LuLaRoe Is Being Sued By Consultants Who Call It a ‘Pyramid Scheme’
LuLaRoe’s comfortable, brightly-colored clothing is popular among women with chronic illnesses and chronic pain, and its “buttery soft” leggings and dresses have been named a favorite clothing choice by many in the Mighty community. But on Friday, the company was named in a class-action lawsuit that alleges the company is a “pyramid scheme” and utilizes unlawful business practices.
The lawsuit, filed in California, names four plaintiffs though it also seeks to represent “thousands of consultants,” and alleges six counts of unlawful, fraudulent and unfair business practices, advertising and breach of contract. The main complaint is focused on the company’s buyback policy, which allowed the “consultants” who buy and then resell LuLaRoe merchandise to return their inventory for a full refund if they wanted to leave the company.
The buyback policy was reversed in September, but the plaintiffs allege they were misled and thought the 100 percent buyback would continue. They say it helped encourage consultants to join LuLaRoe since they felt the risk was lower (consultants must buy the inventory they wish to sell — at least $5,000 in merchandise).
There are no physical LuLaRoe stores and the items are not sold on the website — you can only buy LuLaRoe through the consultants. Consultants typically hold “pop-up shops” and sell their inventory through Facebook groups.
“Consultants were encouraged to max-out their credit cards with inventory purchases, all of which would be refunded at 100 percent, plus free shipping, should the consultants decide to stop selling for LuLaRoe,” the lawsuit says.
According to a statement on the LuLaRoe website, the 100 percent refund was meant to be a temporary fix for the problem of retailers holding “going out of business” sales when they wished to leave the company, which the company claims was creating an “uneven playing field” for other retailers. The 100 percent buyback policy was in place from…