Crocs’ Hey Dude Shoe Brand Fined $1.95 Million by Federal Watchdog – Sourcing Journal

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The Federal Trade Commission (FTC) fined direct-to-consumer footwear brand Hey Dude Shoes for failing to fulfill orders and declining to provide timely refunds.

A subsidiary of Crocs Inc. since last year, Hey Dude Inc. this week agreed to pay the FTC $1.95 million to settle charges that it suppressed negative reviews on its e-commerce site and violated the Commission’s Mail, Internet, or Telephone Order Merchandise Rule. The company didn’t tell customers about the status of late orders and cancel those orders when a product was not available. Instead of issuing refunds for merchandise that was ordered but not shipped—as the rule requires—the company issued gift cards redeemable through its e-commerce store.

Between 2020 and 2022, Hey Dude Shoes’ third-party online management review interface automatically published all five-star reviews to its website “with little scrutiny,” according to the FTC. In many instances, the brand withheld negative comments from public view. The complaint alleged that Hey Dude’s written policies and procedures instructed employees to cherry pick positive reviews for publication. Hey Dude Shoes only began publishing all product reviews after it found out it was being investigated by the FTC, the complaint said.

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“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,” FTC Bureau of Consumer Protection director Samuel Levine said. “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.”

The proposed court order, announced Monday, would require Hey Dude Shoes to address its previous conduct and change its protocols. The order would bar the company from further violations of the Mail Order Rule, and prohibit it from misrepresenting consumer sentiments by requiring it to publish every review it receives, including those that were previously withheld.

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If the U.S. District Court for the District of Nevada, where the complaint was filed, issues the final order, the $1.95 million fine will go toward paying back consumers who were denied refunds on undelivered orders. “We will continue to hold online retailers accountable for violations of the FTC Act and other laws we enforce,” Levine said.

In July, Hey Dude Shoes parent company Crocs cut the brand’s second-half outlook after disappointing wholesale performance curbed Q2 revenue growth. On an earnings call, Crocs CEO Andrew Rees spoke to the brand’s major wholesale distribution challenges related to its transition from a small distribution center in Las Vegas to a larger warehouse nearby. Crocs expects to open the warehouse by the end of the year and transition Hey Dude Shoes to a new ERP system.

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Hey Dude Shoes did not immediately respond to a request for comment.

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