vanity sizing
n. The practice of placing a smaller size label on a larger size garment.
vanity size v.

Example Citations:
Q Can you explain why I need a size 14 pattern when I usually buy size 10 in ready-made clothes?
- R.K., via e-mail

A The reason is that the ready-to-wear industry cheats and the pattern industry doesn't. The North American pattern brands all adhere to a sizing standard set many years ago, while in the women's apparel industry "vanity sizing" has become a huge selling tool. In general, the pricier the clothes, the smaller the sizes must read; sadly, this silliness is proven to sell clothes.
—"'Vanity sizing' makes you a 10," The Toronto Star, August 29, 2002

But the high-end designers are not eager for any of this. They have made money on vanity sizing, and that has led to today’s haphazard size labeling. (The exception to the high-end rule that smaller is better is, no surprise, in bra sizing. For more expensive bras, size labels tend to run big.)
—Patricia Wen, “ Size often an immeasurable problem,” The Boston Globe, December 23, 1998

Earliest Citation:
One of Evins’ customers, a large-boned Hollywood beauty, wears a very large shoe, yet she has Evins stamp a much smaller size on the bottom of the shoe, a practice the designer politely calls “vanity sizing.”
—Anne V. Hull, “Shoe styles of the rich & famous,” St. Petersburg Times, January 13, 1988

Notes:
This phenomenon is also called size inflation (1994):

"Companies that make rather expensive clothing are just making bigger and bigger clothes and putting smaller numbers on them," says Christina Lindholm, an associate professor of fashion design at the University of Cincinnati.

Size inflation has become especially common for pricier garb, she says, because it provides a flattering reason to pay more.
—David Jacobson, "Americans Keep on Getting Heavier," Chicago Sun-Times, October 2, 1994

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