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Marketing by

Paul Zimmerman

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Washington AG Settles with Makeup Company Over Marketing Practices

On September 6, 2016, the Washington State Attorney General announced a settlement with Julep Beauty, Inc. and its owner Jane Park. The settlement requires the defendants to  pay $3 million for using deceptive “negative option” marketing tactics to lure consumers into signing up for recurring boxes of Julep products, and then making it very difficult to cancel their subscriptions.

Julep designs and produces its own nail polish and other beauty products and markets them through social media and online advertisements. The company sells primarily through its website. It also distributes products through three Seattle beauty parlors, retailers such as Sephora and Nordstrom, and on TV through QVC.

As a promotion, Julep offers a “free” Welcome Box of Julep’s products. Consumers must provide a credit or debit card in order to pay taxes and shipping fees, but the company did not adequately disclose that consumers were also enrolling in a subscription plan. The disclosures regarding the subscription and cancelation terms were buried in web checkout pages that consumers allegedly did not see.

While the company's terms stated that consumers may cancel at any time, the AG alleged that it was often extremely difficult to do so. Julep did not employ enough customer service representatives to handle the volume of cancelation requests, and some consumers had to call multiple times before a cancelation was honored. Additionally, a number of consumers continued to be billed after canceling their subscription.

The Better Business Bureau had given Julep an “F” rating in 2014 for similar issues: not addressing customer complaints; difficulty of cancelation; and unresponsive customer service. The company has since increased the size of its customer-service team by over 50 percent, according to Julep’s CEO.

The settlement requires the defendants to provide adequate disclosure of the costs and terms of its subscription services going forward, and to provide enough customer-service reps to handle complaints and cancelations.

This case highlights the importance of transparency in marketing. Brands and marketers needs to be open and clear in all their messaging and marketing materials, from honoring email “unsubscribe” requests to addressing customer service questions on social media. Further, brands should be careful not to deceive consumers on social media, which is new territory for regulators. The FTC is cracking down on brands running influencer campaigns on social media that do not follow disclosure requirements.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.