Outlet Store Bargains May Be Cheaper Quality, Lawsuit Claims

Millions of shoppers will descend on outlet stores over the next few days to search for designer brand names at bargain prices. But are you really getting the high-end quality those fancy labels suggest?
In many cases, no, according to critics who told the I-Team's consumer investigator Randy Mac the public is often misled about the quality of the merchandise available for sale.
Though most shoppers think they've struck gold when they find a discounted or offseason item for sale at an outlet store, odds are good that item of clothing has never seen the inside of any other retail store.
Shoppers choose outlet malls for holiday shopping because stores often boast the names of the world's most famous designers.
"It's cheaper," one shopper told NBC4.
"I think I get a better deal," another shopper said.
One shopper noted stores often sell goods at close to half price.
But consumer attorney Hassan Zavareei said you shouldn't buy into the hype.
"People get very excited about the discounts they (think they) get," Zavareei said. "Don't believe the price tags."
Zavareei has filed lawsuits against seven major outlet retailers, accusing Michael Kors, Kenneth Cole, Nordstrom Rack, Columbia, Guess, Levi Strauss and Joseph A. Bank of fraud for displaying deceptive savings on their price tags.
He said some stores list a "Compare At" price that is not true - a price at which the item was never on sale.
"It's a total fabrication," he said.
The phrases "compare at" or "manufacturer's suggested retail price" often appear on these tags, followed by a lower price that suggests substantial savings for the consumer.
According to a letter sent by California Congresswoman Anna Eshoo to the Federal Trade Commission -- upward of 85 percent of designer merchandise sold by outlets is manufactured specifically for those stores -- and not by the designers whose names they bear.
"Is it deceptive advertising? Is it deceptive pricing?" Eshoo said. "That's why we asked the FTC to investigate."
"A lot of these designers make a deal with these off-price discount stores where they sell the name of their label and it's a license," said stylist Aly Scott, who worked for a fashion designer and as a celebrity stylist before founding her own company called Style Chic LA.
She told the I-Team top designers get as much as 20 percent of sales for licensing the use of their names to companies that then sell those clothes to outlet stores.
And it's often not the same product you think you recognize from the department stores.
"It's just getting produced somewhere different, cheaper quality, cheaper fabric," Scott said.
Scott said it's a big win for designers.
"They love it," she said. "They're not paying to do any of the nitty-gritty in terms of production or cost and the people unfortunately think, 'Oh I'm getting this amazing product and look at the discounted price. I'm getting a deal.'"
"Really, you're getting a cheaper product, a cheaper quality," she said.
The retailers named in the lawsuit have denied the allegations against them in court documents regarding "compare at" pricing. Most companies contacted by NBC4 declined to comment on pending litigation.
Nordstrom Rack admitted in court documents it manufactures products to be sold only at Nordstrom Rack, but told the I-Team its "items offered for sale at Nordstrom Rack with 'compare at' prices are not lesser-quality versions of original items."
Michael Kors initially denied the allegations and later settled, agreeing to pay $5 million, but without admitting any wrongdoing.
While the FTC has rejected Eshoo's request for an investigation into deceptive outlet pricing -- they take the matter seriously enough to post consumer tips about the issue. Among the FTC's suggestions:
•    Ask outlet employees whether the merchandise you're interested in was made for the outlet.
•    Be familiar with the normal retail prices of the items you want to buy.
•    Look for signs that suggest why the price of a piece may be lower, like thinner fabric or sparse stitching.

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