthful price advertising -- and thus
restricts significant amounts of protected commercial speech. As further
explained, however, on the limited record before us, real parties’ “free speech”
constitutional challenge fails on demurrer.
a. Section 17501
As real parties’ contentions require us to interpret the prohibition
contained in section 17501, we begin by examining the statute and its
provenance. Section 17501 is one of three provisions enacted in 1941 as the

11
original components of Article 1 of Chapter 1, Division 7, Part 3 of the
Business and Professions Code, which sets forth the FAL’s primary
prohibitions against false and misleading advertising. (Stats. 1941, ch. 63, §
1, pp. 727-728.) The three provisions -- sections 17500, 17501, and 17502 of
the Business and Professions Code -- were derived from a single predecessor
statute, former Penal Code section 654a. (See People ex rel. Mosk v. National
Research Co. of Cal. (1962) 201 Cal.App.2d 765, 769, fn.1.)
Of the three provisions, the most prominent is section 17500, which “is
the major California legislation designed to protect consumers from false or
deceptive advertising.” (Olson, supra, 96 Cal.App.3d at p. 190.) Section
17500 makes it “unlawful for any person . . . with intent directly or
indirectly to dispose of real or personal property or to perform
services . . . or to induce the public to enter into any obligation
relating thereto, to make or disseminate . . . before the public in this
state, . . . in any newspaper or other publication . . . or in any other
manner or means whatever . . . any statement, concerning that real
or personal property or those services . . . which is untrue or
misleading, and which is known, or which by the exercise of
reasonable care should be known, to be untrue or misleading.” The
prohibition in section 17500 is broad in scope, as it encompasses “‘not only
advertising which is false, but also advertising which[,] although true, is
either actually misleading or which has a capacity, likelihood or tendency to
deceive or confuse the public.’” (Kasky, supra, 27 Cal.4th at p. 951, quoting
Leoni v. State Bar (1985) 39 Cal.3d 609, 626).) Under section 17500, such
conduct is a misdemeanor; additionally, an action for violation of section
17500 or other provisions of the FAL may be brought either by a public
prosecutor or by other persons with standing, and the remedies available
include restitution and injunctive relief (§ 17535).
Sections 17501 and 17502, by their plain language, enhance or
supplement section 17500. Section 17501 sets forth a specific prohibition not
found in section 17500. Similarly, section 17502 establishes an immunity

12
from liability for entities that publish “an advertisement in good faith[]
7
without knowledge of its false, deceptive, or misleading character.”
The conclusion that Business and Professions Code section 17501 was
intended to extend beyond section 17500 derives additional support from
their history. In 1915, the Legislature enacted a version of former Penal
Code section 654a that contained two components, viz., the predecessor of the
current version of Business and Professions Code section 17500 and the
predecessor of the current version of section 17502. The first component was
based on the so-called “Printers’ Ink Model Statute,” which was drafted in
1911 at the request of the Printers’ Ink advertising journal, and promoted by
8
that journal as a basis for legislation. (Olson, supra, 96 Cal.App.3d at p. 190
& fn. 7; Note, The Regulation of Advertising (1956) 56 Colum.L.Rev. 1019,
1058-1059.) The second component constituted the final portion of the 1915
version of former Penal Code section 654a. In 1933, the Legislature amended
former Penal Code section 654a by inserting the predecessor of the current
version of Business and Professions Code section 17501 between the initial
9
two components of the statute. The structure of former Penal Code section

7
Section 17502 states: “This article does not apply to any visual or
sound radio broadcasting station, to any Internet service provider or
commercial online service, or to any publisher of a newspaper, magazine, or
other publication, who broadcasts or publishes, including over the Internet,
an advertisement in good faith, without knowledge of its false, deceptive, or
misleading character.”
8
The Printers’ Ink Model Statute was eventually adopted in many
states, either in its original form or with modifications. (Olson, supra, 96
Cal.App.3d at p. 190, fn. 7.)

9
Following the 1933 amendment, former Penal Code section 654a
provided:
“Any person . . . who, with intent to sell . . . real or personal
property . . . or to induce the public . . . to enter into any obligation relating
thereto . . . shall make . . . in any . . . advertising medium . . . or by means of
any . . . advertising device, . . . an advertisement . . . which [] shall contain

13
654a thus manifested the Legislature’s intent to strengthen that statute by
adding the predecessor of Business and Professions Code section 17501.

any statement . . . concerning such real or personal property . . . which . . . is
false or untrue, . . . or which is deceptive and misleading, and which is
known, or which by the exercise or reasonable care should be known, to be
false or untrue, deceptive or misleading, by the person . . . circulating or
placing before the public said advertisement, shall guilty of a misdemeanor.
“For the purpose of this section, the worth or value of anything
advertised shall be taken to be the prevailing market price, wholesale if the
offer is at wholesale, retail if the offer is at retail, at the time of publication of
such advertisement in the locality wherein the advertisement is published.
“No price shall be advertised as a former price of any advertised thing,
unless said former price was the prevailing market price as above defined
within three months next immediately preceding the publication of said
advertisement or unless the date when said former price prevailed shall be
clearly, exactly and conspicuously stated in the said advertisement.
“Provided, however, that this act shall not apply to any publisher of a
newspaper, magazine, or other publication, who publishes said advertisement
in good faith, without knowledge of its false, deceptive, or misleading
character.”

14
 b. Scope of Prohibition in Section 17501
The key question concerns the extent to which section 17501 implicates
free speech rights. Our inquiry into the scope of the prohibition necessarily
begins with its express terms, as a statute’s language “is generally the most
reliable indicator of legislative intent.” (Hassan v. Mercy American River
Hospital (2003) 31 Cal.4th 709, 715.) The prohibition states: “No price
shall be advertised as a former price of any advertised thing, unless
the alleged former price was the prevailing market price as above
defined within three months next immediately preceding the
publication of the advertisement or unless the date when the alleged
former price did prevail is clearly, exactly and conspicuously stated
in the advertisement.”
Because the prohibition must be construed within section 17501,
viewed as a whole, we examine it in light of the preceding paragraph, which
focuses on “worth” and “value”: “For the purpose of this article the
worth or value of anything advertised is the prevailing market price
. . . at the time of publication of such advertisement in the locality
wherein the advertisement is published.” Generally, in a commercial
setting, the value or worth of an item is its market value, which may be
shown by the market price. (Bagdasarian v. Gragnon (1948) 31 Cal.2d 744,
10
753; Yellen v. Fidelity & Casualty Co. (1931) 115 Cal.App. 434, 441) In

10
As our Supreme Court has explained, “‘value,’ in connection with legal
problems, ordinarily means market value.” (Bagdasarian v. Gragnon, supra,
31 Cal.2d at p. 753; Bullock’s, Inc. v. Security-First Nat’l. Bank of Los Angeles
(1958) 160 Cal.App.2d 277, 282 [“‘When applied without qualification to
property of any description, [“value”] necessarily means the price it will
command in the market,’” quoting Bouv., Law Dict., Rawle’s Third Revision,
p. 3387]; see Joint Highway Dist. v. Ocean S. R. Co. (1933) 128 Cal.App. 743,
754.) The term “worth” is usually attributed the same meaning. (Yellen v.
Fidelity & Casualty Co., supra, 115 Cal.App. at p. 441; Black’s Law Dict.
(10th ed. 2014) p. 1844, col. 2 [“worth n. . . . 1. The monetary value of a
thing”].) Ordinarily, value or worth, so understood, is not established by a
single sale, but “‘by the haggling of the market.’” (Guild Wineries &
Distilleries v. County of Fresno (1975) 51 Cal.App.3d 182, 187, quoting Janss

15
turn, the term “market price” ordinarily refers to the prevailing price at
which the item is offered by sellers in the pertinent market. (Black’s Law
Dict. (10th ed. 2009) p. 1381, col. 1 [“market price” . . . . The prevailing price
at which something is sold in a specific market. See at-the-market price”; “at-
the-market price. The price at which a good or service is offered, or will fetch,
within a specified area: esp., the retail price that store owners in the same
vicinity generally charge for a particular thing or its equivalent.”].)
Viewed in context, the prohibition, by its plain language, forbids any
advertisement of the former price of an “advertised thing” that does not
express the market price information regarding former worth or value, as
specified in the statute. Simply put, the prohibition bans any advertised
claim regarding the former price of an item (1) unless the advertised former
price was “the prevailing market price as [] defined [in section 17501] within
the three months next immediately preceding the publication of the
advertisement” or (2) unless the advertised former price was the prevailing
market price -- as defined in section 17501 -- on a clearly specified date. So
understood, the prohibition imposes standardized market-based meanings on
permissible former price claims, and proscribes all other former price claims -
- including discount advertising that conveys the seller’s own former price for
an item, unless that advertised former price coincides with one of the
11
specified two market prices.

