The Washington state Attorney General has announced a $3 million settlement against a Seattle-based beauty products subscription company for deceptive marketing practices.
Attorney General Bob Ferguson says Julep Beauty Inc. lured consumers into its subscription service by offering "welcome boxes" without properly disclosing the company was also signing those consumers up for a monthly subscription that started at $19.99 a month.
Consumers only realized the problem, when the charges occurred on their credit cards.
Ferguson said the company then made it extremely difficult for consumers to cancel the service.
"What's deceptive or unfair. That's the test," Ferguson said in an exclusive KING 5 interview. "Is it a deceptive or unfair business practice? If they aren't disclosing key issues to you in a fair way, that's deceptive."
Ferguson estimated roughly 55,000 consumers nationwide were negatively impacted by the company between December 2012 and September 2015.
"Anytime you have tens of thousands of consumers who are deceived into getting this monthly subscription that they wanted no part of and didn't want to pay, that raises the profile, combined with the fact that those consumers had such a hard time canceling the service once they realized they were in it," Ferguson said.
As part of the settlement, Julep will prove it has paid $1.5 million in refunds, in other words restitution to affected subscribers; $250,000 in costs and fees; and provide another $1 million in products at retail value to charities and people in need.
"We feel this is a fair resolution for the conduct in this case," Ferguson said.
Ferguson said the company has corrected its business practices so that consumers are now adequately informed about the terms of service.
Julep owner Jane Park would not speak with KING 5 on camera, but she did release a statement included in full below.
"As an entrepreneur working hard to create jobs in Washington State, I was shocked and disappointed to hear Attorney General Ferguson’s characterization of our settlement with his office that was announced today. His statement to the press was full of inaccuracies, errors and mischaracterizations. I understand from his office that they are in the process of correcting the mistakes and reissuing the press release.
To set the record straight, Julep has never engaged in deceptive marketing. We have always been clear about the terms and benefits of our Maven subscription program, which is beloved by thousands of women across the country. Unlike passive subscriptions, at Julep we actively invite our Mavens to engage with us monthly, sending multiple communications prior to any charge. Furthermore, the Consent Decree the AG’s office signed has no mention of the phrase “deceptive practices” – this statement was new to us as of the press release this morning.
As a startup, we experienced some operational challenges over two years ago that we addressed proactively and voluntarily, months before ever being contacted by the Attorney General’s Office. In the summer of 2014, we experienced a period of extraordinary growth at the same time that a change in fulfillment practices caused delays in shipping. As a result, we experienced an unprecedented volume of customer service calls and we were not able to answer all of our call volume. We took immediate action to solve these operational challenges because I am absolutely dedicated to delighting our customers. We increased the size of our customer service team by over 50%, added extended call hours, hired experienced operational leaders and issued refunds to impacted customers. I am so proud of our amazing and passionate customer service team - those of you who have called us have probably experienced first-hand their exceptional commitment to helping our Mavens resolve their questions and concerns.
Despite having taken all of these actions prior to the AG’s office ever contacting us, Bob Ferguson is now trying to take credit for our proactive actions. In fact, here’s how Bob Ferguson’s “$3 Million Settlement” breaks down:
$1.5MM in refunds issued before the AG’s office contacted us:
• $1.5MM in refunds that Julep proactively completed before ever being contacted by the AG’s office. We did this because we love our customers. We did this because we wanted to make up for the fact that we couldn’t answer all our phone calls the way we had up until the summer of 2014 and ever since.
$500k in payments and product due as a result of this settlement:
• $250k in legal fees we agreed to in order to close out this matter
• $250k in product donations I offered to make to local women’s organizations and homeless shelters.
$250k suspended penalty that is not due:
• $250k in future suspended penalty due only IF we breach the consent decree. Importantly, there was NO penalty imposed and due to be paid for past actions.
Boiling it down, the settlement impact to Julep today is therefore only $250k in legal fees and $250k in product donations. We do not know where the Attorney General gets $3MM from, and believe it is unethical and deceptive for him to characterize our settlement in this way.
I started Julep out of a passion for transforming the beauty experience and encouraging women to experiment outside their comfort zones. I am as committed as ever to launching innovative products co-created with our amazing community. I’m grateful for each and every one of our customers."
The Attorney General's office said the reason for the discrepancy in the required product donation as part of this settlement is that the AG's office was citing the retail value of the product, $1 million, not the company's actual cost which is $250,000, as Park mentioned.
A spokesperson for the Attorney General disputed Park's portrayal of the agreement and called her statement "inaccurate."
Ferguson's office said Park did engage in deceptive practices and still must prove the required restitution has been paid in full.
That spokesperson added that the AG's office stands by its original press release and is not issuing a new one.
Copyright 2016 KING