By law, all multilevel marketing companies are required to have a buyback program that offers a 90% refund if you change your mind within a year. So why is LuLaRoe bring sued?
Case: Lemberg, Laurence, Bluder, & Stuckart v. LuLaRoe, United States District Court, Central District of California, Case number: 5:17-cv-02102.
Who should pay attention to this case?: All LuLaRoe Retailers who were Retailers between April 1, 2017 and September 13, 2017 and either attempted to return product for 100% and free shipping and or purchased additional inventory during that time and will now not get a 100% refund.
Case allegations: Unlawful, Fraudulent, and Unfair Business Acts and Practices, Untrue or Misleading Advertising, Unjust Enrichment, Breach of Contract, Breach of the Covenant of Good Faith and Fair Dealing, and Conversion.
All but the last allegation revolve around the claim that LuLaRoe created a policy upon which Retailers relied when making purchases or returning their inventory for a refund and then did not honor that policy. The last allegation essentially accuses LuLaRoe of theft.
How did this all come about?
LuLaRoe retailers started leaving the company in droves. Whether it was the change in the compensation plan, the constant issues with product quality, the jump in the number of retailers, or the repeated issues with new launches, they were done. However, they did not want to spend money to return their products to the company, so they started having “Going Out of Business” (GOOB) sales.
Whether publicly advertised or not, GOOB sales obviously affect the Retailers trying to stay in business. To prevent the brand from being devalued by the lower prices offered by Retailers leaving the company, LuLaRoe instituted the 100% buyback policy. They offered free shipping and a 100% refund on the product returned by resigning Retailers.
LuLaRoe then announced that they would no longer honor the 100% buyback, blaming unscrupulous Retailers who were taking advantage of the program. Instead, the policy became refunds for products purchased only from LuLaRoe (not other consultants), within the last year, that they considered salable. Additionally, Retailers had to pay for shipping. LuLaRoe alone determined whether a product was something that could be re-sold. If not, they retained the product.
Basically, LuLaRoe could decide they didn’t want to refund the money and then keep the product for their own purposes – a write-off for donations or they could re-sell it for profit after it had already been paid for. This is the essence of unjust enrichment.
LuLaRoe had a policy until late 2016 that they would take back any product a Retailer sent back, less a 15% restocking fee. Without providing a reason, they rescinded that policy.
This resulted in Retailers with a lot of inventory (after all, they’d been incentivized to buy more and more product) that they could not sell at a discount without risking LuLaRoe terminating their contract (because another Retailer reported them to the compliance department).
The laws regarding multilevel marketing practices are regulated for exactly these reasons – to level the playing field between independent consultants and the more powerful companies.