Corp. v. Board of Equalization of Blaine County (1970) 478 P.2d 878, 881.)

11
In supplemental briefing, petitioner contends the prohibition, as
interpreted above, “contains no ‘ban’ on truthful speech,” and “expressly
allows for retailers to advertise any truthful former price, so long as the
retailer also identifies the date when the price was offered.” The crux of
petitioner’s argument is that in the clause, “unless the date when the alleged
former price did prevail is clearly, exactly and conspicuously stated in the
advertisement,” the term “prevailed” refers to the retailer’s own price on the
specified date, rather than the prevailing market price for the date. We
reject that interpretation, as it would require us to impose a new meaning on
the term “prevail” different from its meaning in the other portions of the
statute. By its plain language, the prohibition clearly bans all truthful
former price claims regarding the retailer’s own prices that do not coincide

16
 Because the meaning of the elements of the prohibition discussed above
is clear, we need not look beyond the statutory language to consider the
statute’s legislative history or other factors. (Jackpot Harvesting Co., Inc. v.
Superior Court (2018) 26 Cal.App.5th 125, 141.) Moreover, nothing before us
supports an alternative interpretation of the prohibition. Because the
prohibition was enacted as a provision of former Penal Code section 654a, it
is reasonable to infer that the Legislature’s intent was to enhance the then-
existing protections against false, deceptive and misleading advertisements
contained in that statute. As interpreted above, the prohibition does, in fact,
ban certain forms of false, deceptive, and misleading advertisements
regarding former prices -- albeit at the cost of banning a considerable amount
of truthful and nonmisleading advertising regarding former prices, including
a good deal of discount advertising by individual retailers regarding their
own former prices. For example, if a retailer offered widely sold brands of
Halloween costumes, the prohibition would preclude the retailer from
advertising, “All Halloween costumes 50 percent off our former prices,” on the
day after Halloween, unless those prices coincided with one of the two
requisite market prices.
Our interpretation of the prohibition finds support in the 1957 Attorney
General opinion and Spann v. J.C. Penney Corp. (C.D. Cal. 2015) 307 F.R.D.
508 (Spann). The Attorney General stated that sections 17500 and 17501
have application “in the so-called ‘comparative advertising’ field,” which
encompasses advertisements of an item’s value or worth, and advertisements
of an item’s former selling price. (30 Ops.Cal.Atty.Gen. 127, 129 (1957).) The
Attorney General further concluded that under the statutes, both types of
advertisement “must coincide with the same standard, the ‘prevailing market
price,’ which means the actual selling price of the article in the open market.”
(Ibid.)
As discussed further below (see pt.D.3.b.i., post), in Spann, the plaintiff
asserted a putative class action against real party J.C. Penney, asserting
claims under section 17501, based on allegations resembling those relevant
here. (Spann, supra, 307 F.R.D. at pp. 512-513.) The plaintiff requested an

with the specified prevailing market prices, regardless of whether the retailer
specifies the date on which its claimed former prices obtained.

17
order certifying the class, which the trial court granted. (Id. at p. 533.) In so
ruling, the court concluded that according to the “clear language” of section
17501, “when a retailer advertises a ‘former’ or ‘original’ price and compares
it with a sale price, that ‘former’ or ‘original’ price must refer to the prevailing
market price of the item.” (Id. at p. 526.)
Petitioner insists the legislative purpose behind section 17501 was “not
[to] limit or penalize protected or truthful speech.” We recognize our
obligation, “if possible, to construe [the] statute in a fashion that renders it
constitutional” (In re M.S. (1995) 10 Cal.4th 698, 710), and that in
extraordinary circumstances, a court may disregard statutory language that
conflicts with manifest legislative intent (Times Mirror Co. v. Superior Court
(1991) 53 Cal.3d 1325, 1334, fn.7; Kramer v. Intuit Inc. (2004) 121
Cal.App.4th 574, 578-581). However, those principles are inapplicable here,
as there is no way to confine the prohibition to nonprotected commercial
speech without rewriting it. (Vasquez v. State of California (2008) 45 Cal.4th
243, 253 [“We may not rewrite the statute to conform to an assumed
intention that does not appear in its language”]; City of Sacramento v. Public
Employees’ Retirement System (1994) 22 Cal.App.4th 786, 793-797.)
Nor does anything before us suggest the existence of a legislative intent
to focus section 17501 exclusively on false, misleading, and deceptive
commercial speech. As explained above, the prohibition operates by
affirmatively defining two limited classes of permissible former price claims
12
while banning all other such claims. In order to construe the prohibition as
targeting only nonprotected commercial speech, it would be necessary to
imply new language qualifying the prohibition so that it does not ban
protected commercial speech. Given the prohibition’s grammatical structure,
it is impossible to impose that qualification simply by inserting the phrase,
“false, misleading, or deceptive” somewhere in the prohibition. Petitioner has

12
We note that in 1933, when the predecessor of section 17501 was
enacted, the precise extent to which commercial speech enjoyed constitutional
protection was uncertain, as there was relatively little litigation regarding
that issue. (See Gerawan Farming, Inc. v. Lyons, supra, 24 Cal.4th 468 at
pp. 487, 494-497.)

18
identified no appropriate qualifying language, and has submitted no evidence
that the Legislature inadvertently omitted language of that type.
Although the complaints suggest what appears to be an alternative
interpretation of section 17501, that interpretation neither complies with the
canons of statutory interpretation nor restricts the prohibition to
nonprotected commercial speech. Each complaint alleges that the relevant
“market” is the pertinent real party’s “own offering of the items.” To the
extent those allegations are intended to state a general interpretation of
section 17501, they suggest that the statutory term “prevailing market price”
means the price in a single “market,” understood as the business operation of
the retailer making the price claim. So construed, the prohibition would ban
any advertised former price claim unless it (1) was the retailer’s own
“prevailing” price “within three months next immediately preceding the
publication of the advertisement” or (2) was the retailer’s own “prevailing”
price on a specified date.
The proposed interpretation is untenable. First, it disregards the
common meaning of the term “prevailing market price,” and would render a
portion of the standard surplusage. As noted above, the prohibition refers to
the definition of an advertised item’s prevailing market price stated in the
standard, that is, “the prevailing market price . . . at the time of publication
of such advertisement in the locality wherein the advertisement is published.
(§ 17501, italics added.) Accordingly, if the phrase “prevailing market price”
generally meant the price set by the retailer responsible for the
advertisement -- that is, the retailer’s own price -- the italicized phrase would
be superfluous to the definition of “prevailing market price.” Indeed, had the
Legislature intended the phrase to refer to the price offered by the business
responsible for the advertisement, it could easily have done so, and omitted
13
the use of the terms “market” and “prevailing market price.” (See Goebel v.

13
In so concluding, we do not reject the possibility that under the statute,
as properly construed, a retailer’s own former price for a good may sometimes
constitute the requisite former market price. As explained further below (see
pt. D.3.b.i., post), that situation occurs when the good in question is an “in-
house” item sold only by the retailer, as the retailer’s price for such a good is
necessarily the “prevailing” price at which it is sold.

