Calif. class action suit alleges 'unfair competition' with Ivanka Trump brand

Ivanka Trump's fashion brand is facing a class action lawsuit brought by a California boutique, claiming that the first daughter's close relationship to the president and role in the administration gives her business an unfair advantage. 

A small, San Francisco boutique almost 3,000 miles away from Ivanka Trump’s office in the White House might not seem like a business that would find itself entangled with the first daughter’s multi-million dollar fashion brand.

But the two-store chain, which sells high-end clothing and accessories for men and women, claims that improper conduct by the current administration and a mixing of politics and business has put the fashion retailer, and many others like it, at an unfair disadvantage.

In a class action lawsuit filed in San Francisco Superior Court last week, the 40-year-old, family-owned Modern Appealing Clothing argues that unethical promotion of the Ivanka Trump brand by the current administration has violated the US Constitution and a California statute protecting businesses against unfair competition.

It also alleges that sales of the product “have surged since the election because of unlawful, unfair, or fraudulent, promotional activities” and that administration officials have “knowingly and willfully conspired and agreed among themselves to damage plaintiffs financially by the unfair business practices herein alleged.”

President Trump’s business ties concerned many business and government observers as he campaigned for the presidency, and his decision to place his real estate empire in blind trust and give his sons the reins has left ethical experts with additional questions and concerns. Critics say the unprecedented conflicts of interest, which exist both nationally and internationally, have the potential to compromise the nation’s best interests.

But it’s the business of the president’s eldest daughter, his close political advisor, that has ushered in the most recent ethical concerns. As anti-Trump protesters organized a boycott of Ms. Trump’s merchandise and stores that carry it, such as Nordstrom, the administration has fired back to defend and even promote the brand.

And showing favor for Trump family brands over American competitors can have an unfair economic impact on businesses, critics say.

“The unfair competition claim is where I’m expecting a lot of litigation against the Trump administration and the family business,” Richard Painter, a corporate law professor at the University of Minnesota and an ethics expert, tells The Christian Science Monitor in a phone interview.

“It is not unfair competition to say, ‘Well I’m a Trump supporter; buy my stuff.’ But to go get a job in the government in the Trump administration and then have your company marketing with a Trump connection, now we’re getting into abuse,” he adds. “There is a real economic impact.”

Rallying against the boycott of Trump-related products, which also included the Ivanka Trump brand, the administration has sharply criticized movements steering shoppers away from purchases that benefit the family. Press Secretary Sean Spicer publicly defended Ms. Trump’s brand, while Counselor to the President Kellyanne Conway outright encouraged viewers to purchase items from the women’s fashion line while speaking on a Fox News segment. Mr. Trump himself criticized Nordstrom in a tweet after the department store decided to drop his daughter's merchandise. 

"Ivanka has taken on several measures to promote high standards of ethical conduct," Mr. Spicer said Tuesday. "Even though she's not a federal employee, she'll follow the restrictions that would apply if she were. She’s taken these steps with the advice of counsel and in consultation of the Office of Government Ethics."

The clothing brand made some $100 million in revenue in 2015. Its sales have increased by more than 300 percent from January to February of this year, and orders are up by more than 500 percent when compared to last year's averages.

This isn’t the first suit to bring allegations of unfair competition against the administration. Earlier this month, a Washington, D.C.-based wine bar sued Trump, arguing that the new Trump hotel in the capital was culling the business of diplomats and politicians hoping to court the Trump administration.  

Mixing politics and products isn’t a new method of boosting sales. “Politicization of merchandise has gained traction," Professor Painter says, noting that for years, companies have capitalized on causes favored by the left, issuing support for gay marriage or transgender rights and endorsing candidates for office to appear socially conscious to Democratic shoppers.

Selling something and advocating for a political candidate or ideal as an outsider to politics is protected by free speech. It’s the act of leveraging a position of power or platform to support a brand that breaches ethical lines, Painter says. 

And while a small boutique in liberal San Francisco might struggle to cite direct damage from the Trump family’s brands, other similar businesses in less liberally-inclined areas could see an impact.

“There’s no question that the prominence of the Trump family in government creates advantages in the commercial world,” Kirk Hanson, the executive director of the Markkula Center for Applied Ethics at Santa Clara University in California, tells the Monitor. “The Trump brands will generate an unending series of lawsuits over the next four years because the conflict of interest is real and unresolved.”

Ms. Trump has skirted ethical questions thus far by acting as an unpaid advisor in the White House, a position which the administration argues does not make her an employee. But as her role grows and she gains a West Wing office and security clearance, ethical experts question her influence, and the competing interest in her brand.

"Competition between plaintiff MAC and defendant Ivanka Trump will continue to favor defendant Ivanka Trump because defendants continue to fail to take appropriate steps to avoid exploiting public office for private gain," the suit argues.

It’s too soon to say how courts might decide, and whether a decision favoring plaintiffs would create a shift in the Trump family’s business handlings. But the unprecedented entanglements and conflicts could change the way the US views its future political leaders, Professor Hanson says.

“To my knowledge, this is the first time a first family has had so many business conflicts of interest in American history,” he says. “We will learn a lot from the next four years, and it may lead to a reassessment of our ethics laws and exemptions we grant for the president and for advisors who don’t hold formal White House jobs.”