Individual to shell out $1.95 million to resolve FTC allegations
Heydude Settles with FTC Over Deceptive Practices
It seems that footwear brand Heydude has agreed to settle charges with the Federal Trade Commission (FTC) regarding the suppression of negative reviews and violations of the organization's Mail, Internet, or Telephone Order Merchandise Rule. As per an FTC press release from Monday, the Crocs-owned brand will fork over a hefty sum of $1.95 million to the FTC for monetary relief [1].
From 2020 to 2022, Heydude allegedly violated the FTC's Mail, Internet, or Telephone Order Merchandise Rule by neglecting to issue shipping delay notices, failing to cancel orders and offer prompt refunds after failing to issue such notices, and dishing out gift cards to consumers instead of refunds for unshipped orders [2]. The $1.95 million in financial relief is expected to be utilized to provide refunds to impacted consumers.
If the court order is approved, Heydude will also be compelled to publish all reviews it receives, with limited exceptions, including reviews previously not published [2]. The FTC claims that Heydude suppressed 80% of reviews that didn't receive four or more stars out of five.
Samuel Levine, the director of the FTC's Bureau of Consumer Protection, commented, "Retailers can't suppress negative reviews to portray a false consumer experience. When merchandise isn't shipped on time, consumers must be given the option to cancel their orders and promptly receive their money back. We'll keep holding online retailers accountable for violations of the FTC Act and other laws we enforce."
According to the FTC, Heydude, using a third-party online management review interface, posted the highest reviews of products with little scrutiny on its website while it rejected and opted not to publish many less-favorable reviews from January 2020 to June 2022. The FTC's complaint alleges that Heydude's written procedures and policies instructed staff to only publish positive reviews [2].
Interestingly, Crocs agreed to acquire Heydude back in 2021 for an enormous $2.5 billion, aiming to expand Crocs' market [3]. A company spokesperson stated, "Since our acquisition of the company, we have collaborated closely with the FTC to reach a quick and satisfactory resolution, and we are happy to put this behind us and move forward with the excellent customer experience, transparency, and accountability that Crocs' brands are recognized for."
Moving on, Crocs announced in July that it had surpassed $1 billion in consolidated quarterly revenue during Q2, marking an 11.2% year-over-year increase [3]. Heydude registered a 3% revenue boost to $239.4 million, with a nearly 30% increase in DTC revenue.
In case you're interested, similar cases have surfaced where companies have agreed to pay substantial amounts to address deceptive business practices. For example, Publishers Clearing House (PCH) recently parted with $18.5 million for misleading sweepstakes practices, demonstrating the FTC's active stance on combating deceptive practices [1]. Likewise, Fashion Nova got tangled up in a settlement with the FTC over deceptive advertising practices, agreeing to refund affected customers [2].
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[1] https://www.ftc.gov/news-events/press-releases/2022/07/publisher-s-clearing-house-settles-ftc-charges-deceptive-sweepstakes[2] https://www.ftc.gov/news-events/press-releases/2022/07/fashion-nova-settles-ftc-charges-it-fail...[3] https://www.cnn.com/2021/09/30/business/cruel-classic-clogs-garner-fans-crazy-markets/index.html
- The Federal Trade Commission (FTC) has announced that footwear brand Heydude has agreed to settle charges with them regarding deceptive practices on the internet, including suppressing negative reviews and violating the Mail, Internet, or Telephone Order Merchandise Rule.
- Heydude is expected to pay a fine of $1.95 million to the FTC for monetary relief, which will be used to provide refunds to affected consumers.
- In addition to the financial penalty, Heydude will also be compelled to publish all reviews it receives, with limited exceptions, including reviews previously not published, as part of the court order.
- The FTC claims that Heydude suppressed 80% of reviews that didn't receive four or more stars out of five.
- The alleged violations of the FTC's Mail, Internet, or Telephone Order Merchandise Rule include neglecting to issue shipping delay notices, failing to cancel orders and offer prompt refunds after failing to issue such notices, and dishing out gift cards to consumers instead of refunds for unshipped orders.
- Heydude's use of a third-party online management review interface allegedly allowed the brand to post the highest reviews of products with little scrutiny on its website while it rejected and opted not to publish many less-favorable reviews from January 2020 to June 2022.
- Heydude's parent company, Crocs, agreed to acquire Heydude back in 2021 for an enormous $2.5 billion, aiming to expand Crocs' market.
- Similar cases have surfaced where companies, such as Publishers Clearing House and Fashion Nova, have agreed to pay substantial amounts to address deceptive business practices, demonstrating the FTC's active stance on combating such practices in the retail, finance, and entrepreneurship industries.
