Boohoo Group has reached a final settlement in a consolidated class action lawsuit accusing it of engaging in a scheme to inflate the original prices of its fast fashion wares in order to “deceive customers into a false belief that the sale prices [that they advertise on their e-commerce sites] are deeply discounted bargain prices.” That is what plaintiffs Farid Khan, Haya Hilton, and Olivia Lee argued in the respective complaints that they filed against Boohoo Group-owned brands – Boohoo, Nasty Gal, and PrettyLittleThing – in the spring of 2020. Boohoo confirmed the settlement, which is still subject to court approval, on Tuesday. 

Boohoo confirmed that it has agreed to the settlement without any admission of wrongdoing, per Reuters, and that the associated monetary sum is “within its existing legal provisions, which stood at 17.8 million pounds ($22.4 million) as of Feb. 28.” 

The matter got its start back in April 2020 when Khan, Hilton, and Lee filed their since-consolidated lawsuit, arguing that “on a typical day,” the Boohoo brands “prominently display on [their] landing pages some form of a sale where all products or a select grouping of products are supposedly marked down by a specified percentage – for example, 40, 50, or 60% off.” The problem with that, they contend, is that such a “sale” is “not really a sale at all,” and that “all the reference prices on the Boohoo websites are fake” since the retailers never offered up the “sale” garments for their original, pre-sale prices. 

Given that the plaintiffs and other consumers have “relied on [the Boohoo brands’] representations that each of the products” that they purchased “was truly on sale and being sold at a substantial markdown and discount” when that was not true, the plaintiffs claim that Boohoo, Nasty Gal, and PrettyLittleThing are each on the hook for damages of more than $5 million for violating California Unfair Competition Law, California False Advertising Law, and California Consumer Legal Remedies Act. 

In the answers that they filed in response to the proposed class action complaints in February, the Boohoo Group brands denied the bulk of the plaintiffs’ lawsuit and set out nearly 30 affirmative defenses in an attempt to shield themselves from claims that they are actively engaging in a “scam” in order to “lure unsuspecting customers into jumping at a fake ‘bargain.’”

Boohoo Lawsuit

Specifically, the brands argued that despite the plaintiffs’ claims that they “fell victim to the deception” of various sale events, the plaintiffs do not actually allege any tangible harm. Khan, for instance, claims that he was duped by Boohoo’s “50% Off Everything” advertising, but “does not allege that he is out-of-pocket anything (e.g., that his $6 t- shirts were worth less than the rock-bottom price he paid for them).” As such, Boohoo and co. argued that the plaintiffs lack standing to bring their suits since “they do not plausibly allege that they suffered any damages, i.e., that the price they paid was more than the value received.” 

Beyond that, Boohoo, Nasty Gal, and PrettyLittleThing each assert that “purchasing behavior is complex, and the overwhelming majority of [their] customers bought items for many different reasons that had no connection to the reference pricing, and without any misunderstanding as to what the reference price means.” In reality, they contend that “most of [their] customers” shop on their sites “because of [the] competitive pricing,” not necessarily because of any reference pricing tactics.

Still yet, the defendants have also argued that “all or part of the claims” asserted by the plaintiffs are barred by the First Amendment to the U.S. Constitution and the free speech provision of the California Constitution, “which protect, among other things, [the] defendants’ right to promote and advertise the products at issue.” The statutes that the plaintiffs rely on, including California Business and Professions Code section 17501 – the statute upon which their false advertising claims are based on – “unconstitutionally regulate free speech.” 

The Free Speech Argument

Such a free speech assertion is not unprecedented, as J.C. Penney, Sears, Kohl’s, and Macy’s argued – in a similar case – that Section 17501 violates the First Amendment and California’s liberty of speech clause, and is unconstitutionally vague. In that case, which was filed in 2017, the Los Angeles city attorney argued that the retailers ran afoul of the California state law by offering up their products at “reference prices” that purported to reflect former prices. 