19
City of Santa Barbara (2001) 92 Cal.App.4th 549, 559.) Second, under
petitioner’s interpretation, the prohibition would not target only false and
misleading commercial speech, as it would ban certain truthful claims by
individual retailers, for example, claims regarding an item’s former market
value (as based on the prices offered by other sellers in the market) when
that differed from the retailer’s own former price. In sum, we conclude that
the prohibition, properly construed, bans a considerable amount of
commercial speech protected under the First Amendment and the free speech
14
provision of the California Constitution.
c. Failure of Constitutional Challenge Based on Free
Speech Rights on Demurrer
The remaining question is whether the prohibition, as interpreted
above, is an invalid regulation of commercial speech. Our focus is on whether
there is an adequate justification for the prohibition. (See Gerawan Farming,
Inc. v. Kawamura (2004) 33 Cal.4th 1, 21-24; City of Corona v. AMG Outdoor
Advertising, Inc. (2016) 244 Cal.App.4th 291, 306; Baba v. Board of
Supervisors (2004) 124 Cal.App.4th 504, 518-520.) Under the Central
Hudson test, the prohibition is valid only if it is narrowly tailored to directly
advance a substantial governmental interest. (Central Hudson, supra, 447

14
In a related contention, relying on Zauderer v. Office of Disciplinary
Counsel of Supreme Court (1985) 471 U.S. 626 (Zauderer) and Beeman,
supra, 58 Cal.4th 329, petitioner contends that section 17501 merely compels
commercial speech, and thus is not subject to the Central Hudson test. We
disagree. Zauderer and Beeman examined regulations that did not ban a
general class of commercial speech, but merely compelled disclosures in
specified circumstances. In Zauderer, the pertinent regulation was an Ohio
State Bar rule requiring attorneys advertising contingency-fee rates to
include information regarding the payment of court costs (Zauderer, supra,
471 U.S. at p. 663); in Beeman, the pertinent regulation was a statute
requiring prescription drug insurance claims processors to provide certain
cost information to consumers (Beeman, supra, at p. 336). Each court
characterized the regulation as facilitating, rather than impeding, the flow of
information. (Zauderer, supra, 471 U.S. at p. 650; Beeman, supra, at p. 356.)
In contrast, the prohibition in section 17501 bans an entire class of
commercial speech, with two narrow exceptions.

20
U.S. at pp. 567-570.) Generally, the test cannot be applied “in the abstract,”
or on the basis of speculation or conjecture. (Gerawan Farming, Inc. v.
Kawamura, supra, at p. 22.) As our Supreme Court has explained, under the
Central Hudson test, establishing the validity of a statute regulating
protected commercial speech requires a factual showing regarding the
Legislature’s actual grounds for enacting the statute and its efficacy in
achieving the legislative objective. (Gerawan Farming, Inc. v. Kawamura,
supra, 33 Cal.4th at pp. 21-24.) In addition to establishing that the statute
addresses a governmental interest that is, “‘in fact,’” substantial, the record
must disclose “substantial evidence” that the statute directly advances the
interest in question and is narrowly tailored to achieve that objective. (Id. at
p. 23.)
Although the proponent of a statute restricting protected commercial
speech ordinarily bears the burden of justifying it (Edenfield v. Fane (1993)
507 U.S. 761, 770), that rule is inapplicable here, as real parties assert their
challenge on demurrer. Because the challenge depends on facts extrinsic to
those necessary to state petitioner’s section 17501 claims, it amounts to an
15
affirmative defense. However, “[a] demurrer based on an affirmative
defense cannot properly be sustained where the action might be barred by the
defense, but is not necessarily barred.” (CrossTalk Productions, Inc. v.
Jacobson (1998) 65 Cal.App.4th 631, 635.) Accordingly, real parties’
challenge fails unless it is conclusively demonstrated by the facts pleaded in
the complaints or subject to judicial notice. (See Gold v. Los Angeles
Democratic League (1975) 49 Cal.App.3d 365, 376; Keimer, supra, 75
Cal.App.4th at pp. 1229-1230.)
Here, the meager record permits no evaluation of the validity of the
section 17501 under the Central Hudson test. In view of the broad sweep of
the prohibition contained in the statute, we question whether an adequate
justification exists for the prohibition. Nonetheless, the record before us does
not establish that the requisite justification does not exist. For that reason,

15
Generally, an affirmative defense relies on a fact that is independent of
the factual allegations essential for the plaintiff’s claim. (Bevill v. Zoura
(1994) 27 Cal.App.4th 694, 698.)

21
real parties “free speech” challenge necessarily fails on demurrer. (Gerawan
16
Farming, Inc. v. Kawamura, supra, 33 Cal.4th at pp. 21-24.)
D. Vagueness
We turn to real parties’ contention that section 17501 is void for
vagueness under the due process clauses of the United States and California
Constitution. For the reasons discussed below, we reject the contention.
1. Governing Principles
“It is a well-settled rule that ‘a statute which either forbids or requires
the doing of an act in terms so vague that [people] of common intelligence
must necessarily guess at its meaning and differ as to its application, violates
the first essential of due process of law.’” (Connor v. First Student, Inc.
(2018) 5 Cal.5th 1026, 1034, quoting Connally v. General Const. Co. (1926)
269 U.S. 385, 391 (Connally).) Statutes “that are not clear as to the regulated
conduct are void for three reasons: (1) to avoid punishing people for behavior
that they could not have known was illegal; (2) to avoid subjective
enforcement of the laws based on arbitrary and discriminatory enforcement
by government officers; and (3) to avoid any chilling effect on the exercise of
First Amendment freedoms. [Citation.]” (Concerned Dog Owners of
California v. City of Los Angeles (2011) 194 Cal.App.4th 1219, 1231
(Concerned Dog Owners).)
“As to the first two applications, the Fourteenth Amendment due
process guarantee against vagueness requires that laws provide adequate
warning to people of ordinary intelligence of the conduct that is prohibited,
and standards to protect against arbitrary and discriminatory enforcement.
[Citation.] . . . [¶] The third application of constitutional vagueness applies
when [the statute] ‘clearly implicates free speech rights.’” (Concerned Dog

16
We note that in supplemental briefing, petitioner contends the statute
can be shown to be valid under Central Hudson test, and has directed our
attention to evidence relevant to one of its prongs, namely, whether the
statute serves a substantial governmental interest. Real parties’ “free
speech” challenge to the statute thus cannot be resolved on demurrer, as
doing so would deny petitioner an opportunity to make a full evidentiary
showing regarding the application of the Central Hudson test. (See Tobe,
supra, 9 Cal.4th at p. 1092.)

22
Owners, supra, 194 Cal.App.4th at p. 1231.) Generally, when a statute
regulates protected speech, it is subject to heightened scrutiny for clarity.
(Holder, supra, 561 U.S. at p. 18; Concerned Dog Owners, supra, at pp. 1231-
1232.)
2. Standards Applicable to Real Parties’ Challenges
Here, real parties assert facial and as-applied challenges to section
17501, and the trial court, in concluding that the latter was successful,
subjected the statute to heightened scrutiny due to its potential impact on
free speech. At the threshold of our inquiry, we must resolve two issues
regarding our standards for evaluating the challenges, namely, whether real
parties can assert a successful facial challenge if section 17501 clearly applies
to some of their alleged misconduct, and whether their challenges require
heightened scrutiny.
a. Propriety of Facial Challenge
The parties dispute whether real parties’ facial challenge fails if the
statute clearly applies to some of their alleged misconduct. Relying primarily
on Hoffman Estates, supra, 455 U.S. 489, petitioner contends that real
parties cannot successfully challenge the statute as void for vagueness if
some of their alleged conduct is clearly subject to the statute. Real parties
maintain that under Johnson, supra, 135 S.Ct. 2551, they are permitted to
assert a facial challenge even if their conduct clearly falls within the ambit of
section 17501. As explained below, we agree with petitioner.
i. Facial Vagueness Challenges Before Johnson
We begin by setting forth the key rules regarding facial vagueness
challenges prior to Johnson. When the challenged statute did not implicate
free speech rights, the standard for a successful facial challenge was high:
the party asserting the challenge was obliged to show that the statute was
“impermissibly vague in all of its applications.” (Hoffman Estates, supra, 455
U.S. at p. 495; People ex rel. Gallo v. Acuna (1997) 14 Cal.4th 1090, 1116
(Gallo).) Furthermore, the court’s evaluation of a facial challenge inquired at
the threshold whether the statute clearly applied to the challenger’s conduct.
(Hoffman Estates, supra, at p. 495 [“A court should . . . examine the
complainant’s conduct before analyzing other hypothetical applications of the
law”]; Maynard v. Cartwright (1988) 486 U.S. 356, 361 [“Vagueness

