Contract analysis

I. Executive Summary Calderwood & Harkness LLP ("C&H" or the "Firm") was formally retained by Cascade Retail Holdings Inc. ("CRH" or "Cascade") on April 9, 2024, to represent CRH in connection with a consumer-protection inquiry initiated by the Washington State Attorney General's Office ("AG" or "AG's Office"), Consumer Protection Division. This memorandum sets forth our initial assessment of the matter, including th

II. Background A. The Civil Investigative Demand On March 26, 2024, the Consumer Protection Division of the Washington State Attorney General's Office issued a Civil Investigative Demand to Cascade Retail Holdings Inc. under the statutory authority of RCW 19.86.110. The CID is directed to CRH as a corporate entity and was served on CRH's registered agent for service of process in the State of Washington. The AG perso

III. Scope and Analysis of the CID A. Document Requests (23 Requests) The CID contains 23 separate document requests, which we have grouped thematically below for purposes of analysis. The requests are broad in scope, spanning CRH's pricing policies, the Smart Price program, consumer-facing materials, complaint records, financial and transactional data, internal communications, third-party consultant materials, and b

1. Pricing Policies and Procedures (Requests 1–4) Requests 1 through 4 seek all internal policies, standard operating procedures, training materials, and written guidelines governing the setting of "original," "compare-at," "was," and "list" prices for products sold on cascaderetail.com and in CRH's retail store locations. These requests encompass both the current policies in effect and any prior versions of such pol

2. Smart Price Program Materials (Requests 5–9) Requests 5 through 9 target the Smart Price program specifically. They seek all documents related to the conception, development, internal approval, launch, and ongoing operation of the Smart Price promotional program. This includes, but is not limited to: • Business cases, proposals, and internal presentations prepared in connection with the development or approval of

3. Consumer-Facing Advertising and Signage (Requests 10–12) Requests 10 through 12 seek samples of consumer-facing materials displaying reference prices. Specifically, the requests seek: • Representative samples of online product detail pages from cascaderetail.com displaying "compare-at," "original," or "was/now" pricing for products in the six identified product categories during the period October 15, 2023 through

4. Consumer Complaints and Responses (Requests 13–14) Requests 13 and 14 seek all internal records of consumer complaints regarding pricing or reference pricing, including complaints received through CRH's customer-service channels (phone, email, online chat, and social media), as well as CRH's responses to such complaints. The requests also seek any internal summaries, analyses, or reports regarding consumer complai

5. Financial and Transactional Data (Requests 15–18) Requests 15 through 18 seek point-of-sale data, pricing histories, and transactional records for SKUs in the six identified product categories. Specifically, the AG seeks: • Historical pricing data for each SKU in the six categories sufficient to establish the actual prices at which each product was offered for sale — both online and in-store — during the period Ja

6. Internal Communications (Requests 19–20) Requests 19 and 20 seek internal communications — including emails, memoranda, instant messages, and chat messages — among CRH personnel regarding reference-price setting, the Smart Price program, and any concerns about pricing accuracy. Request 19 specifically identifies the following custodians: • Raymond Soo, Vice President, Marketing & Pricing Strategy; • Members of the

7. Third-Party Consultant Materials (Requests 21–22) Request 21 seeks all reports, analyses, deliverables, and work product from Praxton Analytics LLC relating to the algorithmic reference-price model, including the model's technical documentation, validation reports, and any recommendations made by Praxton regarding the model's design or implementation. Request 22 broadens the scope to include materials from any oth

8. Board and Management Materials (Request 23) Request 23 seeks board presentations, executive committee materials, audit committee materials, and compliance reports referencing reference-pricing practices, the Smart Price program, or consumer complaints regarding pricing. This request is relevant to the AG's assessment of whether CRH's senior leadership was aware of potential issues with the Smart Price program and

IV. Legal Framework A. Washington Consumer Protection Act — RCW 19.86 *et seq.* The Washington Consumer Protection Act ("CPA"), codified at RCW 19.86 et seq., is the primary statutory authority under which the AG's investigation is proceeding. The CPA is a broad consumer-protection statute modeled on the Federal Trade Commission Act and is construed liberally to effectuate its purpose of protecting the public from un

V. The AG's Preliminary Findings A. Sample Analysis The AG's Office, through Investigator Sandra Pietsch, conducted a preliminary analysis of CRH's reference-pricing practices during the period January 1, 2024 through March 15, 2024. The analysis examined a sample of 2,340 SKUs across the six product categories identified as the focus of the investigation. The sample was drawn from product listings on cascaderetail.c

6. Consumer electronics accessories These categories were likely selected by the AG's Office for several reasons. First, they are categories in which "compare-at" reference pricing is commonly and prominently used in CRH's marketing — these are product categories where the display of a purported discount is a significant driver of consumer purchasing decisions. Second, the consumer complaints filed with the AG's Offi

VI. Preliminary Risk Assessment A. Liability Exposure Based on our initial review of the AG's CID, the consumer complaints, and the AG's preliminary findings, we assess CRH's liability exposure as significant. Several factors contribute to this assessment. Strength of the AG's case. The AG's preliminary sample findings are substantial. A 68.4% rate of inflated reference prices across a sample of 2,340 SKUs is a high