Julep, the Seattle-based beauty products company, has settled a lawsuit with Washington State Attorney General Bob Ferguson’s office over deceptive business practices. But Jane Park, the company’s founder and CEO, is disputing the announced dollar figure and other details spelled out by the AG’s office on Tuesday, even saying that Ferguson’s characterization of the settlement was “unethical” and “deceptive.”
A news release on the AG Office’s website (printed in full below) said that Julep and Park “will pay $3 million for using deceptive ‘negative option’ marketing tactics.” The lawsuit dealt with complaints received between 2012 and 2015 which were brought after consumers had difficulty canceling subscriptions for boxes of cosmetics which Julep mailed out on a monthly basis.
According to the AG, as a promotion, Julep offered a “free” Welcome Box of Julep products. Consumers had to provide a credit or debit card in order to pay taxes and shipping fees, but in the time period covered by the lawsuit, the company did not adequately disclose that consumers were also enrolling in its Maven subscription plan. Disclosures regarding the subscription and cancellation terms were buried in web checkout pages that the consumer was unlikely to see, the AG said.
“It is maddening for consumers to receive products they don’t want but are charged for,” Ferguson said in the AG release. “That’s a deceptive way to run a business, and I won’t allow a company to get away with it.”
Park claims in a lengthy statement to GeekWire (printed in full below) that she was “shocked and disappointed” in Ferguson’s characterization of the settlement. She says Julep issued $1.5 million in refunds to consumers before ever being contacted by the AG’s office. She says Julep’s only penalty paid in relation to the settlement was $250,000 in legal fees to close the matter. Park says she also offered to make a $250,000 donation in Julep products to local women’s organizations and homeless shelters.
GeekWire reached out to Ferguson’s office to get more clarity on the situation, and the AG’s Office is standing by the release as distributed.
In September 2014, GeekWire reported on the Better Business Bureau giving Julep an “F” rating for its inability to respond to customer inquires related to the subscription program. The cosmetics and e-commerce startup raised $30 million in funding that April. That same year, Park had been named CEO of the Year at the annual GeekWire Awards.
Full news release from Attorney General’s Office:
Washington State Attorney General Bob Ferguson today announced Seattle-based Julep Beauty, Inc. and its owner Jane Park, will 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. Today’s announcement covers deceptive practices that occurred between 2012 and 2015.
“It is maddening for consumers to receive products they don’t want but are charged for,” said Ferguson. “That’s a deceptive way to run a business, and I won’t allow a company to get away with it.”
In a statement, Park said, “I want to take this opportunity to acknowledge and take responsibility for Julep’s previous practices that formed the basis of the AG’s lawsuit that was settled and announced today.”
Julep agreed to pay $1.5 million in restitution to affected subscribers, $250,000 in costs and fees, and to provide hygiene products with a retail value of $1 million at no cost to qualified charities and government institutions that serve victims of domestic violence and the homeless and prison populations.
The precise number of consumers affected is unclear, due in part to Julep’s inconsistent record-keeping. Approximately 55,000 customers nationwide canceled these recurring shipments between December 2012 and September 2015.
Another $250,000 in civil penalties will be suspended, provided Julep and Park avoid further violations of the law. The Attorney General also required the company to provide adequate disclosures of the costs and terms of its subscription services going forward, and to employ sufficient customer service staff to handle complaints and cancellations.
Julep designs and produces its own nail polish and other beauty products and aggressively 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 in the time period covered by the AGO lawsuit, the company did not adequately disclose that consumers were also enrolling in a subscription plan. The disclosures regarding the subscription and cancellation terms were buried in web checkout pages that the consumer was unlikely to see.
Many consumers first realized they were obligated to pay for the boxes when an unknown Julep charge showed up on their debit or credit account statements, or when additional, unexpected boxes of products arrived. The most common subscription plans cost consumers either $19.99 or $24.99 per month.
While Julep’s terms stated that consumers may cancel at any time, in practice 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 cancellation was honored. A number of consumers continued to be billed after canceling their subscription.
The AGO investigation began after the office received a number of consumer complaints. The case was handled by Assistant Attorneys General Todd Bowers and Joel Delman.
Statement from Jane Park of Julep:
As an entrepreneur working hard to create jobs in Washington State, I was shocked and disappointed to hear Attorney General Ferguson’s characterization of our settlement with his office that was announced today. His statement to the press was full of inaccuracies, errors and mischaracterizations. I understand from his office that they are in the process of correcting the mistakes and reissuing the press release.
To set the record straight, Julep has never engaged in deceptive marketing. We have always been clear about the terms and benefits of our Maven subscription program, which is beloved by thousands of women across the country. Unlike passive subscriptions, at Julep we actively invite our Mavens to engage with us monthly, sending multiple communications prior to any charge. Furthermore, the Consent Decree the AG’s office signed has no mention of the phrase “deceptive practices” — this statement was new to us as of the press release this morning.
As a startup, we experienced some operational challenges over two years ago that we addressed proactively and voluntarily, months before ever being contacted by the Attorney General’s Office. In the summer of 2014, we experienced a period of extraordinary growth at the same time that a change in fulfillment practices caused delays in shipping. As a result, we experienced an unprecedented volume of customer service calls and we were not able to answer all of our call volume. We took immediate action to solve these operational challenges because I am absolutely dedicated to delighting our customers. We increased the size of our customer service team by over 50%, added extended call hours, hired experienced operational leaders and issued refunds to impacted customers. I am so proud of our amazing and passionate customer service team — those of you who have called us have probably experienced first-hand their exceptional commitment to helping our Mavens resolve their questions and concerns.
Despite having taken all of these actions prior to the AG’s office ever contacting us, Bob Ferguson is now trying to take credit for our proactive actions. In fact, here’s how Bob Ferguson’s “$3 Million Settlement” breaks down:
$1.5MM in refunds issued before the AG’s office contacted us:
- $1.5MM in refunds that Julep proactively completed before ever being contacted by the AG’s office. We did this because we love our customers. We did this because we wanted to make up for the fact that we couldn’t answer all our phone calls the way we had up until the summer of 2014 and ever since.
$500k in payments and product due as a result of this settlement:
- $250k in legal fees we agreed to in order to close out this matter.
- $250k in product donations I offered to make to local women’s organizations and homeless shelters.
$250k suspended penalty that is not due:
- $250k in future suspended penalty due only IF we breach the consent decree. Importantly, there was NO penalty imposed and due to be paid for past actions.
Boiling it down, the settlement impact to Julep today is therefore only $250k in legal fees and $250k in product donations. We do not know where the Attorney General gets $3MM from, and believe it is unethical and deceptive for him to characterize our settlement in this way.
I started Julep out of a passion for transforming the beauty experience and encouraging women to experiment outside their comfort zones. I am as committed as ever to launching innovative products co-created with our amazing community. I’m grateful for each and every one of our customers.