23
challenges to statutes not threatening First Amendment interests are
examined in light of the facts of the case at hand; the statute is judged on an
as-applied basis.”].)
Under this “as-applied inquiry first” rule, the facial challenge failed if
the statute clearly applied to some or all of the challenger’s conduct.
(Hoffman Estates, supra, 455 U.S. at p. 495 [“A plaintiff who engages in some
conduct that is clearly proscribed cannot complain of the vagueness of the law
as applied to the conduct of others”]; Tobe, supra, 9 Cal.4th at p. 1095 [“If the
statute clearly applies to a criminal defendant’s conduct, the defendant may
not challenge it on grounds of vagueness”]; Allen v. Sacramento (2015) 234
Cal.App.4th 41, 55 [facial challenge to ordinance unsuccessful where
ordinance clearly applied to challengers].) Although criminal statutes
received greater scrutiny than civil statutes, the “as-applied” determination
did not hinge on whether the statute’s application was perfectly clear, even in
the case of criminal statutes (Hoffman Estates, supra, 455 U.S. at p. 502); it
was sufficient that the bulk of the alleged conduct “readily f[e]ll” within the
scope of the statute (see Holder, supra, 561 U.S. at p. 21). Additionally, the
challenger was not permitted to defeat the determination by raising abstract
or hypothetical questions regarding the statute’s application in situations
remote from the challenger’s concrete circumstances. (Id. at pp. 21-25.)
The principal decision regarding these rules was Hoffman Estates.
There, a merchant asserted a facial vagueness challenge to a city ordinance
requiring retailers to secure a license in order to sell items “‘designed or
marketed for use’” with illegal cannabis or drugs. (Hoffman Estates, supra,
455 U.S. at p. 491.) After determining that the statute implicated no
cognizable free speech interests, the court examined it under the “as-applied
inquiry first” rule. (Id. at pp. 495-504.) Upon finding the statute clearly
applied to at least some of the merchant’s conduct, the court concluded that
the facial vagueness challenge failed, notwithstanding the existence of
ambiguities relating to the merchant’s conduct. (Ibid.)
Here, the parties dispute whether Johnson abrogated the use of the
“as-applied inquiry first” rule in the context of real parties’ facial vagueness
challenge to section 17501, which restricts protected commercial speech.
Prior to Johnson, the fact that the challenged statute restricted protected

24
commercial speech did not displace the application of the “as-applied inquiry
first” rule to a facial vagueness challenge. (Harell v. Florida Bar (11th Cir.
2010) 608 F.3d 1241, 1253-1257 [relying on rule to reject facial vagueness
challenges to bar regulations restricting attorney advertising before
examining issues relating to validity of regulations under Central Hudson
test]; Hunt v. City of Los Angeles (9th Cir. 2011) 638 F.3d 703, 710, 714-718
[relying on rule to reject facial vagueness challenge to statute before
determining it to be valid regulation of commercial speech under Central
Hudson test]; NAACP v. City of Philadelphia (E.D.Penn. 2014) 39 F.Supp.3d
611, 614-616 [relying on rule to reject facial vagueness challenge to airport
billboard regulations before determining regulations were valid under First
Amendment]; see City of Vallejo v. Adult Books (1985) 167 Cal.App.3d 1169,
1173-1177 [relying on rule to reject vagueness challenge to zoning ordinance
before determining ordinance did not contravene First Amendment].) Rather
-- as discussed further below (see pt.D.2.b., post) -- that fact potentially
required the employment of a higher standard of scrutiny in determining
whether the statute clearly applied to the challenger’s conduct. (Holder,
supra, 561 U.S. at pp. 20-25; see Hoffman Estates, supra, 455 U.S. at p. 498.)
ii. Continuing Vitality of “As-Applied Inquiry First”
Rule
For the reasons discussed below, we conclude that Johnson did not
abolish the use of the “as-applied inquiry first” rule here. In Johnson, a
criminal defendant asserted a vagueness challenge to the “residual clause” of
the Armed Career Criminal Act, (18 U.S.C. § 924(e)(2)(B)), under which a
defendant was subject to an increased sentence where the offense “involve[d]
conduct that present[ed] a serious potential risk of physical injury to
another.” (Johnson, supra, 135 S.Ct. at p. 2555.) Under prior case law
establishing a categorical approach to deciding whether an offense met the
statutory definition, a court was required to assess risk based on “a judicially
imagined ‘ordinary case’ of a crime, not to real-world facts” relating to a
particular defendant’s own conduct. (Id. at p. 2557.) Without analyzing
whether the residual clause clearly applied to the specific crime of the
defendant, the court concluded the clause was unconstitutionally vague. (Id.
at pp. 2560-2561.) Pointing to persistent difficulties courts had encountered

25
in attempting to apply the test for risk, the court found the test effectively
unworkable and the residual clause fatally vague.
While Johnson addressed the facial challenge to the statute without
first attempting to apply it to the defendant’s conduct, the high court noted
that some of its prior holdings contradicted the notion that “a vague provision
is constitutional merely because there is some conduct that clearly falls
within the provision’s grasp.” (Johnson, supra, 135 S.Ct. at p. 2561.) The
court noted it had previously struck down criminal statutes whose language
was so plainly incapable of satisfactory definition that the court deemed it
unnecessary to address whether the challenger’s conduct arguably fell within
it. (Ibid.) In United States v. L. Cohen Grocery Co. (1921) 255 U.S. 81, 91,
the court invalidated a criminal statute prohibiting grocers from charging an
“unjust or unreasonable rate” for a commodity; in Coates v. Cincinnati (1971)
402 U.S. 611, 614, the court struck down a criminal statute prohibiting
people on sidewalks from engaging in “annoying” conduct.
To the extent Johnson declined to look first at the defendant’s conduct,
it created uncertainty regarding the high standard for a successful facial
challenge. Nevertheless, it neither expressly overruled Hoffman Estates nor
even mentioned it. As one circuit court observed, the unifying tenet of the
prior cases on which the court relied was that a criminal statute that ‘“simply
has no core’ and lacks ‘any ascertainable standard for inclusion and
exclusion’” is impermissibly vague, regardless of the facts of the particular
case. (United States v. Cook (7th Cir. 2019) 914 F.3d 545, 550; see United
States v. Jones (7th Cir. 2012) 689 F.3d 696, 703, abrogated on other grounds
in Johnson, supra, 135 S.Ct. at p. 2563.) Similarly, Johnson itself involved
an unusual statute whose application had been demonstrably problematic.
(Johnson, supra, 135 S.Ct. at p. 2560 [“The clause has ‘created numerous
splits among the lower federal courts,’ where it has proved ‘nearly impossible
to apply consistently,’” quoting Chambers v. United States (2009) 555 U.S.
122, 133 (con. opn. of Alito, J.), abrogated on other grounds in Johnson,
supra, 135 S.Ct. at p. 2562.) As the court observed, “this Court’s repeated
attempts and repeated failures to craft a principled and objective standard
out of the residual clause confirm its hopeless indeterminacy.” (Johnson,
supra, 135 S.Ct. at p. 2558.)

26
 In our view, Johnson did not put an end to the “as-applied inquiry first”
rule. Rather, the decision appeared to involve an exceptional statute in
which the key defect could be established without examining the statute as
applied to the challenger’s circumstances. Indeed, after Johnson, both
federal and California courts have continued to rely on the “as-applied
inquiry first” rule. (Cook, supra, 914 F.3d at pp. 549-555 [applying rule in
rejecting facial vagueness challenge to criminal statute]; Doe v. Valencia
College (11th Cir. 2018) 903 F.3d 1220, 1233 [relying on rule in rejecting
facial vagueness challenge to school rule regulating unprotected student
speech]; Ledezma-Cosimo v. Sessions (9th Cir. 2017) 857 F.3d 1042, 1047
[applying rule in rejecting facial vagueness challenge to deportation statute];
United States v. Bramer (8th Cir. 2016) 832 F.3d 908, 909 [applying rule in
rejecting facial vagueness challenge to criminal statute]; Arigoni Enterprises,
LLC v. Town of Durham (2d Cir. 2015) 629 Fed.Appx. 23, 25 [applying rule in
rejecting facial vagueness challenge to zoning ordinance]; In re Gary H.
(2016) 244 Cal.App.4th 1463, 1476 [applying rule in rejecting facial
vagueness challenge to criminal statute]; but cf. Henry v. Spearman (9th Cir.
2018) 899 F.3d 703, 708 [stating precedent did not foreclose possibility that
Johnson nullified rule, without deciding issue].) Those decisions include at
least one invoking the rule in the context of a statute restricting commercial
speech. (Contest Promotions, LLC v. City and County of San Francisco (9th
Cir. 2017) 704 Fed.Appx. 665, 668 [applying rule in rejecting facial vagueness
challenge to statute otherwise determined to be valid regulation of
commercial speech under Central Hudson test].)
The remaining issue is whether we should follow the “as-applied
inquiry first” rule. Real parties contend, in effect, that the exceptional
circumstances in Johnson are also present here, as their facial and as-applied
challenges rely on the same claim, namely, that the statute is entirely
meaningless. Pointing to the 1984 committee report, they assert that the
statute’s key terms “individually and in combination create an
incomprehensible statute that is void for vagueness on its face.” They offer
the same contention in challenging the statute for vagueness as applied,
arguing that it “contains a series of terms that have no defined, predictable,
understandable application either singly or in combination. Thus, even if the

