The Lawsuits Behind Lularoe’s “Pyramid Scheme”


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If you’ve ever uttered the word LuLaRoe, then you likely have some strong opinions about the brand and it’s “buttery leggings.” Whether you’re a die-hard fan of the stretchy, patterned fabric or you’ve been invited to one too many online sales by your friends, you’ve probably heard about some of the trouble the company has faced in the last year from customer complaints. Now a new lawsuit alleges that the LuLaRoe sales people also have something to complain about.

Leggings empire, LuLaRoe already faced a lawsuit earlier this year when customers complained of faulty products and now the popular brand has been hit with two more class action lawsuits which claim that the company is actually a pyramid scheme. The lawsuits filed in the state if California last week allege that LuLaRoe’s success stems not from the sale of clothing to customers, but from the merchandise purchased by its work-from-home salesforce of consultants, which is then meant for resale.

“Consultants are instructed to keep around $20,000 worth of inventory on hand, and are inundated with the phrase ‘buy more, sell more,’” one lawsuit said. “These incentives mean new consultants are aggressively pressured to continue purchasing wholesale inventory even when the inventory they have is not selling, is unlikely to sell, or is piling up in their garage.” The LuLaRoe consultants claim that when they complained about the large monetary investment they were encourage to take out lines of credit to help pay for it.

The lawsuit also states that when these small businesses fail for lack of enough sales, LuLaRoe has not come to the consultant’s aid or offered enough financial assistance. The LuLaRoe policy is currently that it will buy back 90% of unsold merchandise, however earlier this year the policy was temporarily changed to 100% buy-back. When it reverted again to 90%, many sellers were left in the lurch to take a loss on the 10% they believed to be secure.

Have you started a business as a LulaRoe consultant? Share your thoughts and experiences in the comments below.

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