Protecting the Rights of Consumers
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Edelman Combs Latturner & Goodwin LLC
Online Shoe Seller Hey Dude, Inc. to Pay $1.95 Million for Violating FTC’s Mail, Internet, and Telephone Order Rule and Suppressing Negative Consumer Reviews
Money may be used to provide refunds to defrauded consumers nationwide
Online shoe retailer Hey Dude, Inc. (Hey Dude) agreed to settle Federal Trade Commission charges that the company misled consumers by suppressing negative reviews, including more than 80 percent of reviews that failed to provide four or more stars out of a possible five. The FTC also contends the company violated the Commission’s Mail, Internet, or Telephone Order Merchandise Rule in several ways between 2020 and 2022 and will pay $1.95 million to the FTC.
“As this case makes clear, when retailers publish consumer reviews online, they cannot suppress negative reviews to paint a deceptive picture of the consumer experience. And when retailers don’t ship merchandise on time, they must give buyers the option to cancel their orders and promptly get their money back,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “We will continue to hold online retailers accountable for violations of the FTC Act and other laws we enforce.”
Hey Dude, which was acquired by Crocs, Inc. in February 2022, advertises, markets, and sells shoes to consumers nationwide on the Internet, using its own website and by soliciting orders via social media advertisements. The FTC’s complaint charges that Hey Dude, formerly known as Happy One, LLC, violated the FTC’s Mail Order Rule in several ways, including: 1) failing to issue shipping delay notices when it could not timely fulfill consumers’ orders; 2) failing to cancel consumers’ orders and issue prompt refunds after failing to issue such notices; and 3) issuing consumers gift cards instead of sending prompt refunds of the original payment for merchandise ordered but not shipped, as required by the rule.
Hey Dude violated the FTC Act by suppressing negative consumer reviews of its merchandise, according to the complaint. From January 2020 to June 2022, the company, which uses a third-party online management review interface, chose to have all five-star reviews (the best rating) posted on its website with little scrutiny. In many instances, however, it rejected and did not publish less-favorable reviews.
Before June 2022, the complaint alleges Hey Dude’s written policies and procedures instructed staff to publish certain types of reviews only if they were positive. According to the FTC, Hey Dude started publishing all consumer reviews only after finding out it was under investigation by the Commission.
The proposed court order announced today, if approved by the court, will require Hey Dude to change its conduct going forward. First, the proposed court order will bar Hey Dude from future violations of the Mail Order Rule. Next, it will prohibit the company from making misrepresentations about consumer reviews by requiring it to publish all reviews it receives, including reviews previously withheld from publication, with limited exceptions related to moderation of inappropriate content.
Finally, the proposed order also will require Hey Dude to pay the FTC $1.95 million, which the FTC expects to use to provide refunds to consumers harmed by Hey Dude’s unlawful conduct.
The Commission vote authorizing staff to file the complaint and stipulated final order was 3-0. The FTC filed the complaint and proposed final order in the U.S. District Court for the District of Nevada.