27
allegations in the . . . complaints are accepted as true . . . , the conduct
therein described is not ‘clearly proscribed’ by [s]ection 17501 -- because
[s]ection 17501 ‘clearly proscribes’ nothing.” (Italics omitted.)
We are not persuaded. As our Supreme Court has explained, an
overarching principle in evaluating vagueness challenges is that “abstract
legal commands must be applied in a specific context. A contextual
application of otherwise unqualified legal language may supply the clue to a
law’s meaning, giving facially standardless language a constitutionally
sufficient concreteness.” (Gallo, supra, 14 Cal.4th at p. 1116.) In view of that
principle, real parties’ contentions cannot be resolved adequately without
examining section 17501 in the context of the misconduct alleged against
them. In our analysis below (see pt.D.3., post), we therefore follow the “as-
applied inquiry first” rule, with due attention to whether the statute’s
application to the facts alleged in the complaint establishes that it is not
17
fatally vague.
b. Heightened Scrutiny
The remaining question before conducting that analysis is whether, in
view of our conclusion that section 17501 restricts protected commercial
speech, a higher standard of clarity is required in our application of the “as-

17
After oral argument, real parties directed our attention to Bucklew v.
Precythe (2019) 139 S.Ct. 1112. [2019 U.S. LEXIS 2477], which discussed as-
applied and facial challenges under the Eighth Amendment of the United
States Constitution. In holding that a person sentenced to death must show
a less painful alternative method of execution, regardless of whether the
person asserts an as-applied or a facial challenge, the court stated that
“classifying a lawsuit as facial or as-applied affects the extent to which the
invalidity of the challenged law must be demonstrated and the corresponding
‘breadth of the remedy,’ but it does not speak at all to the substantive rule of
law necessary to establish a constitutional violation.” (Id. at p. *31; see also
id. at pp. *26-*34.) Our decision comports with that principle, as we conclude
that absent the extraordinary circumstances present in Johnson, as-applied
and facial vagueness challenges alike fail if the relevant statute clearly
applies to the challenger’s conduct.

28
applied inquiry first” rule. In the context of a facial or as-applied vagueness
challenge to a statute restricting protected speech, heighted scrutiny may be
required in evaluating whether the statute clearly applies to the challenger’s
conduct. (See Hoffman Estates, supra, 455 U.S. at p. 498; Holder, supra, 561
U.S. at pp. 20-25.)
The nature of the heightened standard of clarity was discussed in
Holder. There, legal rights groups and individuals asserted constitutional
challenges to a federal statute making it a crime to “knowingly provid[e]
material support or resources” -- including a “‘service’” such as “‘training’” or
“‘expert advice’” -- “‘to a foreign terrorist organization.’” (Holder, supra, 561
U.S. at p. 1; 18 U.S.C. §§ 2339A(b)(1), 2339B.) The plaintiffs alleged they
wished to support the humanitarian and political activities of two designated
terrorist groups, but refrained from doing so for fear of prosecution under the
statute. (Id. at p. 10.) They argued the statute prohibited them from
educating the groups on how to use specific legal means to achieve peaceful
political goals. (Id. at p. 14.) The plaintiffs challenged the statute on the
grounds that it contravened the First Amendment and was void for
vagueness as applied to them. (Ibid.) The Ninth Circuit concluded that
regardless of whether the ban clearly applied to the plaintiffs, it was void for
vagueness as applied to them because it appeared to restrict free speech. (Id.
at p. 19.)
Relying on Hoffman Estates, the United States Supreme Court rejected
the Ninth Circuit’s ruling, stating: “[T]he Court of Appeals contravened the
rule that ‘[a] plaintiff who engages in some conduct that is clearly proscribed
cannot complain of the vagueness of the law as applied to the conduct of
others.’” (Holder, supra, 561 U.S. at p. 20, quoting Hoffman Estates, supra,
455 U.S. at p. 495.) The court further explained: “That rule makes no
exception for conduct in the form of speech. [Citation.] Thus, even to the
extent a heightened vagueness standard applies, a plaintiff whose speech is
clearly proscribed cannot raise a successful vagueness claim under the Due
Process Clause of the Fifth Amendment for lack of notice. And he certainly
cannot do so based on the speech of others. . . . [O]ur precedents make clear
that a Fifth Amendment vagueness challenge does not turn on whether a law
applies to a substantial amount of protected expression.” (Ibid.) The high

29
court found that notwithstanding a heightened standard of scrutiny, the
vagueness challenge failed, reasoning that “most” of plaintiffs’ conduct
“readily f[e]ll” within the scope of the statute, and the plaintiffs otherwise
raised only hypothetical questions regarding the statute’s application in
situations remote from their concrete circumstances. (Id. at p. 21.)
In view of Holder, when a regulation restricts protected speech, the
application of the “as-applied inquiry first” rule may involve a higher
standard of clarity in determining whether the challenger’s own conduct falls
under the statute. Here, it is unclear that real parties’ challenges trigger
that standard, notwithstanding our conclusion that section 17501 restricts
protected commercial speech. Because the section 17501 claims are
predicated on what is alleged to be real parties’ false, misleading, or
deceptive advertising, the claims do not encompass any protected commercial
18
speech by real parties. Furthermore, due to the limited constitutional
protection afforded commercial speech, real parties may not invoke the
statute’s impact on the protected commercial speech of other parties.
(Hoffman Estates, supra, 455 U.S. at pp. 496-500.) Nonetheless, it is
unnecessary to decide whether heightened scrutiny is mandated here, as we
conclude that even under such a standard of clarity, real parties have

18
The trial court, in overruling real parties’ demurrers to petitioners’
other causes of action, concluded that the complaints’ allegations stated
causes of action for false, misleading, or deceptive advertising under section
17500. Before us, real parties have not challenged that ruling. Accordingly,
for purposes of this writ proceeding, the allegedly false, misleading, or
deceptive former price advertising must be viewed as unprotected commercial
speech, as section 17500 targets such speech (Olson, supra, 96 Cal.App.3d at
p. 195; Keimer, supra, 75 Cal.App.4th at p. 1230). Because the section 17501
claims are directed at the same former price advertising, real parties may not
contend that the prohibition in section 17501 is being applied to their
protected speech.

30
identified no defects or ambiguities sufficient to deny them notice regarding
19
the propriety of their alleged conduct.
3. Analysis

19
Real parties have failed to establish any other tenable basis for
heightened scrutiny of the statute. They suggest that section 17501 is
subject to the enhanced standard of clarity appropriate for criminal statutes
because criminal penalties are potentially available for violations of section
17501 (§ 17534). In Ford Dealers Assn. v. Department of Motor Vehicles
(1982) 32 Cal.3d 347 (Ford Dealers Assn.), our Supreme Court rejected a
contention closely resembling that asserted by real parties. There, an
association of automobile dealers challenged the validity of certain
regulations relating to Vehicle Code section 11713, which bans the
dissemination of the false or misleading statements to the public by licensed
automobile dealers. (Id. at pp. 354-356.) In challenging the regulations as
void for vagueness, the association contended heightened scrutiny was
required because criminal penalties were available for violations of Vehicle
Code section 11713. (Id. at p. 366, fn. 12.) The court declined to apply that
standard, noting that the statute was a “remedial” statute -- that is,
“designed to protect the public” -- and thus subject to liberal construction to
effectuate its purposes, that potential criminal liability under the statute was
not at issue in the particular case, and that “only the civil, administrative
aspects of the statute [were] before the court.” (Id. at pp. 356, 367, fn. 12.)
The rationale in Ford Dealers Assn. applies here. Like the statute at
issue there, section 17501 is a remedial statute subject to liberal construction
to effectuate the protection of consumers, and the instant complaints do not
seek criminal penalties. We therefore decline to subject the statute to the
heightened standard of clarity appropriate for criminal statutes.
Sessions v. Dimaya (2018) ___ U.S. ___, ____ [138 S.Ct. 1204, 1213],
upon which real parties rely, is distinguishable. There, the United States
Supreme Court applied heighted scrutiny to a civil statute authorizing the
deportation of persons with criminal convictions, noting that it had long
subjected such laws to enhanced scrutiny in view of the severity of
deportation as a penalty. That consideration is not pertinent here.

