The news yesterday of a $100m claim having been filed in the US courts against Boohoo and its subsidiaries, PrettyLittleThing and Nasty Gal, for allegedly fake sales promotions and misleading consumers comes at a time when many fashion brands are about to launch unprecedented sales promotions to try and clear unsold SS20 stock.
But what exists in US law also applies in the UK and the EU in respect of the rules against misleading advertising.
Boohoo is claimed to have included false original pricing as against sales pricing on its website. In turn, this is alleged to have caused consumers to fall for fake bargains.
In the UK, misleading consumers represents an infringement of the Consumer Protection from Unfair Trading Regulations 2008 (CPUT). Generally, when a false original sales price was a significant factor for a consumer buying an item from a brand, the brand will have committed a misleading act under CPUT. If a brand gets it wrong and falls foul of CPUT, the consequences it may face include:
- consumers taking action in court against the brand for a refund, discount, and damages; and
- directors and other officers of the brand being found guilty of a criminal offence.
It is easy to see how what might be considered to be small claims for refunds from individual consumers can quickly add up for businesses shifting substantial volumes of stock. Brands should pay attention to what is included in price information in order to ensure that promotions state clear and accurate facts.
Putting to one side the financial implications of getting it wrong and the general market reputational damage, losing the trust of an otherwise loyal customer base can be a disaster for a brand at any time, let alone during a pandemic when consumers may be thinking twice before making purchases. Getting a virtual knock on the door from Trading Standards or the Competition and Markets Authority is likely to make a bad situation worse at a time like this.
If you have any questions about these issues in relation to your own organisation, please contact a member of the team or speak with your usual Fox Williams contact.