Class Action Lawsuit Filed Against Whole Foods Market for Securities Fraud
A class action lawsuit has been filed against Whole Foods Market that accuses the company of securities fraud, stating that by concealing its overcharging of New York City customers, the bad publicity hurt sales and drove down its share price.
According to The Rosen Law Firm, which filed the lawsuit on behalf of shareholders, representatives of the company “made false and/or misleading statements and/or failed to report that: (1) Whole Foods routinely overstated the weight of its pre-packaged products and overcharged customers; and (2) consequently, [the representatives’] statements about Whole Foods’ business, operations, and prospects were false and misleading and/or lacked a reasonable basis.”
Back in June, Whole Foods Market was accused by the Department of Consumer Affairs of grossly overcharging customers. The department said it tested 80 pre-packaged samples and found that each one of them had mislabeled weights, leading to overcharging. What’s more, 89 percent of the samples tested did not meet the “federal standard for the maximum amount that an individual package can deviate from its actual weight, as set by the U.S. Department of Commerce,” reports NBC New York. The company is accused of overcharging anywhere between $0.80 to $15 on samples.
“Some items had all been labeled with the same weight, despite the fact that it would be practically impossible for the individual packages of the items to weigh the same amount,” reports NBC New York. “These products included nuts, berries, vegetables and seafood. In some cases, the labeling issue was found with the same exact products at multiple stores throughout NYC.”
The class action lawsuit alleges that shareholders weren’t informed that the company was under investigation and were therefore misled.
According to a statement from The Rosen Law Firm, “Whole Foods attributed the sharp decrease in sales growth in the last two weeks of the quarter to bad publicity over its overcharging of customers in New York City.” The company’s stock fell by 11.6 percent, causing $1.7 billion in company losses.
Whole Foods Market says it’s committed to transparency in its financial reporting. “We have upheld our responsibility to our stakeholders, and are confident that this complaint is baseless and without merit,” Whole Foods spokesman Michael Silverman said to Reuters.
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Image: Mike Mozart
