Online retailer boohoo settles $197m US class action over fake discount claims

Manchester online retail giant, boohoo, has agreed a $197m court settlement in the US following a class action which accused the group of fake discounts.

The claims related to boohoo brands PrettyLittleThing, NastyGal and boohooMAN, which claimants said had artificially inflated prices on garments, meaning the company never sold them at the original price on its US website, using the markdowns to lead customers to believe they were receiving a discount.

It was claimed that promotions offering “50% off everything” or similar, would appear regularly on the websites.

Around 9.4 million people in the US are understood to be eligible for payouts.

They will receive compensation in the form of gift cards and free shipping.

Claims administrator, KCC Class Action Services, said this comprises a $10 gift card, plus free shipping, totalling $17.45 per gift card.

Vouchers can apply to all three fast fashion sites and it is believed that boohoo will have to distribute more than 11.3 million gift cards, which are valid at any time.

The settlement also requires the websites to post a disclaimer that the prices listed as reference prices are not based on former prices for the products, but instead are based on the company’s opinion on what the full retail value of an item should be.

However, boohoo does not expect to have to pay the full $197m to claimants.

In boohoo’s half year results to August 2022, the retailer set aside a provision of £17.1m to meet the possible outcome of the case and, based on similar cases, it believes that figure will adequately cover the expected redemption rates on the vouchers.

In September last year, boohoo settled another class action in the US, worth up to $4.75m to resolve claims challenging false sales, while not admitting any wrongdoing.

Thebusinessdesk.com has contacted boohoo for comment.