LuLaRoe is a multilevel-marketing company that has brought brightly colored leggings and dresses to communities across the country since its debut five years ago. Yet the company’s sales representatives say that the company is really peddling false hope and intense stress alongside leggings and the dream of being an independent businessperson, and two new class action lawsuits against the company accuse it of exactly that.
Specifically, class actions filed this week [PDF] and two weeks ago [PDF] both accuse the company of running what California law calls an “endless chain scheme,” an even better term than “pyramid scheme.” That’s a term for a marketing scheme where selling actual merchandise to new participants isn’t the point, but recruiting new participants is.
The plaintiffs also allege that LuLaRoe changed the rules and rates after implementing a recent refund program.
“Once consultants signed up, they were pressured to invest and reinvest by purchasing Defendants’ clothing products — regardless of whether they were able to sell their inventory. Plaintiffs were inundated with the slogan ‘buy more sell more’ and were told they would recoup their investments through retail sales and recruitment,” the initial complaint for one class action explains.
The plaintiffs allege that they were rewarded for placing larger and larger orders from the company, but not necessarily for selling that merchandise. You know, to customers.
Distributors with poor sales were told that they needed to recruit more participants and buy more inventory, with leaders suggesting tactics like running up credit cards, taking out loans, and selling pumped breast milk to finance their original assortment of inventory and ever-greater inventory purchases. Distributors have no control over the selection of sizes and patterns that they’re sent.
LuLaRoe said in a statement that its success “has made us the target of orchestrated competitive attacks and predatory litigation,” but that the company does take lawsuits filed against it seriously. “We have not been served with the recent complaints, but from what we have seen in media reports, the allegations are baseless, factually inaccurate and misinformed,” the company stated to the Press-Enterprise.