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Business

Zara's 'fraudulent' pricing practices caught on film in the #ZaraChallenge

By Vivian Hendriksz

Aug 30, 2016

London - In spite of allegations made against Zara, which accuse the Spanish fast-fashion chain of using a deceive pricing scheme in the United States to con shoppers out of billions of dollars, Inditex's leading brand continues to trade as normal. Zara USA has "vehemently" denied all allegations made in the 5 million US dollar Federal Class Action Complaint filed in California last week and in response law firm Geragos & Geragos has released two videos online which are said to depict Zara's fraudulent pricing conduct.

In the class action lawsuit, which was filed on August 19, Zara USA is accused of using deceptive pricing practices in the United States through two different means. The first is by pricing its items in euros, which is likely to confuse consumers, as when they go to the cash register the actual dollar amount is much higher than the conversion rate. However, the complaint claims that the item is sold for a substantially higher amount than the true converted amount, a practice known as "bait and switch." In addition, the lawsuit also accuses Zara USA of including huge mark up on price tags listed in US dollars, without informing shoppers. When a customer does ask why there is such a vast difference in the price listed in euros versus dollars, they are told it is based on a conversation at the time the item was made, which is false, claims the complaint.

Zara USA has denied all allegations made in the lawsuit, and a company spokesperson stressed the fashion retailer prides itself in its "fundamental commitment to transparency and honest, ethical conduct with our valued customers." However, in a video released on YouTube, a employee at a Zara store in Sherman Oaks, California, is seen explaining over the phone that they do not have an 'conversion device' for their prices. In the video, the assistant hints that the price may have been inputted incorrectly or the correct US dollar price tag fell off - but later on she adds that they are unable to check the price of all the items in the store and that they must sell the item at the US price in the system. The video was shot by Devin Rose, the plaintiff who brought the case to the attention of Mark Geragos.

Zara's deceptive pricing schemes caught on camera by Geragos & Geragos

"Since Zara continues to deny that it price gouges the American consumer by tagging it products in euros and charging outrageously inflated amounts in dollars at the register, we have provided Zara with some educational videos for it to take back to the boardroom," said Mark Geragos and Ben Meiselas of Geragos & Geragos in a statement. "Astonishingly, even after Zara denied its deceptive pricing practices last week, Zara doubled down on treating the American consumers as fools and continued the same pricing practices across its US stores."

The second video released by Geragos & Geragos shows a worker from the law firm visiting a Zara store in Los Angeles and comparing the prices of products listed in euros against the prices listed in US dollars in what they call the #ZaraChallenge. In the video one item of clothing is shown with a 29.95 euro price tag and a 49.90 US dollar price tag, which is 48 percent more or 16.28 US dollars more than the true conversion rate, according to the law firm. "We have issued the #ZaraChallenge as a rallying call for consumers to document Zara’s conduct and hold Zara accountable until it is willing to become a responsible corporate citizen, exercise transparency in pricing, and treat the American consumer with dignity and respect by repaying all of the money it has taken from its bait-and-switch scheme," concluded Geragos and Meiselas.

The #ZaraChallenge videos have received over 100,000 views in the last 12 hours and the law firm anticipates they will have over 1,000,000 views by the end of the week. Although Zara has yet to respond to the videos, Meiselas revealed to FashionUnited that the lawsuit has recieved a lot of support from another group of individuals. "The public has been overwhelmingly supportive of the class action and universally furious at Zara for its conduct," he said. "Most notably, customers are perplexed that a multibillion dollar clothing retailer such as Zara, prices most of their products with euro price tags in the United States only to apply arbitrary and grossly inflated conversion rates at the register."

"We have been flooded with several thousand inquiries each day to the law firm from former Zara customers across the country wanting to join the class action, most of whom are providing receipts and additional photographic and video evidence along the lines of what can be seen in the videos we released," Meiselas added. "Zara clearly made matters worse for itself with its previous denial. We are hopeful Zara will learn from its mistakes, take immediate corrective measures regarding its price tags in the US, and make things right with the consumer. Zara's survival as viable brand in the US is very much at stake."

Zara USA has yet to respond to FashionUnited's request for comments.

Photo 1: Zara, website
Photo 2 & 3: Still from #ZaraChallenge video. Geragos & Geragos