03 May 2023 , 16:40
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Online fashion giant Boohoo has agreed to pay a whopping $197 million to settle a case alleging they advertised using fake discounts on their sites.
Prices on PrettyLittleThing, NastyGal and boohooMAN had been artificially inflated a class action lawsuit in the US claimed. The court filing claimed that the brands wouldn't actually have sold the clothing at the original price on its US website and shoppers seeing discounted prices would believe they were getting a great deal.
A class action lawsuit was filed against the company in May 2020, which claimed that Boohoo brands advertised "fake and inflated comparison reference prices to deceive customers into a false belief that the sale price is a deeply discounted bargain price."
It was claimed that there had been promotions offering '50 per cent off everything'' or a similar discount appearing regularly on the website.
So these sale prices were, in fact, not sale prices at all. It has been reported that the settlement was reached "without admission of liability" - though Boohoo apparently asked the court to dismiss the case, arguing that customers had received what they paid for.
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BoohooMAN, PrettyLittleThing and NastyGal were all involved (SIPA USA/PA Images)However, the court disagreed and ruled the customers adequately alleged they wouldn't have bought the items if they knew there wasn't an actual discount. Because of this failed bid to dismiss, it's reported that the original settlement value increased dramatically.
It's thought that around 9.4 million people in the US will be eligible for payouts in the form of gift cards and free shipping as a result of the false advertising. It's also understood that as part of the settlement, the company now faces a requirement for the websites PrettyLittleThing, NastyGal and boohooMAN to post disclaimers.
These disclaimers are said to say that the prices listed as reference prices are not based on former prices for the products. They are instead based on the group's opinion on what the full retail value of the item should be.
Half-year results from Boohoo to August 2022, show the company has set aside a huge £17.1 million in order to pay for the outcome of the case. The figure is thought to be enough to cover the expected redemption rates on the vouchers.
It's believed those impacted would be given a $10 gift card, plus free shipping, amounting to $17.45 per gift card. The gift cards are valid at any time, with no restrictions on transfer or combining gift cards and can be used on any of the three listed sites - PrettyLittleThing, NastyGal or boohooMAN.
Despite reaching a $197 million settlement, it's thought Boohoo does not expect to have to pay the full amount to claimants. In September, Boohoo, boohooMAN, PrettyLittleThing and NastyGal all came to a small, £4.75m settlement agreement to resolve an almost identical class action lawsuit in California.