Michael Kors recently agreed to a settlement in the lawsuit brought against the company last July over deceptive pricing techniques. Tressa Gattinella claimed in her lawsuit that Michael Kors engaged in deceptive pricing practices in regards to the products sold in its outlet stores. In particular, Gattinella claimed that the brand created the illusion of a discount where there actually was none.
For example, she purchased a pair of jeans that had a price tag stating that the MSRP (Manufacturer Suggested Retail Price) was $120 but that the jeans were being sold for the low price of $79.99, leading Gattinella to believe that she was saving money. However, because the brand produces products specifically for its discount stores, by signifying a “discount” price, the brand is misleading its customers into thinking that they are purchasing products at a discount when in actuality they are not.
Michael Kors has agreed to settle this lawsuit for $4.9 million. In addition, the brand has agreed to change the way it labels its price tags, include in-store displays explaining its pricing techniques, and to remove MSRP from its price tags and instead include a “value” designation of what the product is normally valued at.
This sort of lawsuit is one of the trends identified in the Corporate Governance Report by Bloomberg Bureau of National Affairs. The report discusses how many retailers and brands, including Neiman Marcus and Nordstrom, are being sued for similar practices regarding the pricing of their products in their outlet stores.
This is the first of the several lawsuits that will be concluding this year, and it will be interesting to see if the other cases will follow suit and settle or if they will fight in court.