Behind the Glam: Chandler v. Ulta Beauty Uncovers the Truth About Resold Cosmetics

On June 26, 2018, Ulta Beauty, one of the largest beauty retailers in the United States, was sued, calling into question the company’s dishonest selling practices. Brought to the U.S. District Court for the Northern District of Illinois, Chandler v. Ulta Beauty, Inc (2018). was initiated by plaintiff Barbara Chandler, who sued Ulta Beauty for reselling used cosmetic products and labeling them brand new. The case was dismissed initially but later reopened as the court acknowledged the failure to identify any misrepresentation and evidence that the litigant acted with scienter. Given these insights, Ulta Beauty should be liable for deceiving customers into buying used items and disregarding the danger in their actions. 

The case states that there were no signs of scienter, the intent or knowledge of doing wrongdoings, deceptive acts, or misrepresentation committed by Ulta; however, Ulta had clearly shown fraudulent misrepresentation by deceiving its clients. According to the Ulta Beauty store policy “Ulta Beauty's policy does not permit the resale of used, damaged or expired products. Our policies, training, and procedures are aimed at ensuring that only the highest quality products are sold in our stores and online.” Although the store policy claims that they are against reselling old or used products, they continue these practices, all while profiting off their customer’s lack of knowledge regarding their products. 

Furthermore, the case claims that the company did not commit scienter or fraudulent misrepresentation within 17 C.F.R. § 240.10b-5(b), expressing  “an omission is only actionable if the omitted facts were "necessary to make the statements made, in the light of the circumstances under which they were made, not misleading.” Since the customers had no way of knowing that they were being sold a used product for the price of a new one, Ulta acted with omission. The other party lacked a way to uncover the truth, and their lack of knowledge could be considered fraud.  Furthermore, deceiving customers for economic gains is labeled as fraud under Section 5 of the Federal Trade Commission Act (FTC Act) (15 USC 45) and the Retail Consumer Act of Illinois.

Ulta Beauty did not only deceive its clients, but it misled their employees by pressuring them to sell used products. In a CBS news article, a Former Ulta Beauty employee claimed she felt pressured to resell used products. The employee uttered that Ulta has continued to deceive consumers for years, repackaging, restocking, and reselling used beauty products including cosmetics at full price as if they were new. The employer then added, “We had other managers come in from other stores and they were saying 'OK, yeah, you need to clean all these returns, you need to clean this, this is how you're going to get your numbers down,' and it was all a numbers game.” Employees at Ulta stores also were not provided with the knowledge that reselling old products without the customer's consent broke the store policy, thus they did not call into question when they were pressured to do so. As stated on the Ulta Beauty store code, the store works “to ensure that everyone at Ulta Beauty has a safe and secure workplace,” and that their “commitment to comply with all laws is at the heart of our business.” Ulta Beauty once again contradicts itself by saying that they try to create a safe work environment, but continue to make their employees feel pressured to do something that goes against their morals and the store law, indicating an unhealthy work environment. While claiming that their main priority is compliance with the law, Ulta Beauty has been observed violating their store policy but also federal law.

Reselling used products to customers can lead to fatal consequences for the buyer by making them prone to getting an infection or other skin dilemmas. Even if the store cleans these products, there could still be a residue of harmful bacteria on the products. According to the New York Times, “If they are applied to the skin, this can result in irritation, eczema and skin or eye infections, said Dr. Anne Chapas, a dermatologist and fellow of the American Academy of Dermatology.” Additionally, another study carried out by the London Metropolitan University and Dr. Paul Matewele supported this claim, as it discovered that the used products that were tested were filled with bacteria that could cause “gastroenteritis, urinary and respiratory tract infections, bacterial vaginosis and, less surprisingly, acne. The old cosmetics even tested positive for a strain of bacteria that can cause meningitis, a potentially fatal brain disease.” Customers do not know if their products are filled with bacteria or not, which can be considered a fraudulent omission by Ulta Beauty because they know the possible dangers of their actions and how it could lead to putting their clients in jeopardy.  Even with this awareness, the company continues to do it without warning their customers about it and constantly denying the allegations. 

In the Chandler v. Ulta Beauty case one of their arguments is that “[s]ilence is not `fraud' without a duty to disclose,' this argument was also used in the case Higginbotham v Baxter. According to this case, a company does "not have a freestanding legal duty to disclose . . . scandal, no matter how unseemly the scandal was and no matter how significant the scandal would have been to the market." Although a company does not have to reveal all of their deeds to the public, if their actions are damaging to others and if it can risk someone's safety they are required by law to confess to their acts. Even if Ulta Beauty has a non-disclosure agreement (NDA), they still have to share with the public that they are reselling used and old products because the NDA does not protect information that the public is required to know. Furthermore, the Consumer Bill of Rights states that ", The right to safety: to be protected against the marketing of products and services that are hazardous to health or life." Every customer has the right to know the hidden secrets of a company if they are being lied to and if it impacts them in any type of way, according to the consumer bill of rights. 

Four years after the case was initially filed, the verdict in Chandler v. Ulta Beauty, Inc. (2022) should have found Ulta Beauty guilty of failing to provide customers with crucial information that could put them at risk. However, on March 30, 2022, a judge granted Ulta Beauty's motion to dismiss, agreeing that the amended complaint did not adequately allege a materially misleading misrepresentation or omission. The judge also determined that the complaint lacked evidence showing the defendants acted with scienter, resulting in the dismissal without prejudice.

Although companies have the right to privacy when secrets jeopardize public safety or deceive consumers, keeping them hidden is unjustified. If ruled in favor of the plaintiff, this case could have set a legal precedent to protect consumers from companies that conceal harmful information, but the ruling did not have that impact. For now, we must wait for a future case with the necessary evidence to expose these companies' lies regarding the cleanliness of their products.