The state Attorney General’s office says Julep Beauty and CEO Jane Park will pay $3 million for “deceptive” marketing practices. Park, however, says $1.5 million was refunded before Julep ever heard from the AG’s office, and the deal doesn’t mention “deceptive” practices.
The Washington State Attorney General’s office says Julep Beauty and CEO Jane Park will pay $3 million for using “deceptive” marketing practices to get consumers to sign up for subscription boxes of makeup and for making it difficult to cancel their subscriptions.
Park, however, disputes that dollar figure, saying $1.5 million was refunded to customers before Julep ever heard from the AG’s office and the settlement will only cost Julep $500,000. She also says the settlement doesn’t acknowledge any of the disputed practices were “deceptive.”
The state AG’s office said the practices covered by the settlement announced Tuesday occurred between 2012 and 2015.
Julep, founded by former Starbucks executive Park in 2006, has grown by leaps and bounds. It sells its products primarily through its website, as well as in stores including Nordstrom, Sephora and Ulta. It’s attracted some $56 million in venture-capital funding.
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Julep offers a “free” promotional welcome box of products to customers who give their credit- or debit-card information to pay for shipping and taxes.
But in that 2012-15 time frame, the AG’s office said in a news release, the company “did not adequately disclose” that those customers were also signing up for a subscription plan.
Consumers who tried to cancel sometimes had to call multiple times before a cancellation was honored and some were billed even after cancellation, according to the AG’s office, which added that Julep didn’t employ enough customer-service representatives to handle the volume of cancellation requests.
Julep’s most common subscription plans cost $19.99 to $24.99 a month.
About 55,000 customers nationwide canceled their subscriptions between December 2012 and September 2015, although “the precise number of consumers affected is unclear, due in part to Julep’s inconsistent record-keeping,” according to the AG’s news release.
The AG’s office said Julep agreed to pay $1.5 million in restitution to affected subscribers, and $250,000 in costs and fees.
It also agreed to donate hygiene products with a retail value of $1 million to charities and government institutions that serve domestic-violence victims, the homeless and those in prison. Another $250,000 in civil penalties will be suspended if Julep and Park avoid further violations.
The AG’s office also required Julep to provide adequate disclosure of the costs and terms of its subscription services going forward, and to provide enough customer-service reps to handle complaints and cancellations, according to the news release.
Park said Tuesday in an emailed statement that “Julep has never engaged in deceptive marketing” and that the company has always been clear about the terms and benefits of its subscription program.
She also said the financial impact of the settlement with the AG’s office is $500,000, not $3 million.
Park, in a statement Tuesday after the AG’s office announced the settlement, said the company “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.
While growing quickly in 2014 and changing its fulfillment practices, the company ran into shipping delays. “As a result, we experienced an unprecedented volume of customer-service calls and we were not able to answer all of our call volume,” Park said.
The company has since increased the size of its customer-service team by over 50 percent, Park said. It added extended call hours and hired experienced operational leaders.
She said it also issued $1.5 million in refunds to customers, before the company was contacted by the AG’s office.
According to Julep, the settlement with the AG’s office totals $500,000: $250,000 in legal fees, and $250,000 in product donations to local women’s organizations and homeless shelters.
A $250,000 civil penalty is due only if the company violates the consent decree in the future.
“We do not know where the Attorney General gets $3 [million] from, and believe it is unethical and deceptive for him to characterize our settlement in this way,” Park said in her email.
“Furthermore, the consent decree the AG’s office signed has no mention of the phrase ‘deceptive practices,’” Park said.
Peter Lavallee, a spokesman for the AG’s office, said, “We stand behind our portrayal in the press release 100 percent. It’s an accurate reflection of the court documents.”
The consent decree does say that Julep will provide $1.5 million in restitution to consumers, and will be credited for refunds it says it already provided to consumers between December 2012 and September 2015.
Lavallee said the AG’s office had “no reason to doubt their representation [that the refunds have already been made] but they need to prove to us that those refunds have been made. … Trust but verify.”
He said the AG’s office valued the hygiene-product donations at $1 million because that’s the products’ retail value, rather than the $250,000 cost to the company.
The Better Business Bureau had given Julep an “F” rating in 2014 for similar issues: not addressing customer complaints; that canceling service was difficult; and unresponsive customer service.
Julep says it has since worked with the Better Business Bureau to resolve those complaints. The company currently has no rating on the BBB website because the bureau says its “BBB file information is being reviewed and/or updated.”