ClassPass has listed thousands of “beauty and wellness” boutiques as partners without their knowing or despite their repeated complaints, according to an amended complaint to a proposed class-action lawsuit filed Tuesday. This falsely inflated the total size of the fitness startup’s network ahead of its October acquisition by Mindbody while leaving small businesses to deal with angry customers, injured reputations, and potentially dangerous situations, the complaint claims.
Without any agreement with the businesses, ClassPass systematically uploaded the information of thousands of boutiques, copied their website’s wording almost “verbatim” or used generic language, often listed inaccurate appointment times, and took subscribers' money, only to leave unaware small businesses to clean up the mess, per the filing. At times, ClassPass attempted to come to a formal agreement with the boutique studios without informing them that they were already listed as partners—a process that one small business described as “gaslighting.” “ClassPass pays little or no regard to whether gyms, salons, and other entities desire to do business with it at all,” the lawsuit states, adding elsewhere: “These fake partner listings are central to ClassPass’s business model and have contributed to ClassPass’s apparent success.”The purported size of its network is a primary reason so many customers and partners join the ClassPass platform, where monthly subscribers can reserve classes and services using credits, often at below-market prices. But according to the lawsuit, well over a third of ClassPass’ purported 20,000 “beauty and wellness” partners have never agreed to any sort of relationship with the startup. The number rises to over 50 percent in major metropolitan areas like New York City, Phoenix, and Denver, the suit says. In Bridgeport, Connecticut, it passes 90 percent.
ClassPass’ decision to list these businesses regularly came at the expense of angry or unknowing small businesses which, “through no fault of their own, have faced upset customers who blame them for the confusion and not ClassPass, and have received negative reviews and ratings in important online forums,” the lawsuit states. Businesses have said ClassPass has made it harder for massage parlors to screen for people “searching for sexual services” and for salons to adhere to strict COVID-19 protocols; listed “fake appointment times” at salons that promise to never double-book; and even tried to purchase a class for a ClassPass customer as a “personal assistant.”Many purported partners are listed on ClassPass alongside generic language stating that, for example, “Massage Spas are busy and wait times can be unpredictable. But getting pampered shouldn’t be stressful.” The company’s mass partnership strategy has also made it and the small businesses both vulnerable to faux pas. For example, ClassPass listed a Jewish community center with a photo of a nude woman getting a massage.
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While the issues stemming from the “false listings” are numerous, the lawyer leading the case against ClassPass told Motherboard what ties them together is a lack of control.
“I've spoken to businesses in pretty much every single state,” attorney Raphael Janove said. “A central theme that all businesses have is this idea of consent and agreements and knowing how your business is listed online. “After the amended complaint was filed Tuesday, Janove noticed ClassPass changed at least some descriptions of its purported partners, instead saying they were part of “ClassPass Concierge, a beta program that allows you to request appointments at businesses that are not ClassPass partners,” though some incorrect appointment times remained listed. The company did not immediately respond to a request for comment.The plaintiffs are claiming, among other things, false affiliation, false advertising, and unfair competition under federal and state law.
ClassPass worked to aggressively expand its footprint in the beauty-and-wellness space after the pandemic ground the in-person fitness experience to a near-halt in 2020. After watching its revenue plunge 95 percent and laying off or furloughing half its staff, company leadership decided it needed to invest in a more pandemic-appropriate category. “In 2021, we plan to hyper-scale the wellness and beauty options in our network,” chief commercial officer Zach Apter said early this year. Already, by January 2021, such classes comprised 55 percent of the platform’s entire catalogue in New York, according to Modern Retail. Now, the fitness startup boasts thousands and thousands of such partnerships around the country. But the lawsuit states that ClassPass “falsely advertised the size of its network by creating thousands of ClassPass pages for businesses without their permission,” which bolstered its public image. When the fitness scheduling platform Mindbody acquired ClassPass last month, its CEO listed ClassPass’ “huge network of wellness businesses” as a primary reason.
Today, MindBody uses the size of the ClassPass network to “entice” other partners into doing the same, the lawsuit states. On its website, Mindbody states, “Join over 50,000 health and wellness partners around the world growing their businesses on ClassPass.”ClassPass co-founder Payal Kadakia has stated that the company added unknowing businesses to its network from early on. On the NPR podcast “How I Built This” last year, she said that the startup made “a volume bet essentially” that if it listed many partners on its platform, both studios and customers would be incentivized to sign up. That included “certain studios that we just put on the platform where we didn’t have full agreements with yet,” she added. According to Kadakia, the clothing brand Lululemon also sent ClassPass a cease-and-desist letter after the startup offered Lululemon gift cards to anyone who signed up for the fitness platform despite having no agreement with the company. “In sum, ClassPass’s scheme of listing fake ‘partners’ extends back to its founding. It is not a unique, recent phenomenon. Nor is it limited to beauty and wellness industries, as it also extends to gyms and fitness studios,” the lawsuit states. The lawsuit argues the ClassPass business model is inherently based on what is called a “two-sided network effect,” which requires ClassPass to have an enormous number of both customers and partners in every single market it operates in or risk failure.
