DirectBuy and its franchisees allegedly engage in unlawful sales tactics to persuade consumers to pay a $5,000 membership fee and then charge unlawful fees for merchandise bought by its members through DirectBuy.
This is an ongoing investigation and pending class action lawsuit filed on behalf of consumers in Missouri that have purchased "memberships" from DirectBuy's franchisee located in Chesterfield, Missouri, which is operated by a company called Evamor, Inc.
DirectBuy allegedly bills itself as a nationwide buying club that promises members access to brand-name manufacturers of home goods and supplies and the opportunity to buy merchandise with no “hidden store markups and middlemen costs". Generally, the merchandise includes furniture, flooring, carpeting, cabinetry, window treatments, appliances, lighting and home improvement products.
DirectBuy runs an aggressive national marketing campaign, including informercials, internet advertising and direct mail. The class action complaint provides some of the statements used in DirectBuy's marketing efforts:
1. As a DirectBuy member, consumers can save 40-50% of retail prices.
2. The people at DirectBuy are experts on how to stop losing your hard earned money on retail markups.
3. As a DirectBuy member, consumers join an organization that purchases directly from the manufacturer or their authorized dealer.
4. As a DirectBuy member, consumers are guaranteed no retail markup.
5. As a DirectBuy member consumers are no longer in the dark about that items really cost.
This marketing campaign, alleges the class action lawsuit, has one desired goal: get consumers into the store. The class action investigation alleges that once in the store, a consumer is subject to a high-pressured, 90 minute presentation. The consumer is not allowed to price compare the DirectBuy merchandise with similar retailers and further told that if the consumer does not agree to become a member on the spot then that consumer is barred from becoming a member for 4 years. Based on numerous consumer reports and complaints, the presentation uses high pressure and strong arm tactics.
It is only at the end of the presentation that the consumer is told the cost of the membership. The cost is close to $5,000 for three years, then $190 a year for an additional seven years. If the consumer cannot afford the membership then an affiliate of DirectBuy will finance the cost of the membership for close to 20% interest a year, according to some reports. The franchisee and DirectBuy share in this fee.
The class action lawsuit contends that the central premise behind DirectBuy--that there is never a retail market-up--is simply not true. The class action lawsuit cites the following in support of its allegations:
1. That manufacturers and suppliers pay to DirectBuy and its franchisees a rebates, discounts and incentives for purchases made by DirectBuy members, which is equavalent to a "retail markup". These rebates and discounts are not passed onto customers.
2. The member must pay to DirectBuy and its franchisees a "handling fee" of 8% of the purchase price, which is in fact a disguised "retail markup".
3. The members must pay a 15% "freight charge" which is in fact another retail mark-up.
The class action lawsuit against DirectBuy seeks among other things repayment of the fees paid as described above.
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DirectBuy is a nationwide buying club, with headquarters in Merrillville, Indiana. Consumers who pay to become members of DirectBuy can purchase home goods and products at discounted prices. Generally, the stores are operated as franchises.
Evamor, Inc. is a franchisee of DirectBuy that operates in Chesterfield, Missouri. DirectBuy is a nationwide buying club, with headquarters in Merrillville, Indiana. Consumers who pay to become members of DirectBuy can purchase home goods and products at discounted prices. Generally, the stores are operated as franchises.
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