Estee Lauder Settles Suit Alleging Retail Price Fixing

Estee Lauder Cos. said it settled a California lawsuit alleging that it conspired to fix and maintain retail prices and limit the supply of “prestige” cosmetic products sold by department stores.

The New York-based cosmetics company said it would take a pretax charge of $22 million, or 6 cents a share, in the quarter ended June 30 to account for Wednesday’s legal settlement with California consumers, which was disclosed by Estee Lauder in a Securities and Exchange Commission filing.

The charge won’t hurt the company’s financial condition, the SEC filing said.

In addition to its namesake brand, the company markets the Clinique, MAC and Bobbi Brown lines.

However, the case is being refiled in U.S. District Court for the Northern District of California on behalf of a nationwide class of cosmetics consumers.

The settlement stems from a lawsuit pending in Marin County Superior Court filed in 1998.

Under the settlement, Estee Lauder, along with other defendants including Federated Department Stores Inc., will give consumers $175 million in free products, an Estee Lauder spokeswoman said. The defendants also will pay plaintiff attorneys’ fees of up to $24 million.

Estee Lauder said it did not admit any wrongdoing and entered into the settlement solely to avoid costly litigation.

Defendants in the suit include retailers Dillard’s Inc., May Department Stores Co., Neiman Marcus Group Inc., Nordstrom Inc., Saks Inc., Target Corp., and French cosmetics makers L’Oreal and Clarins.

Federated, parent of Macy’s and Bloomingdale’s stores, said it was party to the settlement but did not expect it to have a material effect on earnings. Other defendants could not immediately be reached for comment.

Estee Lauder shares fell 5 cents to $34.23 on the New York Stock Exchange.