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Manufacturer Behind Kylie Cosmetics and KKW Beauty Sues to Keep Coty From Stealing Its Trade Secrets

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  • Seed Beauty, the company that manufactures Kim Kardashian West and Kylie Jenner’s makeup lines, believes Kylie Cosmetics gave confidential trade secrets to its competitor, Coty Inc, which Jenner sold 51% of her brand to earlier this year.
  • Seed is now suing Kylie Cosmetics and Coty in an effort to stop them from sharing and using those secrets. 
  • The lawsuit comes just days after Seed won a temporary injunction in a similar case against KKW Beauty, which Coty recently acquired 20% of, preventing it from sharing confidential information as well. 
  • KKW Beauty denied claims that it shared information with Coty, and though Coty and Kylie Cosmetics have not responded to the lawsuit yet, they will likely argue that Seed’s allegations are speculative and that the secrets it claims Kylie Cosmetics shared aren’t actually trade secrets.

Kardashian-Jenner’s Strike Deals With Coty Inc.

The company behind Kylie Jenner and Kim Kardashian West’s makeup lines, Seed Beauty, is taking legal action to protect its trade secrets now that both stars have massive deals with Coty Inc. 

Coty Inc. is the beauty conglomerate that owns brands like CoverGirl, Sally Hansen, Rimmel, and others. It has recently made headlines for striking million-dollar deals with the sisters in what some view as an effort to refresh their image and attract a younger audience. For some time now, Coty has been struggling to keep up with its competitors in the industry, so it seems like their new strategy is to link up with more social media-driven brands like Kardashian West and Jenner’s.

Earlier this year, Coty bought 51% of Kylie Cosmetics for $600 million, and just this week, news broke that Kardashian West sold 20% of KKW Beauty to the company for $200 million.

The deals were huge for the sisters, valuing both of their brands at around $1 billion and leaving them each with net worths of $900 million. However, the deals were pretty concerning for Seed Beauty, which partnered with Jenner since her line started in 2016, taking care of logistics, manufacturing, development, storage, and distribution. 

Seed also took on the same responsibilities for KKW Beauty when Kardashian West launched the line in 2017. Now, Seed Beauty is worried that Coty has, and will continue to, get access to the secrets that it believes make Seed a strong force in the beauty industry. 

Seed Beauty Sues After Kylie Cosmetics Allegedly Shares Trade Secrets 

On June 30, Seed Beauty filed a civil lawsuit against Coty and King Kylie, the LLC behind Kylie Cosmetics, to prevent the misappropriation of trade secrets. 

The lawsuit says that because of Coty’s inability to “successfully compete in the new digital cosmetics world through its own innovation,” the company has engaged in a plan “to steal the secret sauce behind Seed,” through its deals with the sisters.

The suit claims, “Coty made a $600 million investment in King Kylie, but it really was a subterfuge to learn Seed’s confidential business methodologies.”

“Any competitor who acquired such information would be given an unfair competitive advantage,” it adds. 

The suit also alleges that Kylie Cosmetics knowingly shared Seed Beauty’s confidential intellectual property and Coty knowingly accepted that information. The complaint is highly redacted, so it doesn’t specify the secrets that Seed wants to keep private, but it could include things like information about product formulations, information about the business’ core operations, and the structure of its partnerships, according to Forbes. 

Seed says it repeatedly asked Kylie Cosmetics not to share certain parts of their partnership agreement over the course of negotiations with Coty, which were rumored to have begun in June of 2019. 

However, according to the suit, Jenner’s team refused to confirm or deny whether or not they had shared information. Seed also says it asked Coty not to ask for, or use, its trade secrets, but Coty similarly refused to assure Seed that it wouldn’t.

Now, Seed Beauty is asking the court to permanently bar Kylie Cosmetics from disclosing it’s trade secrets. It’s also asking that the court force Coty to promise not to use information that it’s already allegedly acquired. On top of that, it wants Coty to be prevented from developing any color cosmetics with Kylie Cosmetics for a period of time that was redacted in the suit.

“This action is to stop Coty’s theft of Seed’s pioneering and proprietary digital-first business model that has revolutionized the cosmetics industry,” the suit says.

Injunction Against KKW Beauty 

But again, the Seed’s concerns don’t just focus solely on Coty’s relationship with Kylie Cosmetic. In expectation of a Coty-KKW deal, Seed filed a similar lawsuit against KKW Beauty, also seeking protection of its trade secrets. 

Seed filed the lawsuit on June 19, likely after learning from its experience with her sister’s deal. KKW Beauty then filed an opposition to the lawsuit, claiming that Seed’s legal action was an “attempt to stifle the success of the Kardashian-Jenner family.” It also argued that KKW Beauty did not share any trade secrets with Coty and requested that the court compel arbitration.

