Fashion Nova is being fingered by the Federal Trade Commission (FTC) for suppressing negative reviews of its products online. Settling the issue will come with a hefty settlement for the fast fashion juggernaut.
The FTC, which is tasked with protecting consumers and businesses from deceptive or anti-competitive practices, revealed Tuesday that the Vernon, Calif.-based e-tailer will be required to pay $4.2 million for misrepresenting shopper sentiments about its apparel and accessories. The case is the first in the Commission’s history to challenge a company for concealing unfavorable reviews posted to its e-commerce site.
The complaint alleges that Fashion Nova worked with a third-party online product review management platform to suppress shopper product ratings lower than four stars out of five. The brand used the platform to automatically post positive reviews, while holding lower-starred reviews for its later approval, the FTC wrote. From late 2015 through November 2019, however, it failed to post the hundreds of thousands of unfavorable reviews, depriving other consumers of information that could potentially impact their purchasing decisions and artificially inflating product ratings.
“Deceptive review practices cheat consumers, undercut honest businesses, and pollute online commerce,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement this week. “Fashion Nova is being held accountable for these practices, and other firms should take note.”
The FTC announced that it would be sending letters to 10 other companies that use similar review management services, placing them on notice that avoiding publishing negative reviews violates the law. It also released guidance for web-based businesses and review platforms on appropriately managing reviews. The effort follows a similar push that took place in October, wherein the Commission warned over 700 businesses about the threat of civil penalties should they tamper with reviews.
The case is not Fashion Nova’s first brush with the FTC. April 2020 saw the women’s wear brand face allegations that it withheld information from shoppers about the status of late orders, failing to give them a chance to cancel when merchandise was not shipped in a timely manner. The company also illegally leveraged gift cards to compensate shoppers for unshipped goods instead of providing them with cash refunds. Ultimately, Fashion Nova paid out a total of $9.3 million to settle the issue.
This week’s proposed settlement accompanies increased scrutiny for Fashion Nova, which the FTC said “will also be prohibited from making misrepresentations about any customer reviews or other endorsements.” The company will be required by law to post all consumer reviews of products available for sale, except for those that contain obscene, sexually explicit, racist, or unlawful content.
“The Commission is committed to ensuring that consumers and honest businesses are not cheated by dishonest review practices, it wrote,” noting that it voted unanimously to issue the complaint. It also voted 4-0 to accept the company’s consent agreement, in which it acquiesced to the settlement without an admission of liability. The FTC will soon publish a description of that agreement, and it will be open for public comments for 30 days through the Federal Register. Any comments will be taken into account before the proposed consent order is finalized, the FTC wrote.
“The Federal Trade Commission’s allegations against Fashion Nova are inaccurate and deceptive,” a company spokesperson told Sourcing Journal Wednesday. “Fashion Nova never suppressed any website reviews, and it immediately and voluntarily addressed the website review issues when it became aware of them in 2019.”
Fashion Nova said its failure to review and manually release reviews that were filtered by a “reputable third-party enterprise software vendor” was accidental. “At one point in time, the company inadvertently failed to complete this process given certain resource constraints during a period of rapid growth,” the spokesperson said. “That issue was remedied several years ago and all previously unpublished reviews have now been posted,” they added, as long as they complied with “reasonable terms” like being relevant to the product in question and free from profanity.
The spokesperson said the brand is “highly confident” that it would have won the case in court, and only agreed to settle the case to avoid the distraction and legal fees that it would incur in litigation.
“Fashion Nova continues to be an entrepreneurial led company solely focused on providing a great assortment of fashionable clothes at very affordable prices,” they added. “It prides itself on knowing that 80 percent of its business comes from repeat customers, and does its best to listen carefully to customer feedback every day and keep getting better in everything that it does.”