Just Fab Controversy (2015)

Just Fab: Deceptive Online Business Practices

Just Fab Controversy

TechStyle Fashion Group, formerly known as JustFab Inc., is an online subscription fashion retailer that carries a selection of shoes, handbags, jewelry, and denim. It offers a personalized shopping experience based on members' indicated fashion preferences. TechStyle Fashion Group is the parent company of a portfolio of five online subscription service brands including JustFab, FabKids, ShoeDazzle and Fabletics. The company was founded by Don Ressler and Adam Goldenberg in March 2010. Celebrities have promoted TechStyle through a variety of forms of media. They have gotten a lot of praise from singer-songwriter Avril Lavigne, YouTube beauty gurus Elle and Blair Fowler, and actress Kate Hudson. TechStyle has expanded worldwide, and is especially popular for their "all size" campaign to promote that it's ready-to-wear collection would now include sizes XS to 3X, 24-34 and 16W- 24W. Although the company has many positive components of their business, they are also disparaged harshly for their flaws as a company.

The company's business model and credit card practices have been criticized as deceptive. The company has been criticized by customers who say they've been duped into signing up for memberships, charged surprising membership fees, and that it's extremely hard to get out of memberships. The company deducts money from account without notifying users. In October 2011, a national class action lawsuit was filed against Just Fab. In August 2017, JustFab was issued an ASA ban for luring customers into a subscription trap, via a promotion on its website. The ASA has warned the brand to ensure its advertising prominently presents the condition that consumers joining the website as special members would be enrolling on a subscription contract and the specific action they needed to take to avoid the monthly fee of $35. JustFab Inc paid $1.8 million in 2014 to settle a Californian lawsuit brought by the Santa Clara and Santa Cruz district attorneys that alleged the company had not “clearly and conspicuously” explained the monthly fee. In September of 2015, Buzzfeed released an in-depth report of JustFab's misleading subscription service which refers to subscribers as "VIP members." Members were complaining that they did not even realize they were signing up for a subscription that would cost them a monthly charge of $39.95. The company had racked up more than 1,400 complaints to consumer bodies in the US. But it also has, as its own marketing chief, Shawn Gold, admitted in a blog post published in May last year, around 250,000 “angry” customers who “really hate us”. Additionally, these customers claimed the company made it difficult to cancel the subscription service. JustFab is the biggest scam in online fashion.

At first glance, the company seems awesome. You can purchase a majority of products for under $20. However, in their tiny text was some kind of membership clause, which meant that after a purchase, you are automatically enrolled in a monthly subscription. You have only the first 5 days of the month to opt out, or they automatically charge you $39.95. Many people have complaint that even after opting out, they were sometimes charged. After finding out about this, people immediately contacted "customer service" to cancel their unwanted memberships after being tricked into this mess. Customers complained that they were put on hold for an unbelievably long time, and unfortunately, people had to get on with their lives and hang up eventually.

This picture is what shows up on their website as a customer. The VIP membership looks like you are just buying shoes.. It does not mention anything about recurring payments.

The company is abusing a tricky UI, loaded with dark pattern design gimmicks like forced continuity and sneak into basket. They have the ultimate goal of getting customers to sign up for a VIP membership that they may not truly want. Used at least lightly by many e-commerce sites, dark patterns are ways web designers use the irrationality and laziness of any given human in order to increase the bottom line. Many argue that they’re unethical. In fact, the EU has passed a mandate that its countries push through laws protecting consumers from misleading subscription interfaces, which Germany was the first to enact. When customers want to buy products at a non-member price, JustFab gives sneaky terms and conditions language: “I accept the terms of the Just Fab VIP Membership Program!” and a small check box. Checking the box, which underhandedly looks like a normal Terms and Conditions box, would sign a person up for a VIP membership at checkout, something that people purposefully try to avoid because of rumors about their deceptive policies. You have to really be paying attention if you want to purchase an item without roping yourself into the monthly subscription. Who knew making a purchase could be this hard?! Users who are not extremely tech savvy might have a more difficult time with preventing themselves from the unwanted subscription. This is a problem for many users. They should not be stressed about buying a pair of shoes and wondering what charges will end up on their bank statement. In all four phases of ethical theory, being Individualism, Utilitarianism, Kantianism, and Virtue Theory, the policies of TechStyle and JustFab can be considered highly, and without a doubt, unethical.