(Section 17500 states, “No price shall be advertised as a former price of any advertised thing, unless the alleged former price was the prevailing market price as above defined within three months next immediately preceding the publication of the advertisement or unless the date when the alleged former price did prevail is clearly, exactly and conspicuously stated in the advertisement.”)

However, instead of actually reflecting previously-used prices, J.C. Penney and co. “deliberately and artificially set the false reference price higher than its actual former sales price so that customers are deceived into believing that they are getting a bargain when purchasing products,” according to the city. 

In a motion to dismiss in that case, the defendant retailers argued that the statute restricts free speech rights and is unconstitutionally vague, and the trial court agreed, only to be overturned by the state appeals court in May 2019. 

“By vacating the trial court’s grant of demurrer on grounds the statute was void for vagueness, the appellate panel’s decision reaffirms the validity of Section 17501,” Manatt’s Richard Lawson stated at the time. “It also puts retailers on notice that additional enforcement actions may be in their future.” At the same time, Holland & Hart’s Brent Johnson and Nathan Archibald noted that in light of the court’s decision, and the difference between the California state statute – which focuses on the “prevailing market price” – and the Federal Trade Commission’s – which centers on a retailer’s “own former price,” unless and until “a California court strikes down Section 17501 for violating the free speech rights of retailers, even a truthful price comparison is a violation if it does not meet the strictures of California’s pricing statute.” 

*The cases are Farid Khan, et. al., v. Boohoo, et. al., 2:20-cv-03332 (C.D.Cal.).

A European Union regulator is looking to crackdown on anti-competition within the fashion industry. In a statement on Tuesday, the European Commission announced that it has started “unannounced inspections at the premises of companies active in the fashion industry in several Member States,” and at the same time, “has sent out formal requests for information to several companies active in the fashion sector,” citing concerns that the unidentified fashion industry players may be engaging in anti-competitive behavior in violation of EU law, including by potentially joining together to fix prices, limit production or share markets or customers, instead of engaging in competition. 

“The Commission has concerns that the companies concerned may have violated Article 101 of the Treaty on the Functioning of the European Union (‘TFEU‘) and Article 53 of the European Economic Area Agreement, which prohibit cartels and other restrictive business practices,” the European Commission stated, noting that unannounced inspections are “a preliminary investigative step into suspected anticompetitive practices.” The regulator cautions, stating that fact that it is carrying out such inspections and sending out formal requests for information “does not mean that the companies are guilty of anti-competitive behavior, nor does it prejudge the outcome of the investigation itself.” 

The fashion industry-specific action comes as the focus of the Commission for the 27-member bloc appears to primarily lie with big tech. In March, for instance, the Commission revealed that it had initiated a formal antitrust investigation to assess whether an agreement between Google and Meta (formerly Facebook) for online display advertising services breached EU competition rules, namely, Article 101 of the TFEU and/or amounts to the abuse of a dominant position (Article 102 TFEU). Meanwhile, earlier this month, the European Commission informed Apple of its preliminary view that it abused its dominant position in markets for mobile wallets on iOS devices “by limiting access to a standard technology used for contactless payments with mobile devices in stores (‘Near-Field Communication (NFC)’ or ‘tap and go’),” and thereby, restricting competition in the mobile wallets market on iOS.

Not limited entirely to tech, the Commission has pin-pointed at least one fashion-centric entity this year (aside from the unnamed companies involved in the recently-announced probe) in connection with an anti-competition probe, announcing early this year that it had launched a formal antitrust investigation to assess whether Pierre Cardin and its licensee the Ahlers Group may have breached EU competition rules by restricting cross-border and online sales of Pierre Cardin-licensed products, as well as sales of such products to specific customer groups. According to a statement from the Commission in January that “Pierre Cardin and Ahlers may have breached EU competition rules by restricting the ability of Pierre Cardin’s licensees to sell Pierre Cardin-licensed products cross-border, including offline and online, as well as to specific customer groups.” 

