Showpo sues online retailer for reputational damage and loss of sales

Former Smart50 finalist Showpo is suing its former graphic designer and online clothing store Black Swallow, alleging the designer unlawfully obtained a customer database and passed it on to her new employer.

According to a report by Fairfax, Showpo is suing 24-year-old Melissa Aroutunian and retailer Black Swallow for reputational damage and loss of sales, claiming that before Aroutunian finished her employment with Showpo in September 2016, she exported a database that listed the information of more than 300,000 customers.

The exported data allegedly contained contact details for Showpo’s 270,000 customers, along with information about other contacts, buyers, suppliers, associates, competition entrants, website users and subscribers.

No financial information or credit card details were included in the database, according to the report.

Aroutunian allegedly downloaded the client contact list before leaving Showpo and is claimed to have subsequently provided that information to her new employers at Black Swallow.

Showpo claims Black Swallow then used the information to market itself as an affiliate of the Showpo brand to customers in unsolicited communications, according to Fairfax.

The case is being heard in the Federal Court and Showpo is reportedly seeking orders for Black Swallow and its employees to destroy or delete the contact information, as well as an order for Black Swallow to not use a stylised “W” in its marketing materials due to its similarity with Showpo’s logo.

Showpo was founded by Jane Lu in 2010. In 2014, the retailer was ranked third in SmartCompany’s Smart50 awards, with a three-year growth rate of 306%, and in 2015, the company was turning over $10 million.

According to Fairfax, that figure is now close to $25 million.

Lu and Showpo were unable to provide comment on the case when contacted by SmartCompany this morning.

However, back in 2014, Lu spoke about the increasingly competitive landscape of online fashion retail in Australia.

“The space is getting crowded, it’s so much harder to get off the ground these days as online fashion is becoming a flooded market, so you need to really work out what your competitive advantages are and push hard to maintain market share,” she said.

SmartCompany was unable to contact Aroutunian for comment, however, Black Swallow founder Alexander Baro told SmartCompany the case “is great publicity”.

Black Swallow strongly denies the allegation it used the Showpo database, and Baro claims he has reached out to Showpo a number of times to resolve the company’s concerns.

“I’ve tried to contact Jane a number of times sort it out. I’ve wanted to sort it out,” he says.

A warning for startups

Alan McDonald, director at law firm McDonald Murholme told SmartCompany that in general terms, businesses should be doing everything possible to stop the transmission of personal customer data, even though he believes the courts are protective of property that businesses have legitimately built up, like databases.

“They really need to make sure that their systems are in place to prevent it,” he says.

Businesses are also reminded that when it comes to use of customer information, third parties need to be careful if they come across data that isn’t theirs.

If information crosses a business’s path that relates to another company’s customers or databases, be aware of the potential consequences of using it, says McDonald.

“If you do, you can be brought into litigation,” he says.

This article was originally published on SmartCompany

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