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.

Once approved, the plaintiffs’ claims would be dismissed, with prejudice, in their entireties. As part of the settlement, the defendants also will pay about $24 million in plaintiffs’ legal costs.

Still to be determined is the structure of how the free products will be disbursed to consumers. The lawyer said that working out the details, as well as giving the firms time to manufacture sufficient merchandise for the giveaway, could take another 12 to 18 months beyond the court approval date. He said the giveaway would probably last one week, and customers are likely to be notified of the opportunity via advertisements in print publications, through a toll-free number or on a company Web site.

A source at a different cosmetics firm described the logistics involved in working out the details as “complicated.” She said her company was still working on the details.

According to several of the beauty firms, however, the likely scenario would be for customers to simply walk up to a cosmetics counter and request the freebie. None were willing to discuss how consumer claims will be validated, and one representative didn’t have a problem with the risk that there may be savvy customers who end up getting more than one free giveaway.

A spokeswoman for Federated Department Stores said, “We’re pleased to have reached a mutually agreeable settlement of this matter and we’ll be seeking soon to have it accepted by a federal court so that its implementation will be national.”

Other retail defendants, such as May Department Stores and Saks Fifth Avenue and Saks’ department store group, declined comment.

L’Oréal USA Inc. said in a statement, “We agreed to participate in the settlement to avoid the time and expense of litigation. There were no findings that any defendant violated any state or federal law or committed any unlawful business practice.

“Under the terms of the settlement,” the statement continued, “defendants as a group have agreed to give class members who purchased department store cosmetics between May 29, 1994, and April 30, 2002, an agreed upon amount of free cosmetics products.”

Lauder, through a spokeswoman, said, “We strongly deny any wrongdoing. We settled the case because we are eager to get on with the business of offering products to our customers, as opposed to getting tangled in a protracted lawsuit.”
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