The investigation, which is currently underway, is said to focus on whether Pierre Cardin and Ahlers, its largest licensee, “developed a strategy to prevent parallel imports and sales to specific customer groups of Pierre Cardin-branded products by enforcing certain restrictions in the licensing agreements,” per Reuters, as the Commission has reinforced rules against curbs on cross-border and online sales as part of a push to boost e-commerce.

The jury is out when it comes to the role of the “metaverse” for fashion/luxury and the extent of that role. Groups, such as Kering and Nike, have made headlines for their efforts in the burgeoning digital space, with the likes of Nike, Gucci and Balenciaga, for example, devoting notable resources to the development of their presences in the Web3 arena. At the same time, others have opted not to embrace this tech trend quite so quickly; LVMH’s chairman Bernard Arnault quipped in an earnings call early this year that the French luxury giant is “not interested in selling €10 virtual shoes,” and instead, is “very much in the real world, selling real products.”

The weight that fashion and luxury goods groups are giving the so-called metaverse is mixed at the moment, but it appears that they may be unable to ignore other aspects of Web3, including, cryptocurrency payment, as the future of consumers’ wallets is expected to consist of both “traditional (centralized) and decentralized finance.” According to a recent report from Morning Consult, some 91 percent of U.S. consumers have heard of cryptocurrency, and 19 percent say they own some, making crypto “no longer just a fringe asset.” A separate survey from Crypto.com and payment processing firm Worldpay found that as much as 75 percent of consumers and 60 percent of merchants want to make use of crypto in the market. 

“In an ideal world, cryptocurrency holders would like to be able to make purchases that take advantage of real-time market prices while avoiding the hassle and cost of fiat conversions,” Crypto.com and Worldpay stated in connection with their findings in February. Given the enduring adoption of Bitcoin and other cryptocurrencies, they argue that merchants (fashion brands, included) cannot ignore consumer interest in crypto for too long. Deloitte echoed this sentiment in a digital assets report of its own, stating that crypto may provide companies with access to new demographic groups, as users often represent “a more cutting-edge clientele.” 

From an internal perspective, Deloitte asserted that “introducing crypto now may help spur awareness within a company about this new technology,” while also “helping to position companies in this important emerging space for a future that could include central bank digital currencies.” 

Against this background, Gucci revealed this week that consumers may begin using cryptocurrencies, including bitcoin, in some of its U.S. stores, including its flagships on Rodeo Drive in Los Angeles and Wooster Street in New York. The announcement comes after Off-White revealed in April that it would follow in the footsteps of fellow fashion brand Philipp Plein (which became one of the first major fashion brands to accept crypto back in August 2021) and start accepting crypto payments in its flagship stores in Paris, Milan, and London. “This is another important step in the growth of the brand, that looks toward the future including Web3 technologies, understanding the needs and desires of its ever-evolving customer base,” the company said in a statement.

Given the wealth that consumers are readily building up – and looking to spend – in Bitcoin, Ether, etc., and the significant gap in where they can actually spend this crypto, other brands will likely follow suit in the not-too-distant future, making this an area worthy of attention when it comes to Web3, which is expected to thoroughly reshape the way consumers pay for goods/services, including those in the fashion/luxury space. 

Rising Challenges & Regulation

Not without challenges and potential regulatory issues, Crypto.com and Worldpay found that while luxury goods companies and fashion brands are “keen to take advantage of higher average transaction value of customers who spend in crypto,” enabling consumers to make crypto payments can be a demanding endeavor. For instance, “Changes to in-store payment systems and infrastructure may be required to ensure compatibility with crypto payments, [which] could present a myriad of challenges that do not exist in digital realms,” they claim. Exacerbating this issue is the fact that customers are often demand “parity between online and in-store payment options,” and there are “fewer opportunities and options to buy, build, and partner with third-party technology companies for in-store solutions, as the providers tend to (still) be focusing their efforts on e-commerce primarily (especially after its rise in customer utilization during the COVID-19 pandemic).” 