31
 As explained below, we reject real parties’ facial and as-applied
vagueness challenges. Their facial challenge to section 17501 fails in its
entirety because the statute clearly prohibits some of the misconduct alleged
in the complaints; furthermore, the as-applied challenge relating to the
remaining misconduct fails on demurrer for want of factual allegations
sufficient to support the challenge.
Generally, “‘[i]n considering whether a legislative proscription is
sufficiently clear to satisfy the requirements of fair notice, “we look first to
the language of the statute . . . .” [Citations.] . . . [Citation.] The
Legislature’s intent “as exhibited by the plain meaning of the actual words of
the law,” must be followed “‘“whatever may be thought of the wisdom,
expediency, or policy of the act.”’” [Citations.]’ [Citations.]” (Benson v.
Kwikset Corp. (2007) 152 Cal.App.4th 1254, 1269.) The standards for conduct
in the statute may also be “fleshed out . . . by reference to any of the following
sources: (1) long established or commonly accepted usage; (2) usage at
common law; (3) judicial interpretations of the statutory language or of
similar language; (4) legislative history or purpose.” (Sechrist v Municipal
Court (1976) 64 Cal.App.3d 737, 745; see Ford Dealers Assn., supra, 32 Cal.3d
at pp. 365-369.)
At the outset, we note that the trial court, in accepting the as-applied
challenge, directed its attention primarily to petitioner’s legal conclusions
regarding the application of section 17501, as alleged in the complaints.
However, “we are not limited to [petitioner’s] theor[ies] of recovery in testing
the sufficiency of [the] complaint[s] [on] demurrer, but instead must
determine if the factual allegations of the complaint[s] are adequate to state
a cause of action under any legal theory.” (Barquis v. Merchants Collection
Assn. (1972) 7 Cal.3d 94, 103, italics omitted.) For that reason, in evaluating
real parties’ vagueness challenges, we look to the factual allegations in the
complaints, rather than any legal conclusions they may contain.
a. Allegations in Complaints
The complaints assert that real parties offer goods for sale online at
prices purportedly discounted from so-called “reference prices” that are
“deliberately and artificially” stated to be higher than real parties’ actual

32
former prices. Some of the goods are “in-house” goods exclusive to each real
party, and the others are nonexclusive goods also sold by competing retailers.
According to the complaints, following an investigation of real parties’
online websites, petitioner found that large percentages of the “daily
offerings” were offered at (or above) the represented reference price only for
periods of 30 days or fewer during the 90-day period preceding the pertinent
advertisements. Depending on the particular real party, the complaints
assert that 19.38 percent to 51.29 percent of the daily offerings were never
offered at (or above) the reference price; that 48.65 percent to 88.08 percent of
the daily offerings were offered at (or above) the reference price for only 14
days or fewer; and that 83.76 percent to 98.55 percent of the daily offerings
were offered at (or above) the reference price for only 30 days or fewer.
As noted above (see pt.C.2.b., ante), the complaints assert that for
purposes of section 17501, the relevant market is the pertinent real party’s
“own offering[] of the items.” In connection with that assertion, each
complaint specifically alleges that with respect to the in-house goods, the real
party is the only possible “market” regarding those goods. With respect to
nonexclusive items sold by other retailers, however, each complaint asserts
that even if the “market” relating to those items encompasses other retailers,
real parties’ reference prices do not coincide with the prevailing market
prices because real parties’ actual prices were consistently below the
advertised reference prices.
b. Clarity of Section 17501
As explained below, the complaints state theories of liability regarding
the in-house goods and the nonexclusive goods that rely on the same
provisions of section 17501, but differ with respect to the markets in which
the pertinent prevailing market prices must be determined. We conclude
that real parties’ facial challenge fails in its entirety because the statute is
clear as applied to the “in-house goods” theory, and real parties have
otherwise failed to show the statute is unclear as applied to the “nonexclusive
goods” theory.
i. In-House Goods
The theory of liability clearly applicable to the in-house goods is set
forth in Spann, supra, 307 F.R.D. 508. That decision concluded that under

33
section 17501, when a retailer sells in-house goods, the retailer’s actual prices
regarding those goods constitute their market prices. (Id. at pp. 526-527.)
For that reason, the retailer’s actual prices for the in-house goods provide an
adequate basis for determining whether the retailer’s advertised former price
claims comply with section 17501. (Ibid.)

In Spann, the plaintiff asserted a putative class action against real
party J.C. Penney, asserting claims, inter alia, under the FAL, including
section 17501. (Spann, supra, 307 F.R.D. at pp. 512-513.) The claims were
predicated on allegations that J.C. Penney advertised false former prices and
false price discounts for “‘its private branded and exclusive branded apparel
and accessories’” on its Internet site and in its stores. (Id. at p. 512.) The
plaintiff requested an order certifying the class, which the trial court granted.
(Id. at p. 533.)
In so ruling, the court rejected J.C. Penney’s contention that the section
17501 claim was not suitable for class litigation. (Spann, supra, 307 F.R.D.
at p. 523.) J.C. Penney argued that under the statute, in order to determine
the “‘prevailing market price,’” the plaintiff was obliged to “analyze each item
sold in the market (i.e., by other retailers in the geographic area), not simply
the price at which [real party] previously offered the items,” and “consider
‘price data from [real party] and competing retailers at different times in
different, numerous local markets throughout California[.]’” (Ibid.) The
court disagreed, reasoning that the market relating to J.C. Penney’s in-house
goods consisted solely of its sales operations because only J.C. Penney sold
those goods. (Id. at pp. 526-527.) The court thus concluded that the
prevailing market prices for such in-house goods were established by J.C.
Penney’s own sales price data, for purposes of evaluating whether J.C.
Penney’s claimed former prices coincided with the former prevailing market
prices specified in section 17501. (Ibid.)
The theory set forth in Spann clearly applies to the false or deceptive
former price claims alleged in the complaints, insofar as they relate to in-
house goods. The complaints generally assert that each real party’s former
price claims for advertised items “pervasively” violated section 17501 because
they reflected neither the prevailing market prices of the in-house goods

34
during the pertinent preceding three-month period nor the prevailing market
prices on specified dates. Those allegations encompass “thousands” of in-
house goods.
The complaints allege that real parties did not specify dates in their
former price claims, and otherwise assert in detail that their actual former
prices for advertised items were usually less than their claimed former prices
for the items. The complaints allege (1) that for significant percentages of the
daily offerings, the items were never sold at (or above) the claimed former
prices during the 90-day period preceding the advertisements; (2) that for
virtually half or more of the daily offerings, the items were sold at (or above)
the claimed former prices for only 14 days or fewer during the 90-day period;
and (3) that for the vast majority of the daily offerings, the items were sold at
(or above) the claimed former prices for only 30 days or fewer during the 90-
day period.
As discussed further below, these allegations support the reasonable
inference that for a considerable amount of the advertised in-house goods, the
claimed former price was greater than the actual prevailing market price
during the statutory three-month period. Because real parties’ daily offerings
did not specify dates upon which the claimed former prices obtained, the
complaints clearly state a theory of liability under section 17501, namely,
that real parties’ claimed former prices for their in-house goods did not
coincide with the prevailing market prices for the relevant three-month
period.
Because the facial challenge fails if section 17501 clearly applies to real
parties, our focus is on whether they have identified any fatal vagueness in
the application of the Spann theory to the facts as alleged in the complaints.
We thus disregard hypothetical problems of application outside those
concrete circumstances, including all such problems identified in the 1984
20
committee report. (Holder, supra, 561 U.S. at pp. 20-25.)

