The Better Business Bureau has updated the business profile for online retailer LuLaRoe after the State of Washington Attorney General’s offices filed a lawsuit against the multi-level marketing business.
The lawsuit alleges that the company’s former business structure constituted a pyramid scheme. The lawsuit also asserts that LuLaRoe’s claims regarding sustainability, profitability, and inventory refunds are unfair and deceptive.
LuLaRoe is a California based marketing business that sells leggings and other apparel. The company is made up of individual retailers who sell the company’s clothing, referred to as “Independent Fashion Consultants”.
If the court rules that LuLaRoe violated the law, Attorney General Bob Ferguson will seek the maximum penalties of $2,000 per violation, as well as costs, fees, and other relief. The State of Washington Attorney General’s office also will seek restitution for affected Washington consumers, but the total amount of restitution the AG office will seek is still undetermined. The lawsuit filed can be found here.
Since January 2016, BBB has processed 414 complaints having an estimated disputed amount of $2,177,633. The majority of the complaints received by the BBB were closed as unanswered or unresolved. LuLaRoe recently reached out to BBB to clean up their “F” rating for unanswered and unresolved complaints. The BBB has also been reporting a pattern of complaints since 2016, which the company has not responded. BBB’s Business Profile on LuLaRoe can be found here.
BBB has reports of four complaints filed by consumers living in the state of Alabama since January 2016. Complaints range from service issues, guarantees/warranty issues, billing/collection issues to refund/exchange issues.
When considering joining the direct selling industry, the Direct Selling Association offers the following list of requirements to verify the legitimacy of the company. The company must:
- “Provide accurate information about the company, its products and what one can expect as a seller of the company’s products and services.
- Charge a nominal fee for a starter kit – the median cost for the start-up kit is $99 and usually includes items such as samples, catalogs, order forms and other tools that help the seller begin selling.
- Base compensation primarily on the sale of products and services to the ultimate user. Compensation can be generated from either your own sales or the sales of others you have recruited.”
Source: BBB.org and Direct Selling Association