Shoe brand Heydude has agreed to settle charges with the Federal Trade Commission related to the suppression of negative reviews and violations of the organization's Mail, Internet, or Telephone Order Merchandise Rule. The Crocs-owned brand will pay $1.95 million to the FTC in monetary relief, according to an FTC press release Monday.
Heydude violated the FTC’s Mail, Internet, or Telephone Order Merchandise Rule between 2020 and 2022 by not issuing shipping delay notices, failing to cancel orders and issue prompt refunds after not issuing such notices, and issuing gift cards to consumers instead of refunds of the original payment for unshipped orders, per the FTC release. The $1.95 million in monetary relief is expected to be used to provide refunds to impacted consumers.
If the proposed court order is approved, Heydude will also be required to publish all reviews it receives with limited exceptions, including reviews previously not published. The FTC said Heydude suppressed negative reviews, including “more than 80 percent of reviews that failed to provide four or more stars out of a possible five.”
“As this case makes clear, when retailers publish consumer reviews online, they cannot suppress negative reviews to paint a deceptive picture of the consumer experience. And when retailers don’t ship merchandise on time, they must give buyers the option to cancel their orders and promptly get their money back,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement. “We will continue to hold online retailers accountable for violations of the FTC Act and other laws we enforce.”
The FTC said that Heydude, using a third-party online management review interface, from January 2020 to June 2022 posted the highest reviews of products with “little scrutiny” to its website while it rejected and didn’t publish many less-favorable reviews. The FTC’s complaint alleges that Heydude’s written procedures and policies instructed staff to only publish certain reviews if they were positive and that the brand began publishing all reviews after it found out it was being investigated.
Crocs in 2021 agreed to acquire Heydude for $2.5 billion, which included $2 billion cash, helping to expand Crocs’ market.
“Since our acquisition of the company, we have worked diligently with the FTC to come to a quick and satisfactory resolution, and we are pleased to put this behind us and move forward with the excellent customer experience, transparency and accountability for which Crocs’ brands are known,” a company spokesperson said in an emailed statement.
Crocs in July announced that it reached over $1 billion in quarterly consolidated revenue during Q2, increasing 11.2% year over year. Heydude saw revenue increase 3% to $239.4 million, with a nearly 30% increase in DTC revenue.