20
The same is true of other contentions raised by real parties and amici.
Real parties argue that section 17501 has been rendered unworkable by
unspecified factual changes in retailing wrought by the Internet. Relying on
facts not alleged in the complaints, amici maintain that the term “prevailing

35
 We reject real parties’ suggestion that the statutory terms “market”
and “prevailing market price” are unintelligible. As explained above (see pt.
B.3.b., ante), those terms have established meanings sufficient to determine --
at least in broad outline -- what section 17501 bans and what it permits.
Indeed, the terms, so construed, have long been used in the California
Uniform Commercial Code to state a specific measure of damages relating to
failed sales transactions (Cal. U. Com. Code, §§ 2708, 2713, 2723, 2724). In
that context, courts have recognized that although it is sometimes impossible
to identify the relevant market or market price, the existence of those items
generally presents factual questions. (Southern Pacific Milling Co. v.
Billiwhack Stock Farm, Ltd. (1942) 50 Cal.App.2d 79, 88.)
The 1957 Attorney General opinion and Spann reached similar
conclusions regarding the terms “market” and “prevailing market price” in
section 17501. The Attorney General found no uncertainty in the term
“prevailing market price” used in the statute, noting that several statutes
and judicial decisions applied similar terms. (30 Ops.Cal.Atty.Gen., supra, at
p. 128.) The court in Spann concluded that under the statute, the
determination of the relevant market price ordinarily presents factual
questions: “[T]he prevailing market price must take into account where, and
at what price, the item in question is offered for sale. [Citations.] At bottom,
this is a simple and straightforward inquiry that assesses what is the item’s
proper market and where and how is the item marketed.” (Spann, supra, 307
F.R.D. at p. 526.)
Real parties and amici contend the specific definition of “prevailing
market price” relevant to the statutory prohibition is unworkable. The
prohibition relies on the definition in the standard set forth in section 17501,
which provides that the “prevailing market price” is that which obtains “at
the time of publication of such advertisement in the locality wherein the
advertisement is published.” (§ 17501, italics added.) Real parties and amici
maintain that the italicized terms have no clear meaning.

market price” is well defined only for markets for generic or bulk
commodities, and thus is inapplicable to sellers of nongeneric goods. These
contentions cannot support vagueness challenges asserted on demurrer.

36
 The clear import of the definition is that a retailer, in selecting the
medium for the advertised item, determines the particular market in which
the prevailing market prices are to be identified. The relevant market is the
one that exists in the locality of consumers likely to see the advertisement at
the time it is published, and consists of the vendors then competing to sell the
advertised item to them. Accordingly, when, for example, a retailer advertises
an item on a specified date in a newspaper whose circulation is limited to Los
Angeles, the relevant market price is that which prevails among the retailers
selling the advertised item to consumers in Los Angeles on the date in
question. Because the term “prevailing” ordinarily means “common,” and
applies to “what is predominant or widespread beyond others of its kind or
class at a time or place indicated . . . .” (Webster’s Third New Internat. Dict.
Unabridged (1976) p. 1797), in a typical case, the relevant market price will
be the common or predominant price among the sellers in the market where
the item is advertised.
The 1957 Attorney General opinion offered the same interpretation of
the definition, concluding that -- depending on the content of the
advertisement -- the prevailing market price was determined by the actual
sales prices of similar goods, or the same good, on the “open local market.”
(30 Ops.Cal.Atty.Gen., supra, at p. 129.) The Attorney General further
stated: “[I]t is not any price on the market that the statute refers to, for
. . . there is often more than one price for the same goods appearing
simultaneously on the market, but the most common one.” (Ibid.; see Haley
v. Macy’s Inc. (N.D. Cal. 2017) 2017 U.S. Dist. LEXIS 210486, *6, *18-*19
[term “prevailing market price,” as used in section 17501, is not
unconstitutionally vague because prevailing means “predominant” or “most
widely occurring”].)
Under the Spann theory, as alleged in the complaints, the application
of the statutory definition of “prevailing market price” is clear. Although
each real party’s online advertisements reach a widespread group of
consumers, the real party is the only retailer selling its in-house goods to
those consumers. For that reason, the real party’s advertised actual price for
an in-house item necessarily constitutes the item’s prevailing market price at
the time the actual price is advertised.

37
 Real parties’ demurrer maintained that the statute did not preclude
determining the prevailing market price of an advertised in-house item on
the basis of similar products offered by other retailers. In our view, that
contention fails in light of the principle that statutes be given their “plain,
commonsense meaning.” (Kavanaugh v. West Sonoma County Union High
School Dist. (2003) 29 Cal.4th 911, 919.) The statutory definition, so
understood, identifies the relevant market price as that for the “advertised
thing,” that is, the exclusive in-house item as advertised. Accordingly, if the
advertisement specifies a precise item -- say, by reference to name, brand, or
other distinctive features (for example, J.C. Penney’s “Christina® Dot Print
Flyaway Bandeaukini Swim Top – Maternity,” which is alleged to be an
exclusive in-house product) -- the market and therefore the market price is
properly determined on the basis of sales of that item only. (See In re High
Fructose Corn Syrup Antitrust Litigation (7th Cir. 2002) 295 F.3d 651, 658
[noting that when seller’s product is differentiated, seller has “a little pocket
of monopoly power”].) Our conclusion finds additional support from Spann,
which rejected the same contention on essentially similar alleged facts.
(Spann, supra, 307 F.R.D. at pp. 523-528.)
Real parties and amici further contend the term “time of publication,”
as used in the definition, has no clear meaning. However, California law has
long provided that when an act is relevant to the operation of a statute, it is
ordinarily treated as falling on a full day, rather than a fraction of a day.
(Municipal Improv. Co. v. Thompson (1927) 201 Cal. 629, 632 [“The law takes
no notice of fractions of a day. Any fraction of a day is deemed a day unless in
a particular case it is necessary to ascertain the relative order of occurrences
on the same day.”].) The time of publication is reasonably construed as a
particular day, absent special circumstances. No such circumstances are
alleged in the complaints; on the contrary, the complaints refer to real
parties’ “daily offerings.” (Italics added.)
Real parties and amici also contend the term “locality” is necessarily
vague, arguing that it has numerous possible meanings, and that the advent
of the Internet has made its application “even more question-begging” due to
the Internet’s broad reach. We disagree. Generally, the term “locality,”
viewed in context (that is, “the locality wherein the advertisement is

38
published”), operates to identify the market for the “advertised item” as the
consumers targeted by the advertisement and the sellers competing to sell
the item to them. So understood, the Internet raises no special difficulty
regarding the term, as it is merely a medium that reaches a very large group
of consumers. In the context of advertising former prices of in-house goods,
the term “locality” plays no role in identifying relevant competing sellers, as
21
only real parties sell their in-house goods.
Additionally, real parties and amici maintain that the key terms in the
statutory prohibition are vague. Central to the Spann theory, as set forth
above, is one of the two exceptions to the prohibition against former price
claims, namely, the provision permitting such a claim when “the alleged
former price was the prevailing market price [as defined in the statute] within
the three months next immediately preceding the publication of the
advertisement.” (§ 17501, italics added.) Real parties and amici contend the
italicized terms have no clear meaning.
Broadly speaking, the provision, by its plain language, permits a
former price claim only when the claimed former price coincides with the
requisite three-month market price. Because the provision refers to “the”
prevailing market price during the pertinent three-month period, the
requisite market price is reasonably viewed as the common or predominant
price during that period. For that reason, in a typical case, a retailer may

21
Real parties’ reliance on Connally, supra, 269 U.S. 385 is misplaced.
There, the United States Supreme Court examined an Oklahoma statute that
obliged the state to pay state employees “‘not less than the current rate of per
diem wages in the locality where the work is performed.’” (Id. at p. 388.) The
court concluded the statute was void for vagueness because the term
“locality,” as used in the statute, had no clear meaning, stating: “Two men,
moving in any direction from the place of operations, would not be at all
likely to agree upon the point where they had passed the boundary which
separated the locality of that work from the next locality.” (Id. at p. 394.) In
contrast, as explained above, no such problems attend the term under the
Spann theory.

39
avoid liability under the statute by advertising a former price that obtains on
22
all or most of the days within the pertinent three-month period.
Nonetheless, as discussed above, the appropriate measure of the prevailing
market price depends on the specific nature of the market. (See Spann,
supra, 307 F.R.D. at pp. 526-527.)
In Spann, relying on expert testimony, the trial court accepted the
statistical “mode” price of an advertised item -- that is, the most commonly
occurring price -- as the appropriate objective standard for determining the
prevailing three-month market price for that item. (Spann, supra, 307
F.R.D. at pp. 516-517, 527-528.) Spann lacks a full description of the expert’s
precise methodology. However, the most straightforward application of the
concept of the mode to the facts alleged here is to identify the three-month
prevailing price for an item as the price offered in the majority of the “daily
offerings” for the period, if there is one, and otherwise as the most frequently
occurring price in those offerings.
Although difficulties may arise in some contexts in determining
whether a former price claim coincides with the requisite three-month
market price, no fatal unclarity attends that determination under the
complaints’ allegations. The complaints allege that for significant
percentages of the advertised items, the actual prices were always below the
claimed former prices during the 90-day period; that for approximately half
or more than half of the advertised items, the actual prices were below the
claimed former prices on all but 14 days (or fewer) during the 90-day period;
and that for the vast majority of the advertised items, the actual prices were
below the claimed former prices on all but 30 days (or fewer) during the 90-
day period.

