back to article In a first, FTC extracts millions of dollars from online store accused of blocking bad reviews on its website

Internet garment slinger Fashion Nova will cough up $4.2m to shut down accusations that it censored negative reviews left by customers on its website. The flash clobber biz allegedly used third-party software to screen product reviews before they appeared on its site. Product ratings of four and five stars were automatically …

  1. cantankerous swineherd

    so, guilty as charged then.

    1. Woodnag

      Yup

      "Fashion Nova never suppressed any website reviews, and it immediately and voluntarily addressed the website review issues when it became aware of them"

      Er, which izzit?

      "never suppressed"

      or

      "immediately and voluntarily addressed the website review issues"

      ???

      1. Pascal Monett Silver badge

        Re: Yup

        Well they never suppressed any reviews - it was the 3rd-party software that did that.

        Not their fault, see ?

        But it's fine, really. Apparently Fashion Nova has an extensive judicial budget. $9 million last year for not being guilty of withholding reimbursements, $4 million this year for not being guilty of withholding bad reviews, it seems to me that this company is ponying up a lot of money for not being guilty of anything.

        I wonder what they won't be guilty of next year, and how much they'll pay ?

        1. Woodnag

          Budget for hiding stuff too?

          Difficult to find the refunds suit with the duck.

          https://www.ftc.gov/news-events/press-releases/2020/04/fashion-nova-will-pay-93-million-consumer-refunds-settle-ftc

    2. msobkow Silver badge

      Pretty much. No one in their right mind coughs up 4 mill just because a lawsuit is "annoying." *LOL*

  2. HildyJ Silver badge
    Meh

    Good, but

    Good on the FTC for doing their job.

    But for Fashion Nova, with revenues estimated at $400m-$600m, it's just a slap on the wrist, like so many corporate fines.

    it's not surprising that they labeled this a 'distraction' and paid up to make it go away.

    1. Brian 3

      Re: Good, but

      It's not a slap on the wrist, it's a small tax on highly profitable business practices. Just like the 'fine' for companies conspiring to keep wages down, the amount is so small that the behavior was HUGELY profitable. Why would other companies not try and do the same, there's so much money to be had! The fines need to be larger than the profit from the illegal behavior, for starters.

      They admit no wrong when they do this, it shouldn't be allowed. They obviously knew this was going on the whole time, and there just never managed to be budget for getting the bad reviews up to speed, oh darn!

      1. Wade Burchette

        Re: Good, but

        The fines need to be paid by the CEO. Watch how quickly bad business practices die when the person in charge is paying is being held financially liable.

      2. Cederic Silver badge

        Re: Good, but

        1% of revenue is not a small 'tax'.

        That's the profit margin in some industries. Retail fashion is 4% to 13% so losing 1% is material.

        1. Androgynous Cow Herd

          Re: Good, but

          On what planet?

          Gross Margin on retail fashion is minimum 50 points, usually closer to 60. The whole concept of "Keystone" pricing COMES from the fashion industry

          (Worked directly on this for several major buyers.).

          If you somehow get down to 4% net out of 50 points gross...You are somehow doing it wrong. Net was typically 35-40 points.

          This was a slap o the wrist that did't even sting.

          1. Cederic Silver badge

            Re: Good, but

            Sorry for citing industry figures on net margin. Sorry also for believing Touker Suleyman when he references the low margins in the industry his brands are in.

    2. Snake Silver badge

      Re: Good, but

      I'll personally say "Good job" when they do the same to Yelp.

    3. Anonymous Coward
      Anonymous Coward

      Re: Good, but

      If they're like most of the fashion retail industry, their margins are somewhere between razor-thin and nonexistent. The $13m in fines that they've considered part of the cost of doing business may well be a substantial fraction of their *profits*. As an example of how thin net profit margins are in retail, Wal-Mart made a profit of $13.5b on $559b in revenue last year. If you prefer cash flow or operating income, the figures are $8.3b and $27b respectively. That works out to somewhere between 2.4% and 4.8% of revenue. Fashion Nova appears to be private so I can't immediately substantiate your $400m-$600m revenue figures, but if their overall margins are comparable to Wal-Mart's then these fines probably accounted for something like half their profits. Note that I'm not offering an opinion as to whether the fines are "adequate" or "appropriate" nor whether it's reasonable or acceptable for the company to treat them as a cost of doing business.

      Revenue or turnover is not a good way to compare businesses in different industries. People like to use it to stir up outrage because the numbers are often huge, and because some multinationals have found ways to game the accounting rules to make it look like their profits are very low even though their underlying businesses have excellent margins, which makes GAAP profit figures misleading. Don't let that confuse you: the retail business is brutally competitive with very small gross margins, and retailers rarely manage to convert even 5% of turnover into profit. Conversely, professional services partnerships have almost no cost of sales and routinely convert 70% of turnover into partner distributions which are effectively profits they take home. It's necessary to understand the nature of the business when evaluating financial reports.

