Nearly 50 Boohoo Group investors are seeking more than 100 million pounds ($127 million) in damages from the British fast-fashion juggernaut after reports of labor rights violations at its supplier factories in Leicester caused its share price to collapse.
The joint litigation claim filed by the law firm Fox Williams said that a 2020 Sunday Times revealing the mistreatment of workers who were paid as little as 3.50 pounds ($4.50) an hour, or well below the legal minimum wage, in unsafe and unsanitary conditions created losses that Boohoo could have avoided if it had kept to past promises of fair production. A second report by the Times in 2022 and a subsequent exposé by BBC Panorama in 2023 led the Nasty Gal and PrettyLittleThing owner’s stock to further plummet in value.
Related Stories
“This is a landmark case that will test the legal framework for securities litigation in the U.K. and the role of environmental, social and governance factors in corporate governance and disclosure,” Andrew Hill, a partner at Fox Williams, said in a statement. “Boohoo is a prominent example of a company that failed to live up to its ESG responsibilities and caused significant harm to investors. We believe that our clients have a strong case for compensation.”
A Boohoo spokesperson said that it has been made aware of the complaint but that it “strongly contests the allegations and will vigorously defend any claim.”
The original Sunday Times article was bookended between a Labour Behind the Label report accusing Boohoo of pressuring its suppliers to stay open despite a nationwide Covid-19 lockdown and a Mirror article that blamed its reckless production practices for a spike in coronavirus cases in Leicester.
Together, they set off a firestorm of outrage that saw retailers such as Amazon and Asos jettison Boohoo from their marketplaces, Britain’s home secretary call for an investigation by the National Crime Agency, and the destruction of more than a billion dollars in stock-market value, seemingly overnight. A monthslong independent review led by Alison Levitt, a former legal advisor to the Crown Prosecution Service, later found the allegations to be “substantially true” and that the company’s monitoring of the “many failings in the Leicester supply chain” was “inadequate” due to “weak corporate governance.”
Boohoo’s rolled out its so-called Agenda for Change to address the problems Levitt highlighted. Still, the hits continued: The Times wrote of warehouse “slaves” forced to walk the equivalent of a half-marathon per shift under sweltering temperatures. Last year, BBC Panorama revealed that hundreds of orders placed with its “model factory” on Leiceter’s Thurmsaston Lane, now shuttered, were being outsourced to Morocco and other parts of Leicester. In January, the same program alleged that Boohoo sewed “Made in the U.K.” labels on possibly thousands of items that were made in Pakistan and then shipped to Thurmaston Lane, something that the company admitted to doing out of “human error.”
The claimants, which include the California State Teachers’ Retirement System, allege that Boohoo made untrue or misleading statements and either failed to disclose or delayed the disclosure of material information to the market contrary to its obligations under the 2000 Financial Services and Markets Act 2000. But it could have broader consequences, too.
“The claim represents an opportunity for investors in Boohoo to recover substantial compensation, but also to discharge their stewardship obligations to support robust governance standards across supply chains in the ‘fast fashion’ sector,” Anisha Patel, senior associate at Fox Williams, said in the same statement. “We hope that, by launching claims such as these, investors are able to incentivize U.K. public companies to improve the governance of working conditions and to reduce “blue-washing” in the fashion industry.”