Ultimately, online crypto payment channels “will lead the way for mainstream adoption in Europe and North America,” per Crypto.com and Worldpay, but “new in-store crypto payment channels will likely de-prioritized for the short- to medium-term.” 

On the regulatory front, the larger crypto push comes, of course, as the U.S. Securities and Exchange Commission (“SEC”) continues to focus its attention on the $2 trillion crypto market. Chairman Gary Gensler highlighted “three areas related to the SEC’s work in this area: platforms, stablecoins, and crypto tokens” in a talk in April, noting that “there is no reason to treat the crypto market differently just because different technology is used.” Gensler’s comments follow from President Joe Biden signing an executive order in March, in which he called on various U.S. government agencies to examine and develop policy recommendations for digital assets, including cryptocurrencies, in light of explosive growth in recent years. 

At the same time, crypto-focused enforcement efforts are starting to come to the fore. The Department of Justice, for instance, arrested two individuals in February for an alleged conspiracy to launder cryptocurrency that was stolen during the 2016 hack of Bitfinex, a virtual currency exchange, presently valued at approximately $4.5 billion. More recently, the DOJ – which created a new National Cryptocurrency Enforcement Team and appointed Eun Young Choi as its first director – charged two different individuals with conspiracy to commit wire fraud and conspiracy to commit money laundering, in connection with a million-dollar scheme to defraud purchasers of NFTs advertised as “Frosties.” 

Federal regulators and law enforcement have signaled that they will increasingly focus on crypto, NFTs, and other Web3 technologies, thereby, sending a clear message of caution to those participating in this readily developing space, and the many that are eyeing it.

*This article was originally published on April 1 and has been updated.

Consumers using online retail marketplaces, such as eBay and Amazon, “have little effective choice in the amount of data they share,” according to the latest report of the Australian Competition & Consumer Commission (“ACCC”) Digital Platform Services Inquiry. While consumers may benefit from personalization and recommendations from these marketplaces based on their data, the data privacy-focused report states that many people are in the dark about how much personal information these companies collect and share for other purposes. 

The report reiterates the ACCC’s earlier calls for amendments to the Australian Consumer Law to address unfair data terms and practices. It also points out that the government is considering proposals for major changes to privacy law. However, none of these proposals is likely to come into effect in the near future. In the meantime, it is worth considering whether practices, such as obtaining information about users from third-party data brokers, are fully compliant with existing data privacy law. 

Online Marketplace Examination

The ACCC examined competition and consumer issues associated with “general online retail marketplaces” as part of its five-year Digital Platform Services Inquiry. These marketplaces facilitate transactions between third-party sellers and consumers on a common platform. They do not include retailers that do not operate marketplaces or platforms that publish classified ads but don’t allow transactions.

The ACCC report focuses on the four largest online marketplaces in Australia: Amazon Australia, Catch, eBay Australia and Kogan. In 2020–21, these four carried sales totaling $8.4 billion. According to the report, eBay has the largest sales of these companies. Amazon Australia is the second-largest and the fastest-growing, with an 87% increase in sales over the past two years. In furtherance of its report, The ACCC examined the state of competition in the relevant markets; issues facing sellers who depend on selling their products through these marketplaces; and consumer issues including concerns about personal information collection, use and sharing.

Consumers Don’t Want Their Data Used for Other Purposes

The ACCC expressed concern that in online marketplaces, “the extent of data collection, use and disclosure … often does not align with consumer preferences.” The Commission pointed to surveys about Australian consumer attitudes to privacy which indicate that 94 percent  did not feel comfortable with how digital platforms including online marketplaces collect their personal information. 92 percent agreed that companies should only collect information they need for providing their product or service, and 60 percent considered it very or somewhat unacceptable for their online behavior to be monitored for targeted ads and offers.

However, the four online marketplaces analyzed do not proactively present privacy terms to consumers “throughout the purchasing journey;” may allow advertisers or other third parties to place tracking cookies on users’ devices; and do not clearly identify how consumers can opt out of cookies while still using the marketplace. Some of the marketplaces also obtain extra data about individuals from third-party data brokers or advertisers.

