EXCLUSIVE: Zara - the fashion retailer favored by Kim Kardashian and Kate Middleton - accused of duping customers out of billions in a massive bait and switch pricing scam in class action lawsuit

Clothing company Zara has been accused of duping millions of American consumers in a massive pricing scam, according to a $5million class action lawsuit obtained exclusively by Daily Mail Online.

The suit alleges that the Spanish retail giant 'deceived' US consumers through classic 'bait-and-switch' pricing that leads to people paying 'well in excess' of the tag amount.

It states that the 'fraudulent' pricing practices have been used across the US, enriching Zara - a favorite of Kim Kardashian and Kate Middleton - to a tune of billions of dollars.

A $5million class action lawsuit against clothing company Zara accuses the retail giant of 'deceiving' US consumers. The retail giant is a favorite of Kim Kardashian (pictured above in 2009 carrying a bag from the store)

Singer Selena Gomez (left in 2008) and actress Penelope Cruz (right in 2011) appear to be avid Zara shoppers. A lawsuit against the store states that the 'fraudulent' pricing practices have been used across the US, enriching Zara to a tune of billions of dollars

The suit was brought by high profile Los Angeles lawyer Mark Geragos whose firm carried out an investigation into Zara's 'unlawful' pricing practices and says the clothing firm perpetuates the 'deception' in two ways.

According to the suit, Zara USA Inc tags clothing only in Euros, which is itself confusing to many consumers, and lures them to the register.

But to make matters worse, the suit claims, not only is the same product sold for a substantially higher amount in dollars, but the product is always sold well in excess of the true converted amount, if it were to be converted using that day's foreign currency rates.

This dodgy practice is known as 'bait-and-switch' in the fashion industry.

The second 'deception', according to the suit, is the practice of 'cover-up pricing' - where the Euro price is covered with a dollar sticker.

In those instances, the suit claims, the dollar amount is almost always applied in the form of a pricing label stuck over the euro price printed on the tag. 

Kate Middleton (wearing a Zara dress) is also a fan of the retail giant, which is accused of 'bait-and-switch' practices and 'cover-up-pricing' in the suit

Kate Middleton (right, wearing Zara pants, with the Duke of Cambridge) and her sister  Pippa (left, wearing a Zara dress) have been seen on several outings wearing the retail brand

The suit claims the dollar amount is way above the true converted amount if the euro price were properly converted to dollars.

According to the 26-page suit, Zara is violating State and Federal law by luring consumers to the register by using these confusing foreign currency tactics and then duping them into thinking they are paying less.

In fact, Zara is slapping a huge markup on the price without telling the consumer, the suit claims.

The suit states: 'Zara's practice of assuring consumers that the discrepancy between the tag price in euros (€), and the dollar ($) price at the register is merely the result of an appropriate application of the conversion rate from euros to dollars.

'In fact, the conversion rate is entirely misapplied - to the extent it is even applied at all - such that U.S. consumers are paying far more than the true prices of the products.'

The legal documents go on to allege that Zara has also 'perpetuated a corporate policy of misinforming consumers' who do ask why the cost of clothing they bought is more than the tag price. 

January Jones (left) and Katie Holmes are Zara shoppers. There are 71 Zara stores in the US

Cat Deeley (left, wearing Zara sandles) and Diane Kruger (right, wearing a Zara skirt) have been known to shop at the store, which has locations worldwide

According to the suit, Zara USA Inc tags clothing only in Euros, which is itself confusing to many consumers, and lures them to the register. Pictured above, a Zara storefront in Toronto

Zara customers are told that the markup is based on a conversion rate at the time the clothing was manufactured - which is false, the suit claims.

The suit was filed in California by law firm Geragos & Geragos on behalf of a man called Devin Rose and potentially millions of other customers against Zara USA Inc.

Zara, which began in 1975, is a leading global fashion brand with more than 2,100 stores in 88 countries.

The firm markets it's clothing as high end fashion at affordable prices and is hugely popular with A-list celebrities including Kim Kardashian, Katie Holmes and the Duchess of Cambridge.

The suit uses Devin Rose as an example in detailing the alleged mass deception.

Rose purchased three shirts from a Zara retail store in Sherman Oaks, California, on May 17 this year.

The suit states that Rose was drawn in by the low cost of the shirts, each displaying a price of just '€9.95' on its tag.

But Rose paid for the shirts he discovered, to his dismay, that he had actually been charged $17.90 for each one. 

In some instances, the suit claims, the Euro price is covered with a dollar sticker on the price tag. But the suit claims products are sold well in excess of the true converted amount, if it were to be converted using that day's foreign currency rates

The suit uses Devin Rose as an example, who purchased three shirts from a Zara retail store on May 17 this year. The suit states that Rose was drawn in by the low cost of the shirts, each displaying a price of just '€9.95' on its tag. But Rose was charged $17.90 for each one

He immediately questioned the cashier about this and was told that the price difference was due to the conversion rate between euros and dollars.

At the same time another customer also raised the same issue and was given the same explanation.

The suit states that at the time Rose bought the shirts, the actual euro-dollar exchange rate would have meant his €9.95 shirts would have cost around $11.26 each.

Instead, Zara charged him $17.90 per garment - a markup of nearly 60 per cent.

The suit added: 'Upon further investigation, Zara has been engaged in such fraudulent pricing practices across the United States.

'On average, consumers are being charged $5 to $50 more than the lowest tag price in euros. 'In the aggregate, the shopping experiences of ordinary consumers like Mr. Rose, have resulted in Defendant Zara being unjustly enriched to the tune of billions of dollars.'

Rose, the suit says, has brought the class action to force Zara to be a 'transparent and responsible' corporate citizen by 'ceasing its practice of defrauding customers and making whole those consumers who have been victims of its deceptive practices'.

It's not the first time Zara has found itself in legal hot water.

The lawsuit mentions that the clothing brand is 'purchased and worn by numerous high profile celebrities', and features photos of Middleton and Kardation

According to Refinery29, the Spanish retailer settled a $1.6million class-action lawsuit for violating the Fair Credit Reporting Act in November last year.

Receipts printed between December 17, 2014 and April 27, 2015 had the first six digits of shoppers' credit card numbers on them when only the last four digits are allowed by law to be included.

Zara agreed to pay out customers up to $100 for each transaction. 

The lawsuit was filed Friday in California Federal Court, Central District. 

Ben Meiselas, the other lead attorney with Mark Geragos, told Daily Mail Online: 'We are hopeful this class action will compel Zara to stop its unlawful pricing practices of charging substantially in excess of the tagged prices on its clothes which, on average has caused American consumers to pay $5 to $50 more per item, and billions of dollars in the aggregate.' 

While a spokesperson for Zara USA said: 'Zara USA vehemently denies any allegations that the company engages in deceptive pricing practices in the United States. 

'While we have not yet been served the complaint containing these baseless claims, we pride ourselves in our fundamental commitment to transparency and honest, ethical conduct with our valued customers. 

'We remain focused on providing excellent customer service and high-quality fashion products at great value for our customers. We look forward to presenting our full defense in due course through the legal process.'

Zara's 'fast fashion' business model has helped to make it one of the world's biggest clothing brands, with owner Inditex focusing on large, flagship stores and its online operation in recent years.

The group currently has 71 Zara stores in the United States.

Zara customers are told that the markup is based on a conversion rate at the time the clothing was manufactured - which is false, the suit claims