‘Sham Markdowns’: Zales Deceives Shoppers With False ‘Original’ Prices, Class Action Alleges

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A proposed class action claims that Zales has fraudulently listed on its website fictitious “original” prices next to a corresponding “phantom discount” to trick consumers into believing they are buying an item on sale.

The 26-page case says that the practice of using false reference prices creates an “artificial price disparity” that inflates a consumer’s perceived value of a particular product, which in turn induces them to buy the item and pay more for it than they otherwise would.

According to the complaint, although it is “well-established” that false reference prices violate federal law and state consumer protection statutes, the retailer has nevertheless listed fictitious “original” prices on its e-commerce websites, zales.com and zalesoutlet.com, in order to increase sales of engagement rings and other jewelry.

“This practice artificially inflates the true market price for these products by raising consumers’ internal reference price and in turn the value consumers ascribe to these products (i.e., demand),” the complaint states. “Consequently, this reference pricing schemes enable retailers, like Defendant, to sell products above their true market price and value—and consumers are left to pay the price.”

Per the suit, Zales is well aware that consumers value a good bargain and have little information, aside from a product’s price, on which to base their understanding of the item’s value.

“Thus, Defendant has a substantial financial interest in exploiting consumers’ well-known behavioral tendencies by inducing consumers into believing they are receiving a bargain—even when they are not,” the complaint argues.

According to the filing, the retailer does so by listing a false “original” price next to a corresponding sale price for products on its websites. Alternatively, Zales offers a “discount code” that auto-populates in a customer’s purchase transaction and purportedly takes 10 to 50 percent off the item’s price, the suit relays.

The lawsuit alleges, however, that products on Zales’ websites are never sold at the purported “original” prices that are listed. Per the case, the “original” price “merely serves as a false reference price Defendant uses as part of a larger scheme to deceptively manufacture false discounts to incentivize consumers to make purchases.”

The suit contends that under California law, retailers may only discount an item from its original price or a competitor’s original price for 90 days; on day 91, the seller must either return the item to its full price or disclose to customers the date on which it was last offered for sale at its original price, the lawsuit states. Moreover, when a seller lists a product for sale at a discount from its own original price, the item must have been sold at the advertised original price on a regular basis for “a commercially reasonable period of time,” the case relays.

According to the complaint, Zales does not list anywhere on its websites that the “original” prices are not the products’ former prices or the prices at which they were sold in the relevant market within the past 90 days. 

“The omission of these disclosures, coupled with Defendant’s use of fictitious advertised reference prices, renders Defendant’s pricing scheme inherently misleading,” the lawsuit says.

Per the suit, Zales’ “original” prices are essentially “sham markdowns” used to drive sales by deceiving customers into believing they are receiving certain jewelry at a steep discount.

The lawsuit looks to represent anyone in California who, within the applicable statutory period, purchased from zales.com or zalesoutlet.com one or more products at discounts from an advertised reference price and did not receive a refund or credit for their purchase.

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