Fashion Nova Pays FTC $9.3M for Illegal Gift Cards, Slow Delivery

Rachel Uranga

Rachel Uranga is dot.LA's Managing Editor, News. She is a former Mexico-based market correspondent at Reuters and has worked for several Southern California news outlets, including the Los Angeles Business Journal and the Los Angeles Daily News. She has covered everything from IPOs to immigration. Uranga is a graduate of the Columbia School of Journalism and California State University Northridge. A Los Angeles native, she lives with her husband, son and their felines.

Fashion Nova Pays FTC $9.3M for Illegal Gift Cards, Slow Delivery

Fast-fashion retailer Fashion Nova will pay $9.3 million to settle Federal Trade Commission charges that it told customers to "Expect Your Items Quick!" yet repeatedly failed to ship orders on time and then illegally denied them cash refunds.

The case against the company that counts Kylie Jenner and Cardi B. among its partners marks the largest settlement the commission has received in a mail order rule case and sends a signal to other direct-to-consumer companies, said FTC attorney Ken Abbe.


"It's an important company and its sales are very high. This number reflects a fair amount of compensation that we can give to consumers based on the injury they suffered," he said.

The 1970s-era rule requires companies fulfilling orders to notify customers if there are shipping delays and offer them the right to cancel with a full refund.

One of Los Angeles' fastest growing e-commerce platforms, Fashion Nova built its empire working with social media influencers who tout the company's cheap denim, plunging necklines and skintight attire on their feeds. Founded in 2006 by Richard Saghian, the company blames the violations on its explosive growth in 2017 and said it fixed them two years ago when the FTC brought it to their attention.

Fast-fashion retailer Fashion Nova counts rapper Cardi B. among its partners.

Image Courtesy of Wikimedia.org

"These issues stemmed from exponential growth in 2017 which taxed our warehouse and IT systems," spokeswoman Jennifer Walker stated in an email. "We are proud of who we are and where we are going and are pleased to be putting this matter behind us so that we can continue to focus on our customers."

FTC lawyers said the problems continued up until this year.

In a complaint filed on Monday, the federal agency said the retailer would regularly take orders from customers for items that were out of stock and send them different pieces that were the wrong size, damaged or used. Often when the company failed to deliver an item, the FTC alleges that Fashion Nova illegally refused a cash refund and offered a gift card instead. In other cases, there were long delays, no warning and no opportunity to cancel the order.

Fashion Nova will refund $2.26 million directly to consumers that were given gift cards that haven't been used. The rest of the money will be sent to the FTC to refund consumers that experienced delays and other problems. The settlement provides redress for the damage done to customers over several years, Abbe said, although he could not say exactly how many that included.

"It was a fair number of consumers. I don't want to say that it was the majority of Fashion Nova's customers, but if you've got hundreds of millions of sales, even if it's a relatively small percentage of people, that's still millions of orders where people didn't get they needed," he said.

The fashion giant has undercut brick-and-mortar retailers like Forever 21 by highlighting curvy women in tight clothes. It has more than 18 million followers on Instagram where it encourages users to post pictures of themselves with its clothes along with the hashtag #novababe. It was the most googled brand in 2018.

The private company doesn't release revenue figures, but Abbe said Fashion Nova does hundreds of millions of dollars in sales. "The company is big and getting bigger," he said.

This is not the first time Fashion Nova has been in the crosshairs of federal regulators. Last year, a New York Times investigation found through internal federal documents the company owed $3.8 million in back wages to hundreds of workers for a period between 2016 and 2019.

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LA Tech ‘Moves’: LeaseLock, Visgenx, PlayVS and Pressed Juicery Gains New CEOs

Decerry Donato

Decerry Donato is a reporter at dot.LA. Prior to that, she was an editorial fellow at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

LA Tech ‘Moves’: LeaseLock, Visgenx, PlayVS and Pressed Juicery Gains New CEOs
LA Tech ‘Moves’:

“Moves,” our roundup of job changes in L.A. tech, is presented by Interchange.LA, dot.LA's recruiting and career platform connecting Southern California's most exciting companies with top tech talent. Create a free Interchange.LA profile here—and if you're looking for ways to supercharge your recruiting efforts, find out more about Interchange.LA's white-glove recruiting service by emailing Sharmineh O’Farrill Lewis (sharmineh@dot.la). Please send job changes and personnel moves to moves@dot.la.

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LeaseLock, a lease insurance and financial technology provider for the rental housing industry named Janine Steiner Jovanovic as chief executive officer. Prior to this role, Steiner Jovanovic served as the former EVP of Asset Optimization at RealPage.

Esports platform PlayVS hired EverFi co-founder and seasoned business leader Jon Chapman as the company’s chief executive officer.

Biotechnology company Visgenx appointed William Pedranti, J.D. as chief executive officer. Before joining, Mr. Pedranti was a partner with PENG Life Science Ventures.

Pressed Juicery, the leading cold-pressed juice and functional wellness brand welcomed Justin Nedelman as chief executive officer. His prior roles include chief real estate officer of FAT Brands Inc. and co-founder of Eureka! Restaurant Group.

Michael G. Vicari joined liquid biopsy company Nucleix as chief commercial officer. Vicari served as senior vice president of Sales at GRAIL, Inc.

Full-service performance marketing agency Allied Global Marketing promoted Erin Corbett to executive vice president of global partnership and marketing. Prior to joining Allied, Corbett's experience included senior marketing roles at Disney, Warner Bros. Studios, Harrah's Entertainment and Imagi Animation Studios.

Nuvve, a vehicle-to-grid technology company tapped student transportation and automotive sales and marketing executive David Bercik to lead the K-12 student transportation division.

This Week in ‘Raises’: Curri Scoops Up $42M, Mosaic Scores $26M

Decerry Donato

Decerry Donato is a reporter at dot.LA. Prior to that, she was an editorial fellow at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

Raises
Image by Joshua Letona

A local logistics platform raised fresh funding to put toward product development, infrastructure and sales and marketing initiatives, while a San Diego-based fintech company closed its Series C funding round to expand its investment in AI which will empower high-growth SMB and mid-market finance leaders.

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Venture Capital

Curri, a Ventura-based logistics platform, raised a $42 million Series B funding round led by Bessemer Venture Partners.

San Diego-based financial platform Mosaic raised a $26 million Series C funding round led by OMERS Ventures.

AHARA, a Los Angeles-based startup focused on providing personalized nutrition suggestions, raised a $10.25 million seed funding round led by Greycroft.

Per an SEC filing, San Diego-based developer of peptide therapeutics designed to assist in the treatment of autoimmune diseases and disorders selectIon raised $5 million in funding.

Miscellaneous

Los Angeles-based Sensydia, a company working on non-invasive cardiac diagnostics, said this morning that it has received $3 million in a NIH grant.

Raises is dot.LA’s weekly feature highlighting venture capital funding news across Southern California’s tech and startup ecosystem. Please send fundraising news to Decerry Donato (decerrydonato@dot.la).

'Esports Winter’ is a Myth, Local Gaming Execs Say

Samson Amore

Samson Amore is a reporter for dot.LA. He holds a degree in journalism from Emerson College. Send tips or pitches to samsonamore@dot.la and find him on Twitter @Samsonamore.

'Esports Winter’ is a Myth, Local Gaming Execs Say
Samson Amore

Last year, global venture capital investment in esports dropped by more than 40%. Investors have been rapidly selling off teams and franchises, and the industry has witnessed a consistent decline in ad spend. This has prompted many critics to coin the term “esports winter,” referring to a fall-off in the industry, an indication that VCs believe their investments didn’t achieve success as expected.

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