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Ecommerce Retailer Fashion Nova Fined $4.2 Million For Blocking Negative Customer Reviews
Fashion Nova—the online apparel brand famous for affordable, skin-tight clothing endorsed by the likes of Cardi B and Kylie Jenner—has once again landed in hot water with federal regulators.
The Los Angeles-based fast fashion retailer will have to pay $4.2 million to settle Federal Trade Commission allegations that the company purposefully blocked negative reviews of its merchandise from being posted online, the FTC said Tuesday.
The regulator claimed that the ecommerce retailer misrepresented products on its website by suppressing customer reviews with ratings lower than four stars out of five. It alleged that Fashion Nova used a third-party online product review management system to flag lower-starred reviews for its approval and to automatically post high-scoring reviews to its website. According to the FTC, the company failed to post hundreds of thousands of lower-starred, negative reviews from late 2015 until November 2019.
“Deceptive review practices cheat consumers, undercut honest businesses and pollute online commerce,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement. “Fashion Nova is being held accountable for these practices, and other firms should take note.”
In addition to the settlement, Fashion Nova is forbidden from misrepresenting any customer reviews and endorsements in the future, and must post all customer reviews to its website for products currently sold (with the exception of obscene, sexually explicit, racist or unlawful content).
In a statement to dot.LA, a Fashion Nova spokesperson described the FTC’s allegations as “inaccurate and deceptive,” and contended that the company “never suppressed any website reviews, and it immediately and voluntarily addressed the website review issues when it became aware of them in 2019.” Instead, the retailer blamed the issue on complications involving its third-party product review software.
“Fashion Nova is highly confident that it would have won in court and only agreed to settle the case to avoid the distraction and legal fees that it would incur in litigation,” the spokesperson said.
The penalty is not the first time that Fashion Nova has had to settle misconduct claims with the FTC. In April 2020, the retailer was ordered to pay $9.3 million in fines over allegations that it failed to ship products in a timely fashion, denied customers cancellations when orders weren’t shipped promptly and issued illegal gift cards to compensate consumers instead of providing refunds.
Fashion Nova’s string of questionable business practices also include revelations that the company’s clothing was being made in dozens of U.S. factories that owed $3.8 million in back wages to hundreds of workers, per a New York Times investigation in 2019. The Times cited sources who claimed that sewers at those factories were paid wages as low as $2.77 an hour.
Update, Jan. 25: This article has been updated to include comment from Fashion Nova.
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.
"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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