There is a timer to buy things. Once something is put in your cart, you only have a certain amount of time left to complete your order. This does not give enough time for the customer to review the policies. JustFab purposely does this in order to trick customers into buying the products before they realize something fishy is going on.

Stakeholders

         Stakeholders are the people who affect, or are affected, by a company’s actions. In this case, the stakeholders are the people directly affected by the hidden regulations regarding the VIP membership. Some of the stakeholders include anybody who purchased an item without knowledge that they were buying into a membership subscription.

         In fact, I am even a stakeholder that was swindled into this membership service. I am from Long Island, and sweet sixteen’s are a huge celebration there. I was in a court for my best friend’s sweet sixteen, and she wanted us to wear a specific white dress with light pink heels. I found it to be almost impossible trying to find pink heels, and I simply googled “pink high heels” and ShoeDazzle popped up! They were a pair of shoes that seemed would cost me $13 (what a bargain!) but it cost much much more than that. Apparently, I had signed up for the VIP membership, and my dad’s credit card was being charged $35.95 a month without us realizing. We waited 3 years and spent $1500 by the time we finally realized that something was up. Let’s just say that I hid from my father for a while after that incident. “Mallory, what the hell is ShoeDazzle, and why have I made continuous payments to them for the past three years?”

          However, when I showed him the website, he was easily just as confused, and apparently, I am not the only one who fell for their VIP membership swindle. The company is directly affected because they will face the repercussions from people’s complaints about their websites. People will start to boycott their products which will hurt their sales/ profits.

Individualism

          Individualism theory is to maximize your company’s profits while staying within the law. During this time, JustFab broke no laws but definitely walked alongside them. According to Individualist Theory, a business is acting within ethical standards when it makes a profit for its stockholders or focuses on their interests, but doing so while pertaining to the laws of society and respecting human rights. JustFab has the goal of profiting and being successful. There is no doubt about that. However, even though no laws were broken, they left many of their customers unhappy by this hidden feature in their rules and regulations. According to JustFab, their data models refine customer targeting, enabling attraction from the right customers, predictions of lifetime value and ultimately an increase the company’s overall return on investment. By analyzing various customer behaviors across channels as well as purchasing trends, and other feedback, they are able to see gaps in their product offering while ensuring the success of potential roll-outs. They also leverage customer behavior data to customize product recommendations and personalization for members, increasing spend per site visit. So, if they do all of this, then why are the deceptive practices still intact? This creates angry customers who will want to boycott the company. Boycotting products ultimately will cause a decline in sales revenue hurting the company in the long run. This deception created angry customers who want to boycott their products ultimately hurting the company’s revenue. This is an unethical business practice under the Individualism theory.

Utilitarianism

            According to utilitarian ethics, happiness or pleasure are the only things of essential value. People who are enraged by this scheme will boycott JustFab’s products, and the company will eventually end up with their revenue declining. It does not make any sense to keep the hidden feature on the website if stakeholders are furious by what they are unknowingly getting themselves into. By making customers more aware of what they are purchasing, and by notifying the customers when they charge their account, they are showing their customers that they are a socially responsible business. By showing that they are a socially responsible business, this will attract more customers to invest in JustFab’s products. In this case, the cost-benefit analysis would be beneficial. Once the public uproar from the consumers happened, the only benefit that can happen is by pulling the hidden fees and immediately releasing a public statement admitting that the deception their business displayed was wrong. This process is less expensive and more profitable.

