Hey Dude Settles FTC Charges Related to Suppressing Negative Reviews for $1.95 Million

Hey Dude has agreed to pay $1.95 million to the Federal Trade Commission (FTC) in order to settle charges related to the suppression of negative reviews online and violations of the government organization’s Mail, Internet, or Telephone Order Merchandise Rule.

According to the FTC, Hey Dude suppressed more than 80 percent of reviews that failed to provide four or more stars out of a possible five. From January 2020 to June 2022, the FTC said in a proposed complaint on Monday that the shoe company, which uses a third-party online management review interface, chose to have all five-star reviews (the best rating) posted on its website with little scrutiny. In many instances, however, it rejected and did not publish less-favorable reviews, the FTC said.

Before June 2022, the complaint further alleged that Hey Dude’s written policies and procedures instructed staff to publish certain types of reviews only if they were positive. According to the FTC, Hey Dude started publishing all consumer reviews only after finding out it was under investigation by the Commission.

What’s more, the FTC’s complaint charges that Hey Dude, formerly known as Happy One, LLC, violated the its Mail Order Rule in several ways, including failing to issue shipping delay notices when it could not timely fulfill consumers’ orders; failing to cancel consumers’ orders and issue prompt refunds after failing to issue such notices; and issuing consumers gift cards instead of sending prompt refunds of the original payment for merchandise ordered but not shipped, as required by the rule.

“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,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement. “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. We will continue to hold online retailers accountable for violations of the FTC Act and other laws we enforce.”

The proposed court order, if approved by the court, will require Hey Dude to change its conduct going forward. First, the proposed court order will bar Hey Dude from future violations of the Mail Order Rule. Next, it will prohibit the company from making misrepresentations about consumer reviews by requiring it to publish all reviews it receives, including reviews previously withheld from publication, with limited exceptions related to moderation of inappropriate content.

FN has reached out to Hey Dude for comment.

Hey Dude, which was acquired by Crocs Inc. in Feb. 2022 in a deal valued at $2.5 billion, has undergone several changes under its new owner. Some of these include the debut of a new logo and brand identity as well as reevaluating its wholesale strategy and launching sneakers.

But these moves have been hard for Wall Street to bet on. In July, Crocs Inc. shares fell after the shoe company cut its outlook for Hey Dude following its second quarter results. Although Hey Dude revenues were up 3 percent to $239.4 million in the quarter, wholesale revenues declined 8.4 percent to $148.8 million. This led parent company Crocs Inc. to downgrade its outlook for full-year growth at the Hey Dude brand and now expects revenues to grow between 14 percent and 18 percent in 2023, compared to its previously outlined mid-20 percent growth.