THE FASHION LAW EXCLUSIVE - Zara has been hit with a massive lawsuit alleging that it is engaged in the widespread practice of deceiving American consumers through a classic bait and switch scheme in connection with its pricing. The $5 million-plus proposed class action lawsuit, which was filed by Devin Rose in the United States District Court for the Central District of California, a federal court in Los Angeles, alleges that Rose (and other Zara shoppers) “has been damaged in that Zara’s deceptive pricing practices caused him to overpay for the garments he purchased.”
According to Rose’s complaint, which sets forth claims of negligence, unfair business practices, unjust enrichment, and fraud, Zara “has been engaged in fraudulent pricing practices across the United States. On average, consumers are being charged $5 to $50 more than the lowest tag price in euros. In the aggregate, the shopping experiences of ordinary consumers like Mr. Rose, have resulted in Defendant Zara being unjustly enriched to the tune of billions of dollars.”
Rose alleges that “behind its façade of attainable elegance, Zara is engaged in a widespread practice of deceiving American consumers through a classic bait and switch.” Specifically, the complaint states that “an investigation into Zara’s unlawful pricing practices demonstrates that Zara perpetrates its deception in two ways.”
a. Clothing Tagged Only in Euros (“Bait-and- Switch Pricing”): Many of Zara’s products are tagged only with a euro price. This alone is confusing to many consumers and lures them to the register. Compounding matters, not only is the same product sold for a substantially higher amount in dollars, but the product is always sold well in excess of the true converted amount if the euro price on the tag were properly converted to dollars.
Rose’s complaint elaborates, noting: Zara marks the price tags on many of its products with only a euro price. Since the euro is a larger unit of currency than the American dollar, these euro prices lead shoppers in the United States to believe that Zara’s products are less expensive than they actually are. Thus, Zara customers are lured in by the brand’s seemingly low prices, and it is only upon bringing the items they intend to purchase to the register that these customers discover their true costs. To make matters worse, however, the prices that consumers are ultimately quoted — prices that are only revealed when the items have been already been scanned and the consumer is asked for payment — are not accurate American dollar equivalents to the euro prices on the tags, but rather arbitrarily inflated amounts that are substantially higher.
b. Euro Price Covered with Dollar Sticker (“Cover Up Pricing”): In those instances where Zara includes a price in dollars, the dollar amount is almost always applied in the form a pricing label affixed over the euro price actually printed on the tag. In this context, the dollar amount similarly is far in excess of the true converted amount if the euro price printed on the tag were properly converted to dollars.
Rose specifically filed suit after purchasing three Zara shirts from a Sherman Oaks, California Zara retail store on May 17, 2016. He claims that at the time that he made his purchases, "the actual euro-dollar exchange rate would have resulted in his €9.95 shirts costing approximately $11.26 each. Instead, however, Zara charged Mr. Rose $17.90 per garment, a markup of nearly 60%.” In connection therewith, Rose claims that as a result of the aforementioned pricing practices, “millions of consumers who have purchased clothing at Zara stores have been gulled into paying prices well in excess of the tag prices.” Moreover, the suit claims that “in both cases, Zara violates State and Federal law by luring consumers to the register with perceived lower prices using a foreign currency and surreptitiously imposing an arbitrary markup without making an appropriate, or any, disclosure to the consumer.”
While the complaint states that “it is obvious that prices for goods will differ when expressed in different international currencies, companies that make a legitimate conversion can do so at the time that the original price is assigned, and then place the differing international prices side by side as shown below. This is not Zara’s practice.”
Speaking exclusively to TFL, one of Rose’s attorneys, Ben Meiselas of Los Angeles-based firm, Geragos & Geragos, said: "We are hopeful this class action will compel Zara to stop its unlawful pricing practices of charging substantially in excess of the tagged prices on its clothes which, on average has caused consumers to pay $5 to $50 more per item, and billions of dollars in the aggregate."
Note: If Rose's proposed class action lawsuit is certified by the court, “similarly situated” individuals (aka individuals who made purchases from Zara in the U.S. around the time Rose did) will be able to join in case at hand against the fast fashion giant and share in the settlement amount. In order for a proposed class action lawsuit – one that gathers many individual claims together into a single lawsuit – to be certified, the named plaintiffs must show that all of the potential class members have claims that raise common legal and factual issues, making it most efficient to deal with all of the claims together. In short: all of the plaintiffs must be “similarly-situated.”
UPDATE (8/22/16): In a statement made to TFL by a spokesperson for Zara USA, "Zara USA vehemently denies any allegations that the company engages in deceptive pricing practices in the United States. While we have not yet been served the complaint containing these baseless claims, we pride ourselves in our fundamental commitment to transparency and honest, ethical conduct with our valued customers. We remain focused on providing excellent customer service and high-quality fashion products at great value for our customers. We look forward to presenting our full defense in due course through the legal process."
UPDATE (8/23/16): According to another statement from Rose's counsel: "Zara's response so far has been beyond bizarre and desperate. Their unlawful conduct is not up for debate, as anyone who goes into a Zara store in the United States can see with their own two eyes that Zara is pricing clothing in euros and charging consumers drastically above the lowest tag price in dollars which is illegal. U.S. laws require that a retailer charge the consumer the lowest tag price - not grossly inflated amounts using fake conversion rates. If Zara wants to double down on its duplicity, instead of acting like a responsible corporate citizen and fixing the mess of its own making, they should be prepared to face the wrath of the American consumer and the full force of the law."