22
In a statute, the term “month” means “calendar” month, absent any
qualification (Sprague v. Norway (1866) 31 Cal. 173, 176; Civ. Code, § 14,
subd. 4), and a “preceding[]” period stated in months is determined by
“counting backward” the requisite number of calendar months (see Scoville v.
Anderson (1901) 131 Cal. 590, 596). Accordingly, the three-month statutory
period here will vary in length from 89 to 92 days, depending upon the
specific date when the advertisement was published.

40
 In view of the allegations, under any reasonable specification of a
requisite three-month market price for the in-house goods -- including the
measure suggested by Spann -- it is clear that the three-month market prices
were often -- and perhaps always -- less than the claimed former prices. The
allegations thus suffice to establish that real parties routinely advertised
former price claims for in-house goods not coinciding with the three-month
market prices. For that reason, much or all of real parties’ alleged conduct
“readily fall[s]” within the scope of the statute. (Holder, supra, 561 U.S. at p.
23
21.)
Real parties suggest the statute is void for vagueness as applied to
them because it does not resolve whether the actual prices charged for in-
house items in their brick-and-mortar stores may serve as the basis for their
online former price claims. However, that contention fails on demurrer
because the reasonable inferences raised by the complaints’ factual
allegations contradict the contention’s presupposition, namely, that the prices
in the brick-and-mortar stores support the online former price claims.
Indeed, the complaints allege that each real party has adopted specific
policies ensuring that its online sales prices “are, by the company’s own
design, in substantial parity with” the sales prices in its “brick-and mortar”

23
We recognize that the complaints rely on a 90-day period, rather than a
three-month period. The complaints’ allegations are thus technically
defective, as the three-month period will comprise 89 to 92 days (see fn. 19,
ante). Nonetheless, those minor defects are immaterial to whether the
complaints state clear claims under section 17501, in view of the patent
falsity of the former price claims as alleged in the complaints.
We also observe that the complaints allege that a retailer necessarily
contravenes the provision in question by publishing a former price that
obtains on fewer than half the number of days within the three-month period.
The complaints assert that a seller violates the statute by advertising a
reference price for a product “higher than that which it actually offered and
sold the product for a majority of the days on which it was offered during the
preceding 90 days.” However, we are not bound by that legal conclusion.

41
 24
stores. In sum, because the statute clearly applies to real parties with
respect to their former price claims regarding their in-house goods, their
facial challenge to section 17501 fails; for the same reason, their as-applied
challenge fails insofar as it asserts that the statute’s application is unclear
25
with respect to their former price claims regarding their in-house goods.
(Hoffman Estates, supra, 455 U.S. at pp. 497-504.)

24
Real parties’ demurrer contended the allegations were defective
because they were pleaded on information and belief. We disagree. As
Witkin explains, “[i]t sometimes happens that a plaintiff . . . lacks knowledge
and the means of obtaining knowledge of facts material to his or her cause of
action . . . . Usually the matters are peculiarly within the knowledge of the
adverse party, and the pleader can learn of them only from statements of
others. In this situation, the pleader may plead what he or she believes to be
true as the result of information . . . the pleader has received.” (4 Witkin,
Cal. Procedure (5th ed. 2008) Pleading, § 398, pp. 537-538.) However, “[i]t is
improper to plead on information and belief when the pleader had actual or
presumed knowledge of the facts.” (Id. at § 399, p. 539.)
Here, real parties are likely to have records of the prices for in-house
items sold in their brick-and-mortar stores. In contrast, petitioner could have
obtained that price data only by visiting real parties’ brick-and-mortar stores
on a daily basis during its investigations in order to monitor the prices of the
“thousands” of in-house goods. Nothing in the complaints suggest that was
possible. For that reason, the price information in question must be regarded
as “peculiarly” within real parties’ knowledge. (4 Witkin, supra, Pleading, §
398, p. 538.)

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In a related contention, amici argue that the application of the phrase,
“the prevailing market price . . . within the three months next immediately
preceding the publication of the advertisement,” is uncertain with respect to
online retailers who publish continuous advertisements for items. We
disagree. Because the statute plainly aims at providing market price
information useful to consumers, the three-month period is properly
construed as a “rolling” period, that is, one whose beginning and end changes
each day, thus requiring a daily recalculation of the prevailing market price
during the three-month period. (Cf. City of Brentwood v. Central Valley
Regional Water Quality Control Board (2004) 123 Cal.App.4th 714, 727-733

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 ii. Nonexclusive Goods
We turn to the as-applied challenge, insofar as it is directed at the sole
tenable theory of liability alleged in the complaints regarding nonexclusive
goods, namely, the theory that disregards the complaints’ erroneous legal
conclusion that each real party’s business operation constitutes the “market.”
That theory relies on the allegations that even if the “market” relating to
nonexclusive goods encompasses other retailers, real parties’ claimed former
prices do not coincide with the requisite market prices.
The theory in question thus differs from the Spann theory primarily
with respect to the market or markets in which the prevailing market prices
are to be determined. Under section 17501, as construed above (see
pt.D.3.b.i., ante), the market for each nonexclusive item advertised by a real
party consists of all the retailers selling the “advertised item” to the
consumers targeted by the real party’s advertisement. In those markets, the
real party’s actual price for a nonexclusive item will not establish the item’s
prevailing market price. (Spann, supra, 307 F.R.D. at p. 526 [ordinarily, “the
prevailing market price is not simply the retailer’s actual original price”].)
Regarding the nonexclusive goods, the complaints rely on the same
factual allegations regarding real parties’ advertising, but contend real
parties’ claimed former prices did not coincide with the requisite three-month
market prices because real parties’ actual prices were consistently below the
claimed former prices. Although on demurrer we are not bound by all factual
conclusions alleged in a complaint, the inference asserted here is, in fact,
reasonable because in competitive markets, the actual prices offered by
vendors selling the same item tend to converge on the market price. (Knapp
v. Art.com, Inc. (N.D.Cal. 2016) 2016 U.S. Dist. LEXIS 78128, *6 [plaintiff
adequately stated section 17501 claim on basis of similar factual allegations
supporting same inference]; see In re High Fructose Corn Syrup Antitrust
Litigation, supra, 295 F.3d at pp. 657-658 [when sellers of identical item
compete, no seller can generally set its own price above or below the market
price, absent special circumstances].) Accordingly, the factual allegation that
real parties’ advertised former prices were consistently higher than their

[concluding that statutory period was “rolling” because that interpretation
best effectuated legislative intent].)

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actual prices supports the inference that those advertised prices were not the
prevailing market prices during the requisite three-month period. The
complaints thus state a cognizable theory of liability under section 17501
with respect to the nonexclusive goods.
We must reject any as-applied challenge to the “nonexclusive goods”
theory on demurrer because it is premature, that is, it hinges on facts neither
pleaded in the complaints nor subject to judicial notice. (Tobe, supra, 9
Cal.4th at pp. 1083, 1088, 1092-1093.) Because the “nonexclusive goods”
theory differs from the Spann theory with respect to the pertinent markets --
and thus potentially the appropriate measure of prevailing market prices --
the key issues raised by the as-applied challenge attend the application of the
statutory terms “market” and “prevailing market price.” No facts regarding
the markets in which real parties sell nonexclusive goods have been pleaded
in the complaints or submitted for appropriate judicial notice. As explained
in Holder, real parties may not predicate their as-applied challenge on
hypothetical problems not tied to their concrete circumstances. (Holder,
supra, 561 U.S. at pp. 23-25.) Accordingly, as with real parties’ “free speech”
challenge, on the record before us their as-applied challenge fails.

DISPOSITION
Let a peremptory writ of mandate issue directing that respondent trial
court vacate its order sustaining real parties’ demurrer to the section 17501
claims without leave to amend, and enter a new order denying that
demurrer. Petitioner is awarded costs.

CERTIFIED FOR PUBLICATION.

MANELLA, P. J.

We concur:

WILLHITE, J. CURREY, J.

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