U.S. Consumers Sue Welspun on Cheap Sheets as Fallout Widens

(Bloomberg) -- Two class-action lawsuits have been filed against Welspun India Ltd. that allege the company fraudulently labeled its bed sheets and towels as premium Egyptian cotton, the latest setback for the supplier after Target Corp. cut ties with the manufacturer over the same issue.

Welspun committed a “widespread fraud” in which “consumers who have purchased Welspun bed linens have overpaid for an inferior product,” a plaintiff alleged in an Aug. 29 lawsuit that seeks to represent a group of consumers filed in New York federal court. The suit was filed by Hagens Berman Sobol Shapiro LLP, a consumer-rights action law firm that represented consumers in a $400 million suit against Apple Inc.

A Welspun spokesman declined to comment on the lawsuits.

Welspun fell 2.2 percent to 56.60 rupees in Mumbai on Thursday.

The controversy over Mumbai-based Welspun has widened since Target said Aug. 19 it’s halting business with the vendor after discovering sheets and pillowcases that were made with cheaper fibers were mislabeled as Egyptian cotton for two years. Indian’s largest home textile manufacturer has seen its market value plummet by about half since then, with Wal-Mart last week pulling the company’s sheets from its stores while other big box stores including Bed Bath and Beyond Inc. are reviewing the authenticity of its products.

Welspun said it’s adopting new labeling practices and has hired Ernst & Young LLP to audit its supply processes. The company said the affected products represent about 6 percent of Welspun’s annual business, which totaled 59.8 billion rupees ($890 million) in fiscal 2016.

Hagens Berman, which filed the first suit, brought a class-action case against Apple and five of the the country’s largest publishing companies in an alleged e-book price fixing scheme, according to the law firm.

Welpsun is accused of falsely advertising its bed linens as 100 percent Egyptian cotton, including linens marketed under the Fieldcrest label for Target, and selling them “at a significant premium,” according to the suit.

A separate class-action case was filed Aug. 31 in a St. Louis, Missouri federal court. Both lawsuits claim minimum damages of $5 million each, the threshold for a class-action, and also filed suit against subsidiary Welspun USA Inc.

The cases are Abbott v. Welspun India Ltd. et al, 1:16-cv-06792, U.S District Court for the Southern District of New York and Aasgaard v. Welspun USA, Inc., 4:16-cv-01408, U.S. District Court for the Eastern District of Missouri.

--With assistance from Michael Hytha and P R Sanjai To contact the reporter on this story: K. Oanh Ha in Hong Kong at oha3@bloomberg.net. To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net, Dave McCombs, Subramaniam Sharma