A new LuLaRoe Class Action lawsuit filed by four former consultants claims the multi-level marketing company misled its sale people with what LulaRoe plaintiffs are calling a “pyramid scheme.”
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The class action lawsuit, which alleges that LuLaRoe is a Pyramid Scheme, was filed on October 13 in the US District Court for the Central District of California. In the suit, LuLaRoe is accused of six counts of misconduct, including unfair business practices, misleading advertising, breach of the covenant of good faith and fair dealing and breach of contract.
Direct-sales clothing brand LuLaRoe sells clothes such as women’s dresses, maxi skirts, pencil skirts, a-line skirts, sheath dresses, and they are “all simply comfortable” – according to the company. LuLaRoe can be purchased only through consultants at in-home parties, on social media or on their websites. There are no LuLaRoe stores, and their company website doesn’t offer clothes for sale. LuLaRoe consultants do not get to choose which items to will sell; the inventory is assigned by the company. In a Network Marketing type model, consultants who recruit new consultants and sell a sufficient amount of inventory are eligible to be promoted to a sponsor, trainer, coach, or mentor role, and they receive higher bonuses. The plaintiffs in the class-action suit describe this structure as a “pyramid scheme.”
INVESTMENT: LuLaRoe Consultants are required to invest $5,000 – $8,000 to start their LuLaRoe business, a huge contrast to most other direct-sales businesses. For example, Pampered Chef, Mary Kay and Tupperware will run you close to $100, while Avon costs just $15 to start. Often, product is included in the start-up kit which offsets cost.
100% REFUND GUARANTEE: Despite the large startup investment, LuLaRoe had a refund policy which made joining up more comfortable. Consultants were able to return unsold inventory for a full refund, which was a safety-net that guaranteed consultants would not lose money.
The LuLaRoe Class Action Lawsuit alleges that LuLaRoe lured consultants into signing up with “bait…”
As bait to lure consultants to sign up and/or to purchase more inventory, in April 2017, LuLaRoe promised consultants they could cancel their agreements with LuLaRoe and be refunded 100% of the wholesale amount of inventory purchased, including shipping charges. The 100% refund had no conditions or exceptions attached. To further induce consultants, LuLaRoe uniformly promised that the 100% buyback policy would never expire:Today, we would like to provide clarity regarding the 100% Buy Back on Inventory policy. This policy does not have an expiration date, nor does it have a required timeframe in which the product should have been purchased in. source LuLaroe
100% REFUND ENDS: However, in September, LuLaRoe posted on its website that it had lowered the promised refund from 100% to 90%, with additional restrictions.
On September 18, 2017, LuLaRoe e-mailed Ms. Lemberg and advised her that she would not be receiving a 100% refund, at best she would get 90%, and LuLaRoe would not pay for shipping. In addition, LuLaRoe now would only accept returns of certain clothing, purchased at certain times, and from LuLaRoe in a certain manner. source LuLaRoe Class Action Lawsuit
LuLaRoe is one of the fastest growing apparel brands in the U.S. Founded in Corona, California in 2013 by working mom DeAnne Stidham and her husband Mark Stidham. LuLaRoe’s comfortable, affordable and stylish clothing is sold by more than 80,000 Independent Fashion Retailers in unique, exciting in-person and online pop-up boutiques. LuLaRoe’s varied styles and patterns make the brand attractive to all types of consumers, whether they’re looking for the perfect style to transition from work to a night out, a way to dress up their every-day leisure look, or are on the hunt for their unicorn leggings. Pieces are designed to mix, match and layer. For more information visit www.lularoe.com.