The Telegraph (November 22, 2020) – Lawyers to quiz Boohoo executives over ‘fake discount’ claims
Retail Gazette (November 23, 2020) – Lawyers to question Boohoo execs over “fake discount” accusations
LOS ANGELES, November 17, 2020 – A federal judge rejected attempts by online retail giants Boohoo, PrettyLittleThing, and Nasty Gal to dismiss three separate class action lawsuits accusing them of misleading customers by advertising fake sales and false reference prices. The court found that the plaintiffs may proceed on their claims of fraud, unfair competition, and false advertising.
The court also denied the companies’ bid to get parent company Boohoo Group plc (LSE: BOO) dropped from the suit on jurisdictional grounds on the basis that there were enough facts presented at this stage tying the company to California. Boohoo denied doing business in California even though their website and LinkedIn pages tell the public that they “moved to LA” in 2017 and that they have their principal U.S. office in Los Angeles. Boohoo Group cleared $1 billion in revenue in 2019 and has a market capitalization in excess of £3 billion.
According to the lawsuits, the three companies engaged in deceptive pricing by running fake sales and fraudulent promotional campaigns on their websites. Specifically, Plaintiffs allege that the companies constantly use false original prices and sham sales to induce their customers into believing that they are receiving substantial bargains when, in reality, they have rarely (if ever) sold their products at the advertised original prices. As a result, consumers have been paying inflated prices, believing the merchandise was worth more than it actually is. These consumers, the Plaintiffs allege, would not have bought from the websites had they known the original prices were fake, or at the very least, would not have paid as much money as they did.
“Companies like Boohoo, Nasty Gal, and PrettyLittleThing should not be preying on the public with deceptive pricing schemes, especially during a pandemic when unprecedented numbers of consumers must rely on the ethics of online retailers. Customers in the U.S. deserve the truth and this federal ruling was a major step towards justice,” said Yasin M. Almadani, co-lead counsel for Plaintiffs.
This is only the latest news raising questions about the fashion conglomerate’s business practices. In July, an undercover investigation by The Times of London exposed allegations of worker exploitation, revealing that the Boohoo Group sources clothing from a sweatshop in Leicester with substandard working conditions that pay below minimum wage. And, in June, Boohoo faced a backlash from investors unhappy with a planned compensation package which would see its leadership team net a total of £150 million between them if the market capitalization of Boohoo reached £6 billion.
“Posting fake prices to falsely inflate the value of your merchandise just to make a few extra bucks is a violation of the law,” said Ahmed Ibrahim of AI Law, PLC, also co-lead counsel for Plaintiffs. “Boohoo, PrettyLittleThing, and Nasty Gal need to find a new business model where they shoot straight with their customers. As we’ve said all along, they should admit what they’ve been doing is wrong, issue refunds to the customers they have misled, and put a stop to the fake sales and false advertising.”
The lawsuits now move to the discovery phase where Plaintiffs’ counsel expect to take testimony of executives and high-ranking management employees. The lawsuits were brought on a nationwide basis by three California residents on behalf of likely over a million similarly situated persons who bought merchandise from the site. Each suit seeks in excess of $5 million in damages, but counsel believes collective damages could easily exceed $100 million.
The three lawsuits are Khan v. Boohoo.com USA, Inc. (No. 2:20-cv-03332), Hilton v. Prettylittlething.com USA, Inc. (No. 2:20-cv-04658), and Lee v. Nastygal.com USA Inc. (2:20-cv-04659). They are before the Honorable George H. Wu, United States District Judge for the Central District of California.
The Court’s Order is linked here.
About the Attorney for Plaintiffs
Yasin M. Almadani is the founding shareholder of Almadani Law, a Los Angeles law firm specializing in complex civil litigation, class actions, major frauds, civil rights, and government-facing investigations and lawsuits. Almadani is an experienced trial lawyer who served as an Assistant United States Attorney for nearly a decade in both the Central and the Eastern Districts of California. Before entering public service, he was in private practice, where he represented Fortune 500 companies in high-stakes, complex civil litigation. He may be contacted at [email protected].
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