Mary Kay Cosmetics Sues RetailMeNot For Fraud, Trademark Infringement

When consumers are ready to make an online purchase a substantial number will pause during checkout, tab over to a search engine and query  “retailer name + coupons.” Frequently that process yields a result that prominently features RetailMeNot.

Mary Kay Cosmetics is suing affiliate site Google Ventures-backed RetailMeNot in federal court for precisely for this reason.  The company doesn’t sell directly to the public — though its corporate site makes it appear otherwise — and says it doesn’t offer deals or coupons. Therefore the company says that RetailMeNot’s presentation of Mary Kay coupons misleads consumers and harms the brand and its relationship with its sales reps (independent consultants) in several ways.

According to the Mary Kay complaint, filed in US District Court in Dallas:

By listing these purported Mary Kay “sales” and “codes” on its website, RMN misleads consumers into believing that Mary Kay has a relationship with RMN, that Mary Kay products can be purchased directly from Mary Kay at a reduced price, and that the coupon “codes” are legitimate . . . [The coupon listings] lead consumers into falsely believing there is an approval, affiliation or partnership between Mary Kay and RMN . . .

RMN’s listing of these “sales,” “deals,” and “coupons” harms Mary Kay and its relationship with its customers (the IBCs). Mary Kay has received various complaints from IBCs and others, who have been pressured by customers to accept and/or honor the false or unauthorized “coupons” posted on RMN’s website. In addition, RMN often resists, refuses or is slow to remove expired coupons and other codes or unauthorized offers, even when users ask RMN to remove them, likely because the number of coupons and other listings for Mary Kay and others on RMN’s website increases the amount of traffic to the website, which in turn allows RMN to charge higher rates for its services.

RetailMeNot began as a user-generated coupon site that came quickly to dominate search rankings for coupon searches. In 2010 it was acquired by WhaleShark Media, which rebranded itself as RetailMeNot and went public in 2013. 

In 2014 RetailMeNot claimed more than 450 million consumer visits to its sites. The company says it made more than $200 million in affiliate revenue the previous year, driving traffic to retailers. Basically the company does a better job of SEO than its retailer customers.

In many cases, however, there is no actual coupon or promo code, merely a link to the retailer website.

Mary Kay seeks to prevent RetailMeNot from using its brand and trademarks in the future as well as monetary damages. RetailMeNot issued a statement to the Dallas Morning News, saying that it believed it was in compliance with the law and would contest the lawsuit.

While Mary Kay may not succeed on all claims, it does appear that the suit has some merit and that RetailMeNot may be compelled to change some of its practices. If so, it’s not immediately clear how this might affect the broader world of affiliate marketing but there would likely be some repercussions.

RetailMeNot has incentives to settle the litigation and avoid the creation of an adverse federal precedent for affiliate marketers. However at least in their public statements, the two sides appear to be completely at odds and so the case could well go to trial.

Postscript: RetailMeNot provided us with the same statement issued to the Dallas Morning News:

RetailMeNot, Inc. takes concerns related to third party intellectual property very seriously. RetailMeNot, Inc. continues to believe that it operates in compliance with law and in the best interests of consumers and its retail partners by aggregating information to help shoppers save money using its websites and mobile apps.

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RetailMeNot, Inc. believes the allegations in this lawsuit are without merit and intends to vigorously contest this matter.