Washington AG sues LuLaRoe clothing seller as ‘pyramid scheme’

The company is accused of misrepresenting how much money can be made selling the patterned leggings.

By Thomas Clouse / The Spokesman-Review

The Washington Attorney General filed a lawsuit Friday alleging that clothing marketer LuLaRoe, and its business model, which uses “fashion consultants,” is actually a pyramid scheme used to defraud those persons it recruits to sell the clothing.

As part of the suit, AG Bob Ferguson asserts that the company misrepresents how much money sellers can make selling the popular patterned leggings and other clothing. The company charges prospective sellers between $2,000 to $9,000 as “onboarding” fees to sell the clothing on the promise that they could make as much as $10,000 to $500,000 a month for part time work.

“LuLaRoe tricked consumers into buying into its pyramid scheme with deceptive claims of high profits and refunds for unsold merchandise,” Ferguson said in a news release. “Instead, many Washingtonians lost money and were left with piles of unsold merchandise and broken promises from LuLaRoe.”

The Spokesman-Review reached out to five local “home office” sales representatives listed on the LuLaRoe website. However, none of them immediately responded to emailed requests for interviews.

LuLaRoe, which is based in California, sells leggings and other apparel. It uses individual retailers, which they call “independent fashion consultants,” to sell the clothing. The new consultants must be recruited and sponsored by existing retailers.

More than 3,500 Washington residents signed on to sell the clothing since January 2014. However, fewer than 2,000 of those consultants remain active, according to the state.

Ferguson explained that a direct-selling business becomes a pyramid scheme when its primary source of income comes from recruiting sellers rather than the retail sales to consumers. They often require steep start-up costs and require minimum purchases on a regular basis.

Between 2014 and 2017, LuLaRoe consultants received monthly bonuses based how much inventory they and their recruits purchased from the company. The more consultants they recruited, the higher the bonuses the company provided.

The business changed its pay structure in 2017 to provide bonuses solely on sales to customers, the state said. “In a LuLaRoe webinar, a LuLaRoe executive explained the change came about because of the ‘need to get away from being a pyramid scheme,’ ” the news release states.

If a judge rules that LuLaRoe violated the law, Ferguson will seek penalties of $2,000 per violation, as well as costs, fees and other relief. He will also seek to force LuLaRoe to pay restitution to the people who paid money to become part of the business.

“It’s time to hold LuLaRoe accountable for its deception,” Ferguson said in the release.

A call to the LaLuRoe corporate office in Corona, California, was not immediately returned on Friday.

Talk to us

More in Herald Business Journal

Jonnathan Yepez Carino speaks with Auliilani De La Cruz’s class about financial literacy during a presentation at Mariner High on Wednesday, May 31, 2023, in Everett, Washington. (Ryan Berry / The Herald)
Extra credit for financial literacy: Bankers teach kids the basics

From building credit to applying for a loan — these execs offer money management advice for students and adults.

The 214-foot tall cranes work to unload their first cargo shipments at South Terminal at the Port of Everett on Thursday, April 8, 2021 in Everett, Wa. (Olivia Vanni / The Herald)
Business Briefly: Port of Everett named Job Creator of the Year

Zap Energy receives $5 million for fusion energy plant and Kenmore Air offering flight from Everett to Victoria.

Rachel Daniels makes a salami rose during a Charcuterie 101 Workshop at Machias Meadows in Snohomish, Washington on Sunday, May 7, 2023. (Annie Barker / The Herald)
Snack queens share secrets to piecing together party platters that wow

Caterers Rachel Daniels and Mallori Rojas specialize in curating charcuterie boards. Here’s how they make their magic.

Michelle LeFevre and her Bernese mountain dog Kona sit in the shade in front of Kona’s Pond outside their home Wednesday, May 10, 2023, in Camano, Washington. LeFevre, a retired teacher, wrote the children’s book “On Kona’s Pond” which centers on her pup and the other creatures that call the pond home. LeFevre’s sister, Susan Cousineau McGough, illustrated the book with watercolor renditions of Kona and the pond. (Ryan Berry / The Herald)
Life ain’t so ruff ‘On Kona’s Pond’

A retired Camano Island teacher’s new children’s book, “On Kona’s Pond,” tells the story of her dog and his wild friends.

FILE - A Boeing 737 Max jet prepares to land at Boeing Field following a test flight in Seattle, Sept. 30, 2020. Boeing said Tuesday, Jan. 10, 2023, that it took more than 200 net orders for passenger airplanes in December and finished 2022 with its best year since 2018, which was before two deadly crashes involving its 737 Max jet and a pandemic that choked off demand for new planes. (AP Photo/Elaine Thompson, File)
Boeing inks deal for up to 300 737 Max planes with Ryanair

At Boeing’s list prices, the deal would be worth more than $40 billion if Ryanair exercises all the options.

Logo for news use featuring Snohomish County, Washington. 220118
Four recognized for building a better community

Economic Alliance of Snohomish County hosts annual awards

Dr. David Kirtley at the new Helion headquarters in Everett, Washington on Wednesday, Jan. 19, 2022  (Olivia Vanni / The Herald)
Everett nuclear fusion energy company nets first customer: Microsoft

The Everett company, on a quest to produce carbon-free electricity, agreed to provide power to the software giant by 2028.

Hunter Mattson, center, is guided by Blake Horton, right, on a virtual welding simulation during a trade fair at the Evergreen State Fairgrounds in Monroe, Washington, on Wednesday, May 3, 2023. High school kids learned about various trades at the event. (Annie Barker / The Herald)
Trade fair gives Snohomish County kids glimpse of college alternatives

Showcasing the trades, the Trade Up event in Monroe drew hundreds of high school students from east Snohomish County.

A Tesla Model Y Long Range is displayed on Feb. 24, 2021, at the Tesla Gallery in Troy, Mich.  Opinion polls show that most Americans would consider an EV if it cost less, if more charging stations existed and if a wider variety of models were available. The models are coming, but they may roll out ahead of consumer tastes. And that could spell problems for the U.S. auto industry, which is sinking billions into the new technology with dozens of new vehicles on the way.  (AP Photo/Carlos Osorio)
Tesla leases space at Marysville business park

Elon Musk’s electric car company reportedly leased a massive new building at the Cascade Business Park.

Henry M. Jackson award winner Tom Lane. (Olivia Vanni / The Herald)
Tom Lane: An advocate for small and local businesses

The CEO of Dwayne Lane’s Auto Family is a recipient of this year’s Henry M. Jackson Award.

John M. Fluke Sr. award winner Dom Amor. (Olivia Vanni / The Herald)
Dom Amor: Working behind the scenes to improve the region

Dom Amor is the recipient of this year’s John M. Fluke Sr. Award

Opportunity Lives Here award winner Workforce Snohomish and director, Joy Emory. (Olivia Vanni / The Herald)
Workforce Snohomish receives Opportunity Lives Here Award

Workforce offers a suite of free services to job seekers and businesses in Snohomish County.