Dive Brief:
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A group of consumers has filed a class-action lawsuit with the United States District Court for the Eastern District of Missouri, Eastern Division, against Welspun India Ltd. and Welspun USA over alleged misrepresentations of cotton used in bed sheets and towels manufactured by the textile companies.
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According to an email to Retail Dive from Dallas law firm Steckler Gresham Cochran (which represents the plaintiffs along with Armstrong Law Firm LLC in St. Louis), the suit alleges infractions of Missouri’s consumer fraud statutes and other laws "through deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, breach of warranty and/or omission of material fact, among other things."
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The suit also alleges that Welspun has “long been aware” that its products were mislabeled. “[I[f what we are learning is true, it is apparent that Welspun’s systematic deception is not just limited to the fake ‘Egyptian’ cotton products that have been identified in the news," attorneys for the plaintiffs stated in the email. "What is not clear, however, is whether retailers are taking the appropriate steps to protect U.S. consumers.”
Dive Insight:
This is unlikely to be the last legal challenge facing Welspun in regards to its Egyptian cotton labeling snafus. The fracas began last month when Target announced it would cut ties with the textile supplier after finding that Welspun products purporting to be made of Egyptian cotton are not, therefore violating Target's code of conduct and standards of vendor engagement.
Welspun is a major supplier of home goods to U.S. retailers, some of which have launched their own investigations into the matter, including: Wal-Mart, Bed Bath & Beyond, Macy’s and J.C. Penney. Wal-Mart pulled some sheets from shelves, though only Target so far has completely severed ties with Welspun. Ikea released a statement saying it has no dog in the fight because it doesn't sell items labeled Egyptian cotton. Right now, Welspun is shouldering the brunt of the problem, but the lawsuit is an indication that retailers could also get caught up in a legal whirlwind that seems destined to swirl.
In the meantime, the retailers involved will have to find a reliable source for their cotton sheets, towels and other goods and find ways to ensure accurate labeling and quality, no matter the source. Target is considering shifting its cotton sheets and towels business to another Indian textiles supplier, Trident Ltd.
Indeed, the debacle points to the potential for pain points in the global supply chain, considering that not even Welspun, much less its client retailers in the U.S., understands how and where the cotton was derived. In a call with investors last month, managing director Rajesh Mandawela acknowledged that the increasing complexity of its supply chain has made it difficult to verify the provenance of the fiber.
It's an astounding admission that shows that most U.S. retailers likely have little idea about the source of the raw materials of their goods, which could become a growing issue in an era when many consumers are demanding sustainable manufacture of the products they buy.