Cosmetics Industry Reaches Accord in Price-Fixing Lawsuit

The beauty industry is being treated to a new legally mandated GWP tactic valued at $175 million as part of a settlement of a five-year old lawsuit.

NEW YORK — The beauty industry is being treated to a new legally mandated gift-without-purchase promotional tactic valued at $175 million, thanks to a settlement of a five-year-old lawsuit.

Eight retailers and at least six cosmetics manufacturers on Wednesday settled the class-action lawsuit that was filed in 1998 in a California state court over price-fixing allegations.

A lawyer for one of the defendants said the lawsuit’s claims of “collusion” centered on how prices seemed to be set up. He explained that the way beauty products have been marketed for the last 50 years came under attack because of consumers’ perceptions concerning the uniformity of prices when shopping from one retailer to another.

Another source familiar with the case said one of the perceptions involved “promotional scheduling,” in which different brands stage and time sales promotions at various stores. Both allegations seemed to spring from an impression of manipulation.

The source pointed out that in this case, the parties had never gone to trial on the merits during the lawsuit’s five-year history in the California court system. Moreover, the more than a dozen defendants had “vigorously denied” the allegations in the lawsuit.

The plaintiffs in the class-action lawsuit were California consumers who at first filed the lawsuit against eight retailers. The lawyers for the consumers subsequently dragged in prestige cosmetics firms, one source said. According to other sources, the retail defendants are Dillard’s Inc., Federated Department Stores, Gottschalks Inc., May Department Stores, Neiman Marcus Group, Nordstrom Inc., Saks Inc. and Target Corp. The cosmetics firms are Boucheron, Chanel, Clarins, Concopco, The Estée Lauder Cos. Inc. and L’Oréal.

The settlement, which does not involve any admission of guilt by the defendants, requires a giveaway of products by manufacturers to consumers. While the total retail value of the freebies to consumers is $175 million, none of the defendants have chosen to publicly disclose what is their respective share in the settlement pie. One of the prestige beauty firms pointed out that the actual cost to the firm is “not great” relative to the “retail value of the settlement.”

According to a defense lawyer for one of the cosmetics firms, the plaintiffs will refile the lawsuit in a federal district court in San Francisco within a few days. That move, he explained, accomplishes several goals. The state court action is deemed closed, while the federal court filing allows the settlement to be considered a “nationwide settlement.” It would be the federal court judge that would determine whether to approve or reject the settlement, a process that he said could take several months.
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