Luxury consignment shop company accused of cheating jewelry buyers

The RealReal, an operator of high-end consignment shops, is facing a federal lawsuit that accuses it of "systematically inflating" the weights of diamonds and other precious gems it sold to consumers.

According to a 32-page Dec. 5 California court filing, plaintiff Gaby Basmadjian, a resident of Novi, Michigan, purchased a diamond ring from TheRealReal.com for $982.62 on Aug. 20, 2017, that was advertised as containing 2.10 carats of diamonds. After receiving the item, she became suspicious and hired a gemologist, who found that the ring had 1.2 carats of diamonds. 

Federal Trade Commission regulations require that a diamond's stated weight be within 1/200th of a carat, meaning the ring should have been between 2.0955 to 2.1055 carats.   

"There is no indication on the description that the carat weight was approximated," the court filing said. "[The] defendant held themselves out as experts in the field of gemology and it was [the] defendant who examined the subject ring and determined its characteristics and selling price."

Like other sellers of fine jewelry, The RealReal bases its prices on the type and weight of its gemstones. The lawsuit, which is seeking class-action status, hopes to recover the difference between the price consumers paid for their jewelry and what the pieces should have cost with the correct gemstone weight. It seeks to represent consumers who bought jewelry from The RealReal from 2013 to the present with gemstones whose weight was misrepresented.

The RealReal denies any wrongdoing.

"The lawsuit is without merit and The RealReal will aggressively defend itself against these baseless claims," the company said in a statement. "We have no further comment on the lawsuit and we look forward to prevailing in court."

The RealReal is different than most concession shops because it authenticates and takes possession of all the merchandise it sells. Customers can make appointments with one of TheRealReal's six "luxury consignment" offices to have their possessions valued for free. Earlier this year, the six-year-old company received $50 million in funding from private equity firm Grant Hill partners, bringing its total funding to $173 million. 

Chief Executive Julie Wainwright recently told TechCrunch the company was on track to sell $500 million worth of merchandise this year. It also has plans for an initial public offering, though it has no timetable.

San Francisco-based The RealReal recently opened its first brick-and-mortar store in New York City's trendy Soho neighborhood, featuring a 35-foot wall with 13 hidden closets filled with women's fashions. Shoppers are also greeted by a wall of Hermès Birkin bags on the upper level and a display of rare sneakers on the ground floor that changes daily. The store also has a menswear department, a library and a cafe.

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