ClassPass Faces Class Action Suit Over Phony Business Listings
ClassPass, the fitness and health club aggregator and subscription app, is facing a proposed class-action lawsuit for allegedly claiming to be partner with countless" small businesses on its subscription-based app without their consent or even knowledge.
The lawsuit, filed Friday in federal court in Manhattan, alleges unfair competition, false affiliation, and false advertising, saying ClassPass unfairly and falsely" steers business away from small businesses and toward itself as a result.
A business has the right to control how it's used, its reputation, its name. It gets to choose who it wants to partner with, how it wants to advertise itself, how it wants to reach out to customers," attorney Raphael Janove told Motherboard. Another business can't take that without consent or knowledge."
ClassPass did not immediately respond to a request for comment.
The lawsuit centers around the experience of a nail salon owner in Montclair, New Jersey.
Leeah Nails says that after a customer received a manicure and pedicure in September, the customer informed the business she had already paid using the ClassPass app. The salon did not have any relationship" or partnership with ClassPass at the time, and the online booking system showed a reservation had been made, but no payment, the lawsuit states.
ClassPass offers its customers a number of monthly credits that vary depending on the subscription level. Customers then use those credits on the ClassPass app to book and pay for a yoga class or wellness service with what is supposed to be a small business that agreed to be a part of the ClassPass network.
The small business apologized but asked that the customers pay for her manicure and pedicure. The angry customer paid and left. Afterward, the customer left a negative review on the ClassPass website.
Complaint The salon discovered, according to the suit, that ClassPass had, in fact, listed Leeah Nails as an affiliated partner on the ClassPass app, alongside service offerings, incorrect appointment slots, and a description of the business that Leeah Nails did not write.
When the nail salon contacted ClassPass, customer service refused to assist on the grounds that Leeah Nails did not have an account with ClassPass," the lawsuit states.
Complaint Hoping to figure out the scope of the problem, Janove, the lawyer, told Motherboard he has spoken with dozens of businesses in at least 20 states" to find out if they know they were partnered with ClassPass. Virtually all of them were unaware," he said.
ClassPass has faced numerous complaints from fitness studios, including partners. The small business owners' issues with the tech company have tended to center around allegations that ClassPass drove prices down below what was sustainable and stripped control from studios. One New York studio owner told VICE in 2020, ClassPass is squeezing studios to the point of death." Because of the size of the company's customer base, many studios feel compelled to remain on the platform anyway.
But ClassPass has struggled in the nearly two years since it was valued at $1 billion in 2020, achieving so-called unicorn" status. The COVID-19 pandemic hit the fitness industry hard, as gyms across the country shut down. As a result, ClassPass lost 95 percent of its revenue and either laid off or furloughed more than half of the staff.
To adapt to the new environment, the company reportedly focused on growing its number of grooming and beauty offerings. As of January, 6,500 of the company's 8,600 beauty and wellness offerings had been added in 2020 alone, according to ModernRetail. At that time, the company told ModernRetail that a third of ClassPass credits were being used on wellness and beauty.
In 2021, we plan to hyper-scale the wellness and beauty options in our network," chief commercial officer Zach Apter said then.
To fuel that growth, Janove believes that ClassPass may have shortcut its traditional partnership-building process, in which the company reaches out to businesses in hopes of fostering a relationship, and instead went ahead and scraped the internet for all these businesses and their service listings," falsely inflating the size of its partner base.
So all of a sudden, ClassPass looks like it has a huge network of wellness services," Janove said. But in truth, they don't actually have association with countless [numbers] of these businesses."
This month, Mindbody, a fitness and wellness scheduling company, acquired ClassPass in an all-stock deal.
This post has been updated to include additional information.