The harms from increased tracking and profiling of consumers include decreased data privacy; manipulation based on detailed profiling of traits and weaknesses; and discrimination or exclusion from opportunities. 

You Can’t Just “Walk Out of a Store”

Some might argue that consumers must not actually care that much about data privacy if they keep using these companies, but the choice is not so simple. The ACCC notes the relevant privacy terms are often spread across multiple web pages and offered on a “take it or leave it” basis. The terms also use “bundled consents.” This means that agreeing to the company using your data to fill your order, for example, may be bundled together with agreeing for the company to use your data for its separate advertising business. 

Further, there is so little competition on privacy between these marketplaces that consumers cannot just find a better offer. The ACCC agrees, stating, “While consumers in Australia can choose between a number of online marketplaces, the common approaches and practices of the major online marketplaces to data collection and use mean that consumers have little effective choice in the amount of data they share.” Consumers also seem unable to require these companies to delete their data. The situation is quite different from conventional retail interactions where a consumer can select “unsubscribe” or walk out of a store. 

Do Our Data Privacy Laws Permit These Practices?

The ACCC has reiterated its earlier calls to amend the Australian Consumer Law to prohibit unfair practices and make unfair contract terms illegal. (At present unfair contract terms are just void, or unenforceable.) The report also points out that the government is considering proposals for major changes to privacy law, but these changes are uncertain and may take more than a year to come into effect.

In the meantime, it is worth looking more closely at the practices of these marketplaces under current privacy law. For example, under the federal Privacy Act the four marketplaces “must collect personal information about an individual only from the individual unless … it is unreasonable or impracticable to do so.” However, some online marketplaces say they collect information about individual consumers’ interests and demographics from “data providers” and other third parties. We do not know the full detail of what is collected, but demographic information might include our age range, income, or family details. 

How is it “unreasonable or impracticable” to obtain information about our demographics and interests directly from us? Consumers could ask online marketplaces this question, and complain to the Office of the Australian Information Commissioner if there is no reasonable answer.

Katharine Kemp is a Senior Lecturer in the Faculty of Law & Justice at UNSW Sydney. (This article was initially published by The Conversation.)

With so much conflicting information on customer technology innovation being fed to premium and luxury brand executives, it is no wonder many are confused. Understanding and prioritizing new consumer tech tools is an essential skill that all customer-centric organizations must master. However, executives in critical customer-facing functions, such as e-commerce, marketing, sales, and customer service are often, so focused on programmatic ad technology that they fail to examine and implement new technologies that better serve the best interests of the brand and its customers. 

Against that background, here is a look at five key technologies, in order of priority, and how brands should approach each for maximum financial performance in 2022 and coming years … 

Social Selling Tech

The future of e-commerce is personal and human. Imagine the power of a global social selling community powering the brand’s e-commerce. Social selling is the act of empowering every sales associate with their own “storefront”, or microsite, with complete brand oversight. Associates can creatively curate and personalize for each customer. They can post favorite products, curate boards of products, list services, and integrate with social media such as TikTok and Instagram. Social selling tech integrates and optimizes emotionally intelligent digital retail with social media. LVMH and L’Oréal have invested heavily in social selling leader Replika Software and are rolling out to all brands globally. 

Whatever social selling tool brands select they need to make this the top priority in customer tech beyond a basic e-commerce website. Social selling can improve average cart size 50-200 percent and conversion rates by 8 to 10 times. Game-changing results are the main reason most premium and luxury leaders are putting social selling at the top of the list.