“Put simply, no number of vendors in New York will increase the appeal of the platform to a customer looking for service only in Missouri,” the lawsuit states. “This limitation means that platforms like ClassPass must independently reach a critical mass of users on each side of the platform in every area they seek to operate.”The lawsuit presents the grievances of a slew of small businesses around the country who never wanted to be partnered with ClassPass but nonetheless ended up listed on the platform. Among them is Hairroin Salon in Los Angeles, California, which “explicitly and repeatedly” refused ClassPass’ advances, only to realize, after a customer got her their nails done and then claimed “she paid through ClassPass” that the business had been listed on the platform.“The appointment was booked online using an invalid credit card, as the charge was declined. The phone number and email address reserving the booking were contacts at ClassPass, but after leaving a voicemail and sending an email, Hairroin Salon did not receive a response,” the lawsuit states. When the small business finally got through, they felt ClassPass was “gaslighting” them, as the company said it would close an “account” that Hairroin Salon had never agreed to in the first place.
Others didn’t even get that lucky. Leeah Nails in Montclair, New Jersey, for example, tried multiple times to get ClassPass to remove its landing page on ClassPass, but the fitness platform “refused,” only doing so after the owner filed a lawsuit.ClassPass pitches itself to partners as a way for them to fill empty seats in classes, giving small businesses much-needed extra revenue without taking up inventory meant for direct, dedicated customers. The startup grew enormously offering their classes at such unsustainably low rates that customers got used to, numerous former partners told VICE last year. The small businesses thus faced a scenario where they felt they had to be on the platform, even if they didn’t want to be. Leeah Nails currently feels that pull. Per the lawsuit, the owner is worried “the false listing of hundreds of partners in the ClassPass Partner Network” will force it to rejoin the platform and swallow “the discounted rates or risk losing customers who wish to use ClassPass to book services because of the wide offerings of the ClassPass Partner Network.”To sneak around the unaffiliated partners, ClassPass workers sometimes pretend to be unaffiliated themselves in order to book classes on behalf of customers, the lawsuit alleges. The Facial Bar in Kansas City, Missouri did not know ClassPass had listed it as a partner “until a ClassPass representative, who only identified themself as a ‘personal assistant,’ attempted to book a reservation on the customer’s behalf,” the lawsuit states. Worried the “personal assistant” was a scammer, the company reached out to the customers, who said she had booked through ClassPass.
The owners of Salon Phoenix, in Hoboken, New Jersey, started to worry that ClassPass was ruining their “hard-earned reputation” after finding out the fitness platform had listed the company as a partner. The salon’s own website states high up: “I NEVER DOUBLE BOOK CLIENTS.” ClassPass published a version of that language to its Salon Phoenix landing page—“they never double book clients,” ClassPass stated—before listing “fake appointment times” that “do not exist or availability when Salon Phoenix is already booked,” according to the lawsuit. Salon Goldyn in Denver, Colorado has dealt with “multiple frustrated and upset customers who either booked unavailable appointments through ClassPass or who booked the salon’s services on the salon’s website” and tried to pay with ClassPass credits, according to the lawsuit.
But Salon Goldyn’s concerns extend beyond that. The small business started to worry that ClassPass is putting its employees and customers at risk. It “absolutely does not want customers to show up early” in order to minimize COVID-19 exposure and refused to partner with ClassPass when asked, according to the lawsuit. When ClassPass added the business to the platform against the business’ wishes, it also told customers “to arrive 15 minutes in advance.” Rapha Massage in Bridgeport, Connecticut, never wanted to partner with ClassPass. When it had done so with Groupon, a Groupon customer asked for “sexual services in the middle of a massage and made the therapist fear for her safety,” according to the lawsuit. The business now “strictly” screens its customers to root out “those who are searching for sexual services,” as well as other potential medical issues, the lawsuit. The massage parlor did not want to partner with ClassPass and have “unsolicited customers” arrive. Nevertheless, it ended up on the ClassPass platform. Midvalley Massage in Millcreek, Utah, has struggled with a similar issue related to ClassPass. “It conducts a rigorous screening of all potential customers and obtains credit card information to ensure that customers are not sexual solicitors or internet scammers,” the lawsuit states. When Classpass asked Midvalley Massage to partner with the tech platform, the business repeatedly declined. ClassPass, according to the suit, added them anyway.