            After the backlash from the online advertisements for the VIP membership, or lack thereof, JustFab did not immediately remove or fix the issues. The CEO of JustFab, Adam Goldenberg, addressed the issue, but did not apologize. In an interview with Bloomberg, he said, “The vast, vast, vast majority of our customers not only understand the VIP model, they also really like it. When you're bringing in hundreds of thousands of new customers a month, you're not going to get everything right." He ultimately put blame on the consumers, which was not a good business strategy. This is not the best move that JustFab could of have made. Based on Utilitarian ethics, JustFab was unethical. They created unhappy consumers because of the misleading subscription service, and the difficulty to cancel their unwanted membership was outrageous.

Kantianism

          Kantianism focuses on acting rationally and on respecting others. Acting rationally can be defined as helping yourself, and others, to make rational decisions. In this case with JustFab, the rational decision was to improve the subscription service and the advertisements for their business to be truthful and much more comprehensible. JustFab did not improve their website and did not remove the hidden features of the subscription service in a timely manner. Therefore, they did not respect their customers, nor did they help them get what they wanted. The consumers said that they viewed these ads as misleading and deceptive. Acting out of good will is to either remove or improve upon the policy present. Another component of Kantian ethics is the Formula of Humanity. The Formula of Humanity is described as “Acting in such a way that you treat humanity, whether in your own person or in the person of another, always at the same time as an end and never simply as a means.” This is broken up into three separate ideas; humanity, ends, and means. An example of acting out of rationality is to either remove or improve upon the policy. This is because it is the right thing to do. Acting out of the ends is to admit that your actions are unacceptable, and to own up to your mistakes. Acting out of means is to value the consumers will, and is to eliminate or fix the policy that the consumers found misleading and deceptive. Being rightly motivated is a main principle of Kantian ethics. There are three maxims for the Kantian Shopkeeper. The first maxim is to be honest with your customers. This helps you gain trust from the customers and will lead to recurrent customers. Fixing the policy, while also making the customers more aware of what they are purchasing, will fulfill the first maxim. The second maxim is to be honest with your customers simply because you like them. JustFab did not admit that their policies were deceptive and morally wrong, so they were not being honest with their consumers. Lastly, the company needs to be honest with their customers because it is the right thing to do. Fixing these misleading advertisements for the subscription service would have been, in the end, the right thing to do because it sparked an uproar by the public. Looking at this case study through the Kantianism perspective, JustFab is viewed as an unethical company because of their immoral practices and business tactics.

Virtue Theory

 

          Virtue Theory is based off four main character traits; courage, honesty, temperance, and justice. These main principles address the whole picture of the situation. Courage is defined as “risking taking and willingness to take a stand for the right ideas and actions.” JustFab took a risk by hiding their policies to deceive their customers. When the policy backfired, they failed in doing what was right, accepting that what they did was wrong, and fixing the policy. Honesty is defined as “Honesty in agreements, hiring and treatment of employees, customers and other companies.” JustFab failed to treat the customers fair by not displaying the policy in a fathomable and reasonable way.  The company did not make up for their wrongdoings; for they never fixed the deceptive and misleading policies and business practices. They thought they could continue to get away with this, but they cannot. Temperance is defined as “reasonable expectations and desires.” The desire was (supposedly) to have an understandable advertisement for their subscription service. However, in the end, they failed to meet expectations and created an advertisement that needs extreme repairs if they want to continue making money. Justice is defined as “hard work, quality products, good ideas, and fair practices.” JustFab created quality products, but when people were tricked by their misleading website, people lost respect and trust for the company. According to the Virtue Theory, JustFab is an unethical company due to their immoral business practices.

 

Overall, JustFab's deceptive business practices is viewed as unethical by all four different ethical theories. This proves that the actions taken by them were unethical no matter what theory you want to use to evaluate the situation. 

References

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