Short Video and Livestream Shopping 

The second most powerful consumer technology brands starting to execute right now is short video and livestream shopping technology. While operating on TikTok and Instagram is valuable, the most valuable video move is to focus resources on bringing static, brochureware sites to life with short videos for every product, and especially the best sellers. Carefully test livestreaming directly from stores and make sure production value and brand ambassadors live up to premium and luxury brand standards. Results from short video and livestream tech platform leader Firework show that average customer engagement increases from 8-seconds to 17-minutes while conversion can go from 0.2 percent to 34 percent. This second priority is a no-brainer. The synergies with social selling are fantastic.

Licensing Customer Behavioral Data

Digital cookie tracking is going to be eliminated due to consumer privacy protections becoming stricter and stricter. While this will certainly be a blow to unethical and illegal data brokers, it is a once-in-a-lifetime opportunity for ethical brands to engage with consumers directly for data access and optimize their marketing and selling communications and product innovations. The first generation of personal data exchanges is now in full bloom. Using a personal data exchange, any brand can design and deploy a fair-value rewards e-mail or text campaign to different segments of customers, to gain consent to license their digital platform data (Instagram, Google, etc.). 

The best personal data exchanges are fiduciaries and can guarantee end-to-end encryption, full anonymity, privacy, copyright, and licensing law protections to consumers. The brand doesn’t have to ever take possession of the data. Consumers receive fair value and privacy while brands generate rich, relevant, actionable, anonymous, segment level behavioral insights. Brands can utilize these behaviorally driven insights to develop new products, compelling content and offers. Brands can finally begin to design and deliver extraordinary customer experiences. This behavioral data can be supplemented with surveys and other tools to establish an on-going dialogue and achieve a 360-degree understanding of customer behaviors and their motivations. Licensing digital platform data direct from the customer is a major leap in the consumer insights journey to personalization. That leap makes it one of the top three priorities in consumer tech for premium and luxury brands.

Blockchain

Blockchain is simply a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be each raw material used to make a handbag, jewelry, a watch, and other premium and luxury goods. Probably the most powerful ways for the premium and luxury goods industry to use blockchain now is to provide provenance (authentic proof of origin) to prevent counterfeits or otherwise infringing products from landing in the hands of consumers seeking authentic goods. Blockchain can provide a secure and trusted tracking system from one end of the supply chain (the creation or mining of raw materials) to the end state, where a customer enjoys, and can even resell, the authentic product. 

When used to authenticate origin, Blockchain can be useful to help eliminate counterfeits by enabling brands and law enforcement to determine the authenticity of a product and help eliminate criminal activity and enhance the sales and profits of legitimate brands. The Aura Blockchain Consortium, led by respected industry veteran Daniela Ott, is bringing top-tier luxury brands together to establish product passports for luxury goods. Since it protects the original brand, and very importantly, the investment of the customer, using blockchain to trace products and fight counterfeiting is the fourth priority in customer tech.

Non-Fungible Tokens

Non-fungible tokens (“NFTs”) can represent any asset. In the premium and luxury industry, NFTs are mostly used to signify that, hidden in a digital artwork, there is unique, authenticating unit of data stored on a digital ledger (blockchain again) that establishes proof of ownership. That is powerful in the digital world. While NFTs will probably bring new forms of innovation to art, fashion, entertainment, beauty, retail, and many other categories, since they are tied to blockchain, which is the foundational force behind cryptocurrencies, they have had the same growing pains. Nonetheless, what premium and luxury brands need to do now is test and learn their way into the NFT marketplace, very meticulously. 

Brands that want to avoid being part of a scam, have their customers scammed, or be scammed themselves, can steer clear of toxic exchanges and dodgy NFT players. Technology from CryptID Technologies and other encryption innovators will soon be available to allow brands to authenticate proof of origin and ownership using tamper-proof, advanced verification techniques, called Zero Knowledge Proofs for any digital asset, at scale. Using cryptographic proofs that do not require blockchains to prove authenticity, and that massively scale transactions, where blockchain cannot, will liberate and empower NFT originators, buyers and sellers. 

Milton Pedraza is the CEO of the Luxury Institute, the Chairman of DataLucent, and is globally recognized as one of the world’s leading experts and private investors in personal data innovation.