KKW Beauty lawsuit reads, “The purported harm to Seed is entirely speculative, unfounded, and already complete,”

“By contrast, KKW stands to suffer comparatively more significant harm if the Court were to enter the amorphous injunction proposed by Seed.”

Ultimately, the court granted the temporary order, which lasts until August 21. That order prevents the brand from sharing details about its partnership with Seed, including “the terms of those agreements, information about license use, marketing obligations, product launch and distribution, revenue sharing, intellectual property ownership, specifications, ingredients, formulas, plans and other information about Seed products.”

Still, that court order didn’t stop Kardashian West and Coty from striking a deal, which was formally announced on June 29, and this legal situation is far from over.

It’s likely that Coty and Kylie Cosmetics will both argue that Seed’s allegations are speculative and that the secrets it claims Kylie Cosmetics shared aren’t actually trade secrets.

Still, the legal battles may be worth it in Seed Beauty’s eyes, as it has built itself quite a good reputation in the industry. According to the lawsuit, Seed goes to great lengths to protect its trade secrets by doing things like limiting access to areas of its factory, requiring all employees to sign non-disclosure agreements, and having security monitor the property.

In the Beauty space, Seed is well known for its speed and efficiency thanks to what it calls its “unique business model,” which makes it capable of turning an idea into a product within weeks. The company is not only known for working with the Kardashian-Jenner’s but is also massively successful for its own line, Colourpop Cosmetics, as well as its partnership with YouTuber Tati Westbrook for her new cosmetics line.

So it’s not surprising to see Seed go to great lengths to keep its secrets to success out of its competitor’s hands.

Coty and Kylie Cosmetics have not yet formally responded to the lawsuit or issued a public comment. The first court hearing is scheduled for October, according to Insider.

See what others are saying: (Forbes) (Business Insider) (The Fashion Law

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Nike To Clean and Resell Used Sneakers at a Discounted Price

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  • At least 15 Nike retail locations in the U.S. are participating in a new program the company calls “Nike Refurbish,” which is aimed at reducing waste.
  • As part of it, Nike will restore shoes with manufacturing flaws, as well as donated or returned shoes, and resell them at a discounted price.
  • Shoes at the end of their wear will be recycled into Nike Grind materials that are used to construct running tracks, gym floors, playgrounds, other Nike products, and more.

Nike Refurbish

Nike announced a new program on Monday called “Nike Refurbish” that will help boost sustainability and reduce waste.

As part of the program, the brand will take donated and returned shoes that are like new or gently used, as well as shoes with cosmetic manufacturing flaws, then clean and restore them to resell at a discounted price. Returned shoes must have been brought back within Nike’s 60-day return period in order for them to be resold. 

Nike employee restoring an eligible pair of sneakers. Source: Nike

All the refurbished shoes will have labeling on the box with information about their condition grade. Plus, they are also covered under Nike’s 60-day return policy. 

Nike Refurbished Footwear Sustainability Initiative | Well+Good
Source: Nike

Nike’s Recycling Efforts

Nike didn’t say what it previously did with returned sneakers in its announcement, but the new plan is part of its wider attempts to recycle materials.

On its website, it markets the initiative as a way for customers to “help keep shoes out of landfills.” and join Nike’s efforts towards, “Zero carbon and zero waste to help protect the future of sport.” 

Shoes that are truly at the end of their wear will be recycled into Nike Grind materials that are then used for tons of other projects, including running tracks, gym floors, playgrounds, outdoor courts, as well as other Nike apparel and footwear.

Nike Grind | Nike Purpose
Nike Grind material that was used to create an outdoor track. Source: Nike

So far, 15 Nike retail locations across the U.S. are confirmed to be participating in this model, but there are plans in place to expand this list over the course of 2021.

See what others are saying: (FOX Business) (Footwear News) (Miami Herald)

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Uber Sees Record Ride Demand But Doesn’t Have Enough Drivers Available

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  • Demand for Ubers outpaced driver availability in March, according to a Monday statement from Uber.
  • On top of seeing its best-performing month since the beginning of pandemic closures, the company also received more bookings last month than any other month in its entire history.
  • In an attempt to attract more drivers, Uber announced a $250 million, one-time stimulus payment last week to “boost” driver earnings.
  • While Uber said it believes it will turn a profit for 2021, the company could be set back more than $500 million because of a U.K. Supreme Court ruling that gives the country’s drivers minimum wage, holiday pay, and pension.

Uber Posts Record-Setting Growth

Uber announced Monday that its ride requests for the month of March were the highest it has ever recorded in its 12-year history. 

According to a filing with the SEC, last month, the company crossed “a $30 billion annualized Gross Bookings run-rate.” Alongside that, average daily Gross Bookings grew 9% from the previous month. 

Notably, this also marked the company’s best month since March of last year, when pandemic closures began in the U.S.

