Guy to shell out $1.95 million to settle FTC allegations
Heydude's Legal Woes: Settling Charges with the FTC
The famed shoe brand, Heydude, has found itself in hot water, settling charges with the Federal Trade Commission (FTC) over some stone-cold allegations. The Crocs-owned brand will hand over a cool $1.95 million to the FTC, according to an FTC press release this week.
The brouhaha? Heydude violated the FTC's Mail, Internet, or Telephone Order Merchandise Rule from 2020 to 2022 by failing to provide shipping delay notices, neglecting to cancel orders and issue refunds after not issuing those notices, and doling out gift cards instead of refunds for unshipped orders, as per the FTC release. The $1.95 million is expected to be used to offer refunds to affected consumers.
If the proposed court order gets the green light, Heydude will be compelled to publish all reviews it receives, save for limited exceptions. Mind you, the FTC uncovered that Heydude suppressed negative reviews, as much as 80% of them that failed to win four or more stars out of five.
Samuel Levine, director of the FTC's Bureau of Consumer Protection, weighed in, stating, "Online retailers can't hide negative reviews to present a rosy picture of the consumer experience. If merchandise isn't shipped on time, vendors must give consumers the option to cancel their orders and get their money back pronto. We'll keep enforcing the FTC Act and other laws to ensure that's the case."
The FTC claims that Heydude, utilizing a third-party online management review interface from January 2020 to June 2022, posted the most flattering reviews of its products with little scrutiny on its website while it rejected and declined to publish many less-favorable reviews. The FTC's complaint alleges that Heydude's internal procedures and policies instructed staff to only publish positive reviews. Once it learned it was under investigation, Heydude changed its ways and started publishing all reviews.
Now, some of you might be thinking, "Hey, were Crocs in the loop when all this went down?" Well, Crocs agreed to acquire Heydude for $2.5 billion in 2021, which included $2 billion in cold hard cash. Since then, Crocs has been working closely with the FTC to sort this out, stating, "We've collaborated tirelessly with the FTC to reach a swift and satisfactory resolution, and we're stoked to put this behind us and focus on the exceptional customer experience, transparency, and accountability that Crocs' brands are renowned for."
In July, Crocs announced that it had smashed past the $1 billion mark in quarterly consolidated revenue during Q2, up a whopping 11.2% year over year. Heydude saw a revenue boost of 3%, pushing its total to $239.4 million, with a nearly 30% increase in DTC revenue. So, even with this bump in the road, it looks like things are still looking rosy for Crocs and Heydude! Stay tuned for more updates!
- The recent controversy involving Heydude, a well-known shoe brand, has raised questions about the role of technology in business, particularly in maintaining transparency online.
- In the wake of the Federal Trade Commission (FTC) investigation, it has become clear that heydude's policy of suppressing negative reviews may contradict laws concerning truthful advertising and the use of artificial intelligence (AI) in businesses.
- As international trade continues to grow, adhering to internet laws and maintaining ethical business practices will be crucial to avoid potential future legal 'wars'.
- The financial implications of this case extend beyond Heydude and Crocs, emphasizing the need for thorough understanding and compliance with relevant business and internet laws to protect both consumers and corporations.