  3. Anonymous Coward
    Anonymous Coward

    "... the company inadvertently failed to complete this process given certain resource constraints during a period of rapid growth."

    Ask a manager: why would we spend money hiring people to process and post negative reviews? 'Inadvertent' my Aspergillus fumigatus.

  4. Kevin McMurtrie Silver badge

    Illegal?

    I know Sony and Samsung do this for their cellphones. 1-star reviews like "It haz good b 2 thic" are published but critical reviews with details and examples vanish.

    1. Alan Brown Silver badge

      Re: Illegal?

      Notify the FTC. They''re not the only ones and some software vendors are threatening customers over bad reviews (making customer employees withdraw those reviews)

  5. FILE_ID.DIZ
    Angel

    Irony or Satire?

    Is it ironic or satire that Fashion Nova's mouth piece does not like bad reviews about its latest bout with the FTC?

    Queue Archer reference.

  6. Potemkine! Silver badge

    Usual scapegoat

    The biz has, instead, blamed the problems raised in the complaint on the web software it used and on human error

    So it's all because of IT then, as always. Marketing and Sales would never do such a vile action.

    1. msobkow Silver badge

      Re: Usual scapegoat

      Yes, conveniently ignoring who specified the requirements for that "web software."

  7. Securitymoose
    Holmes

    Like just about every other review on the Internet souks?

    I never believe much I read on the 5* reviews anyway. Much more interesting are the 3s. Expect the worst, but hope for the best.

  8. lglethal Silver badge
    Trollface

    That must be one hell of a distraction if your willing to pay $4 million to make it go away. Maybe if I start emailing their CEO daily, I'll also get a payout. I can be annoying, I promise, but look I'll go away for $1 million...

    1. msobkow Silver badge

      Heck, I'd settle for $20K to pay off my taxes this year. :)

      1. lglethal Silver badge
        Joke

        But then you would have to pay taxes on that $20k, which means you would need a bigger payout, which would then need more taxes, and well it's turtles all the way down!

  9. Doctor Syntax Silver badge

    "As part of its settlement with the FTC, Fashion Nova will cough up millions of dollars, and must allow all customer reviews to be posted online unless they contain obscene or unlawful content"

    It seems that the FTC should have insisted in one more thing in the settlement: an admission that they were, in fact, wrong.

    1. Alan Brown Silver badge

      "It seems that the FTC should have insisted in one more thing in the settlement: an admission that they were, in fact, wrong."

      'No admission of wrongdoing' is quite different from 'flat out denial' and FN's outburst may well bring the FTC back to the table for another bite (triple the settlement if history is any guide)

  10. Dvon of Edzore
    Thumb Up

    Next!

    Hey FTC! Use that string of one success to investigate a certain company named after a river. The commingled comments for different products and vendors are a rich source of intentional customer confusion, let alone the fake reviews and tolerance of counterfeit goods. Be sure the settlement is at least 10% of annual sales corporate-wide, so you can staff a field office at each of their warehouses for continuous supervision.

  11. a_yank_lurker Silver badge

    Human Error...

    I call BS on human error unless they mean it was human error they got caught. Managlement had to be involved.

    While online reviews are not noted for always being reliable (in both directions), they do serve an aggregate function when enough people actually review the product or service of giving a sense of what the people think. Trying to skew the results is more likely to lead to the Streisand Effect as people will notice. Also, bad reviews are not necessarily as harmful as one might suppose. If there are a couple of hundred reviews, there will some poor reviews but the average rating will help give an idea of how much weight to give these reviews.

  12. Missing Semicolon Silver badge
    WTF?

    Settle

    How can you "settle" and not admit liability?

    1. Donn Bly

      Re: Settle

      People and companies do it (settle without admitting liability) all of the time because it often costs more to prove that you are in the right than it is to defend yourself against the accusation.

      Have you ever had a traffic ticket and entered into a ticket deferment program, even though you felt that you weren't guilty? I know that I have, because if you use the ticket deferment program you don't end up with points against your license AND you don't have to take days off of work, hire a lawyer, etc. It is cheaper to pay the ticket than it is to defend yourself against it.

      On the civil side, you see it all of the time in copyright and trademark infringement cases. In employment law or consumer liability, it is often cheaper just to pay them to go away than it is to pay lawyers to fight it - because you have to pay your own legal fees even if you win.

      I have been on the receiving side of this kind of thing too, where their lawyer walks in and asks "what will it take to make this go away, he has $50K in E & O insurance." I told my lawyer to take the money and walk away, because I was made whole even if they didn't admit that they did wrong.

      4 Million sounds like a lot of money, but a lot of it depends on how much insurance they have.

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