New Economic Realities   //   September 12, 2023

Hey Dude to pay $1.95M to the FTC over shipping delays, other violations

Hey Dude, a buzzy slip-on shoe brand owned by Crocs, is settling with the Federal Trade Commission for $1.95 million over allegations that it failed to notify customers about shipment delays or give customers accurate refunds for missing orders. The FTC also alleges the brand suppressed negative reviews and customer complaints on its website.

The FTC announced the settlement on Monday, citing numerous customer complaints about orders being delayed despite Hey Dude advertising two-day shipping on select items. Some customers said they didn’t receive their orders at all, or that items were missing.

“In numerous instances, such items were out of stock or Hey Dude Shoes shipped merchandise that was materially different from what consumers ordered, according to the FTC’s complaint. Further issues included a lack of records or systems around shopper offers and refunds.

“Numerous consumers have complained directly to Hey Dude shoes about late shipping, undelivered, or incomplete orders, including by phone, email, and Hey Dude shoes’s social media accounts,” the FTC settlement reads. “Many consumers have reported that it was difficult to reach Hey Dude shoes and obtain information about the status of their orders.”

The FTC says the brand violated the Mail, Internet, or Telephone Order Merchandise Rule, which requires sellers to ship within the timeframe they advertise or provide a refund.  Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, said in a statement that “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 settlement is subject to approval by a Nevada federal judge.

The FTC also alleges violations of Deceptive Customer Review Practices, saying that Hey Dude’s reviews system posted five-star reviews but rejected lower star ratings from January 2020 to June 2022. The FTC claims that Hey Dude started publishing all consumer reviews only after finding out it was under investigation.

“Prior to June 2022, Hey Dude Shoes had written policies and procedures instructing its staff to publish certain types of reviews only if they were positive in nature,” the FTC alleges.

A Crocs company spokesperson told Modern Retail in a prepared statement that the alleged violations occurred over the holiday months in 2020, prior to its acquisition of the company in February 2022. It said the monetary portion of the settlement refers to “fulfillment times of a small number of Hey Dude product orders placed online,” and not any issues related to reviews. 

“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,” the Crocs statement said. 

Hey Dude was founded in 2008 in Italy by Alessando Rosano, selling boat-shoe style slip-ons noted for being washable. In recent years, the brand had grown popular with Gen Z shoppers. Crocs announced the acquisition of Hey Dude in December 2021, betting that it could grow a second brand amid demand for comfortable shoes. 

In 2022, Hey Dude saw 70% growth on a pro-forma basis, predominantly from wholesale. Earnings from the second quarter of 2023 show that Hey Dude’s DTC revenue grew by 29.7% year-over-year to $90.6 million. Overall revenues went up to $239.4 million, a 3% increase. 

Crocs plans to invest anywhere from $165 million to $180 million to help support growth for the brand, including completing a new distribution center in Las Vegas slated to open in late 2023.