Economy

LuLaRoe Hit With $1 Billion Lawsuit Alleging Pyramid Scheme

LuLaRoe Hit With $1 Billion Lawsuit Alleging Pyramid Scheme”

We have not been served with the recent complaints, but from what we have seen in media reports, the allegations are baseless, factually inaccurate and misinformed.

This created a saturated market and many consultants were stuck with product they couldn't sell or return, the suit claims. Four plaintiffs have filed two class-action lawsuits against the company, accusing them of six counts of misconduct, including unfair business practices, misleading advertising and breach of contract, according to Business Insider.

"Consultants are instructed to keep around $20,000 worth of inventory on hand, and are inundated with the phrase 'buy more, sell more".

Additionally, consultants were in "unknowingly recruited into defendants' pyramid scheme through manipulation and misinformation". That's because LuLaRoe has allegedly been pressuring salespeople to sell their breast milk to afford their inventory. The law suits were filed on October 13 and 23 of this year, and both were filed in the U.S. District Court for the Central District of California. "Some resulted in financial ruin due to the pressure to max out credit cards and to take loans to purchase inventory".

Some representatives from LuLaRoe have alleged for a long time they have been mistreated by company executives.

Many times, however, consultants learned they would receive nothing for their returned items, the suit alleges.

The company was founded in 2012 and is known for the brightly colored leggings that many sellers splash across Facebook pages, looking to entice buyers and make a profit - or at least break even - from their initial investment to get started as a distributor. "They failed because they were doomed from the start", the lawsuit reads.

How is this not a pyramid scheme? At one point, its policy allowed sellers to return merchandise for 90 percent of its value, not including shipping; that changed to a 100 percent refund with shipping costs before it was suddenly switched back to 90 percent in September, the lawsuit says.

According to research by Parents.com, the average multi-level marketing company sales rep earns just $750 per year before expenses, a figure that hasn't changed since 1980. "We will vigorously defend against them and are confident we will prevail".

Stella Lemberg, a plaintiff in the October 13 lawsuit, says she was pressured to buy up tons of inventory with the promise that she could return anything that wasn't selling.

LuLaRoe offered 100 percent refunds on unsold items - a policy it now says was only temporary.

"We chose to end the [100 percent refund] when it became evident that a good number of retailers were abusing the program by returning product in extremely poor condition and providing inaccurate claims, as well as a retailers using it as temporary solution to struggles in their business", the statement reads.

Turns out, it only made them worse.



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