On top of that, Uber said its delivery business crossed “a $52 billion annualized Gross Bookings run-rate in March, growing more than 150% year-over-year.”

In fact, that demand over the past month was so high that Uber didn’t have enough drivers to meet it.

As vaccination rates increase in the United States, we are observing that consumer demand for Mobility is recovering faster than driver availability, and consumer demand for Delivery continues to exceed courier availability,” the company said.

$250 Million Driver Stimulus

Monday’s filing is in line with another announcement from Uber, which said last week that it is opening up a $250 million driver stimulus to “boost” earnings for drivers. 

“In 2021, there are more riders requesting trips than there are drivers available to give them—making it a great time to be a driver,” the company said at the time. “We want drivers to take advantage of higher earnings now because this is likely a temporary situation.”

“As the recovery continues, we expect more drivers will be hitting the road, which means that over time earnings will come back to pre-Covid levels.”

Can Uber Become Profitable?

In February, Uber reported $6.8 billion in losses for 2020, and for years, many have questioned if its business model is even profitable at all; however, in this latest filing, Uber said it believes it’ll become profitable by the end of 2021.

That said, last month, the Supreme Court of the United Kingdom handed drivers a major win by ruling that they need to be reclassified as “workers,” guaranteeing them minimum wage, holiday pay, and pension. 

While big news, the U.K. classifies “workers” and “employees” separately. As a result, U.K. drivers still aren’t granted full benefits. 

The decision will also likely be a setback for Uber, as Bank of America has estimated that it could cost the company more than $500 million. 

Uber’s Vaccine Access Fund

In other Uber news, the company — along with PayPal and Walgreens — has launched a “Vaccine Access Fund.”

Through that fund, customers can donate money that will be used to help people who normally lack transportation get to their vaccination appointment.

Notably, all three companies have said they’ll donate a joint $11 million. 

That’s on top of the $5 million PayPal previously donated, as well as the 10 million free and discounted rides Uber promised to give in December. 

Uber users are able to donate in-app, and PayPal has launched a donation page on its website.

See what others are saying: (The Wall Street Journal) (CNBC) (CNET)

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China Hits Alibaba With $2.8 Billion Antitrust Fine

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  • Chinese regulators slapped Alibaba with a $2.8 billion fine for monopolistic practices on Saturday, which amounts to 4% of the e-commerce mega-giant’s domestic sales.
  • Regulators accused the company of specifically engaging in a policy known as “choose one out of two,” where Alibaba would penalize sellers who also used other platforms to sell their goods.
  • CEO Daniel Zhang believes the company won’t be negatively affected by the fine, which could have been set as high as 10% of all sales.
  • Despite the fine, the company’s stock rose over 6% by Monday’s closing of the Hong Kong stock exchange.

Dominating the Marketplace

The Chinese e-commerce giant Alibaba was hit with a $2.8 billion antitrust fine by Chinese regulators on Saturday for using its dominant position in the market to punish merchants and rivals.

In particular, it engaged in a policy known as “choose one out of two,”  where a seller on Alibaba would be penalized in a variety of ways if they were found to be selling on another platform.

While the $2.8 billion fine seems large, it only accounts for 4% of the company’s domestic sales. The fine could’ve been far worse, as antitrust fines in China can go as high as 10% of the company’s annual sales.

Alibaba has agreed to take the fine, not fight it, and will fully comply with the demands of the regulators. Those demands include three years of “self-examination compliance reports” to ensure the company isn’t engaging in the same practices.

The news comes after the company’s founder, Jack Ma, has been under intense scrutiny from Chinese officials. Ma has not been seen in the public eye for months and his Ant Group, a sister company to Alibaba, is being forced by Chinese regulators as of Monday morning to become a financial holding company; therefore facing much stricter banking regulations.

Clear Sailing From Here

Fortunately for Alibaba, the company has managed to dodge much of the scrutiny Ma faces as he isn’t really involved with the business anymore. Its current leadership also doesn’t think the fine will really affect the company at all. Unlike Ma’s past rhetoric that was dismissive of regulators, CEO Daniel Zhang released a statement on Saturday that struck a conciliatory tone.

“Alibaba would not have achieved our growth without sound government regulation and service, and the critical oversight, tolerance and support from all of our constituencies have been crucial to our development,” he said.

Zhang added Monday morning that he doesn’t expect any negative impacts from the situation, which possibly helped Alibaba’s stock to rise sharply from $223 per share to $241 as of Monday’s closing of the Hong Kong Stock Exchange, where the shares are traded.

There are a plethora of reasons that could explain the stock’s rise just after it was the target of a major antitrust fine, but notably, there doesn’t seem to be any more antitrust fines in the pipeline, leading investors to be confident that the worst is behind the company.

See what others are saying: (Investors) (New York Times) (Wall Street Journal)

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