Peloton Interactive, the exercise equipment and media company, is facing a class-action lawsuit, led by Eric Fishon, Alicia Pearlman, and Patrick Yang over false advertising (Fishon et al v. Peloton Interactive, Inc. 1:19-cv-11711). The plaintiffs state that Peloton told customers that their on-demand fitness class library was “ever-growing” but Peloton has since deleted approximately 57% of the library’s content.
The library contains fitness classes available on the Peloton Bike, Peloton Tread, and Peloton Digital products; a stationary bicycle, a treadmill, and a phone app respectively. The classes include live spin classes, weightlifting workouts, outdoor running workouts, yoga classes, stretching exercises, and cardio-fitness classes. The complaint alleged Peloton made its products distinctive from other similar ones by advertising the expansiveness of their on-demand classes library.
In Peloton’s pre-IPO filing, Peloton classified themselves as a “technology,” “media,” and “software” company, rather than an equipment manufacturer or fitness company. The CEO and co-founder of Peloton, John Foley, has called the company a “media company akin to Netflix” and said that they had “10,000 classes on-demand.” According to the pre-IPO documents, Peloton recognizes that “[m]usic is an important element of the overall content that [it] make[s] available to [its] Members.” It has made music an important feature of the classes available to its users and allows them to pick classes based on the type of music. The complaint claims that Peloton was aware of musical copyright laws and other intellectual property and licensing laws and that they often used music in these classes without paying proper licensing, citing a suit filed in March 2019 in which several members of the National Music Publishers Association including Downtown Music sued Peloton for copyright infringement (Downtown Music Publishing LLC et al v. Peloton Interactive, Inc. 1:19-cv-02426).
Fishon and the rest of the plaintiffs claim that during the time of the NMPA suit, Peloton continued to advertise its diverse and vast class selection. On March 25, Peloton removed nearly half of the classes available on the on-demand services in response to the lawsuit, but not under the orders of a judge. The on-demand library size dropped from 10,017 classes to 5,739 classes. The removed classes all contained an allegedly infringing song. The complaint says that this action was for Peloton’s “own economic advantage and to the financial detriment of its customers.” Having now reduced the library significantly, Peloton continues to charge the same monthly subscription rate. The plaintiff states that Peloton knew of the alleged infringements since April 2018 and continued to use the music to build its library, meaning that many of the classes made since Peloton became aware of the issue have now been removed.
The complaint cites an article from Business Insider and a letter Foley sent to Peloton members informing them of the changes being made due to the music copyright lawsuit and promising that the company’s decision to remove the music in question from the on-demand library would “not affect [members] experience with (or the cost of) [Peloton’s] service, or access to the kind of music [members are] used to hearing.” Prior to the class-action lawsuit, many members took to Reddit to complain about the changes to the library. Peloton filed to go public in late August despite the copyright infringement lawsuit and the significant change in its content. Its IPO was priced at $29 a share. When it started trading in September its value began going down, getting as low as $20.46 a share. It has recovered slightly in the holiday season and reached as high as $37.02 a share. The price returned to a steady decrease this week and is now trading at $27.07 a share.
The complaint accuses Peloton of defrauding its customers, violating New York’s consumer protection statute and false advertising statute, breach of contract, and unjust enrichment. Plaintiffs are seeking certification of the class and awards for attorney’s fees and costs, actual and/or statutory damages, restitution for profits unlawfully obtained from Plaintiff’s and other members of the class, and pre- and post-judgment interest on any other amounts awarded.
The plaintiffs are being represented by Elias Gutzler Spicer and Dicello Levitt Gutzler. Peloton’s counsel for this case is unknown at this time, but they are being represented by King & Spalding in the case against Downtown Music.