LuLaRoe, a popular MLM women’s clothing company that is also rife with controversy, will pay nearly $5 million in a lawsuit that claimed the company was running a pyramid scheme. The $4.75 million dollar payout will go toward settlements to Washington Residents that sought damages after working for the company.
The Washington state attorney general Bob Ferguson announced the outcome of the lawsuit in a press release on Monday, where it was revealed that LuLaRoe representatives felt that the company misrepresented its representative profitability. The lawsuit claims that some representatives were left with debt after working with the company, as they were forced to buy products from the company before they could resell them.
Through the lawsuit, Bob Ferguson will provide settlements to around 3,000 Washington residents that were part of the lawsuit. The company required its retailers to spend between $500 and $5,000 on an “onboarding” package that involved purchasing product from the company through the representative that signed them up. Representatives would depend on selling the onboarding packages to new representatives in order to pay off what they’d already spent, creating a viscous cycle of dependency classic to all pyramid schemes.
The company promised new representatives that they could make thousands of dollars in income each month, but representatives that were part of the lawsuit felt that the company was being misleading with its income claims. Some representatives claim that they were being paid too much while the people below them carried debt on behalf of the company.
LuLaRoe, a multi-level marketing company that sells women’s shirts, dresses and leggings, has been rife with controversy throughout the last couple of years. In 2018 the company was sued by its supplier for allegedly failing to pay. The supplier sought $49 million dollars from the LuLaRoe founders, who threatened to take their profit from LuLaRoe and flee to the Bahamas.
As a result of the lawsuit, LuLaRoe’s manufacturer, Providence Industries, requested an immediate seizure of $34 million in assets that were in the hands of LuLaRoe at the time. LuLaRoe later filed a counter lawsuit against the supplier for $1 billion dollars in damages, including allegations that the supplier overcharged the company on its products.