Not-So-Fast Fashion: Landmines Facing Brands Moving Toward Direct-to-Consumer Strategies

Speed. Speed to market. Direct to consumers. With traditional business strategies under siege, fashion brands are chasing each other faster and faster down the “direct-to-consumer” rabbit hole, without looking first to see where it leads. Through this, brands and retailers alike have upended the traditional retail experience, overhauled their design and development process, and heavily relied upon social media, influencers and new technologies for experiential-centric marketing and sales campaigns. For increasingly many, it is leading into a field of landmines due to a lack of awareness and procedure in a changing global landscape. We are seeing this happen firsthand in pricing strategy, taxation and advertising.

Deceptive and Unfair Trade Practices (Pricing and Taxing)

While traditionally pursued against brick-and-mortar retailers, online retailers have come under attack by a host of state and private actions alleging deceptive pricing and taxing. In 2016, consumers filed a class action suit against Zara, alleging the retailer “engaged in fraudulent pricing practices across the U.S.” and “surreptitiously imposing an arbitrary markup” in its currency conversion without disclosure to the consumer. See Rose v. Zara U.S.A., U.S. District Court, Central District of California, No 2:16-cv-6229 (2016). In that same year, J.Crew received a complaint by another consumer class action group, wherein the proposed class alleged that J.Crew deceived consumers by engaging in “phantom markdowns,” contending that the “value at” pricing listed for a particular item was never listed at such price, therefore misleading. See D’Aversa v. J.Crew Group, case number 1:16-cv-01590, in the U.S. District Court for the Southern District of New York. Most recently, a consumer class action out of the Southern District of New York was filed against Forever 21, seeking damages in excess of $5,000,000. In that complaint, the plaintiff alleged Forever 21 engaged in a payment system that systematically overcharges the consumer in the guise of a sales tax that does not exist in the jurisdiction governing that transaction. See Togut v. Forever 21, U.S. District Court, Southern District of New York, No. 1:17-cv-05616-RWS (2017).