If a designer discount seems too good to be true, it probably is.
Michael Kors Holdings Ltd. has agreed to pay consumers $4.88 million to settle a class-action lawsuit claiming the company used misleading labels and price tags at its outlet stores to trick shoppers into thinking they had bagged a bargain.
The proposed settlement—it still requires court approval—was filed in a Manhattan federal court on Friday and applies to shoppers who bought products from Michael Kors outlets between July 25, 2010 and July 25, 2014.
The settlement is in response to a suit filed last July by Tressa Gattinella and Kristin Lengyel accusing Michael Kors of marking made-for-outlet items as deeply discounted despite never being for sale at full-price stores. Court documents alleged the “manufacturer’s suggested retail prices,” or “MSRP,” are made up and fool shoppers into “believing they are purchasing products that were formerly sold or offered at a higher price at main-line retail stores and are now significantly cheaper at the outlet stores.”
The company has denied any wrongdoing in agreeing to settle but said it will replace “MSRP” with “Value” on the price tags of goods sold in outlet stores and will display signage defining what those amounts mean.