- within Antitrust/Competition Law and Insurance topic(s)
Sephora, a popular beauty products chain, has recently faced numerous arbitration claims alleging discrimination related to its loyalty program, Beauty Insider. Consumers claim that when they voluntarily provide demographic information in the company’s loyalty program, the personalized recommendations that the program generates are discriminatory under California’s Unruh Civil Rights Act. In response, Sephora has filed at least 16 lawsuits in the state seeking declarations that Beauty Insider does not violate the Unruh Act, despite producing different recommendations based on protected characteristics.
According to Sephora, the personalized shopping experience curated by its loyalty program is optional and does not restrict access to any products a consumer chooses to buy. Beauty Insider also does not change pricing or any sales terms, so it provides full and equal services to all consumers in compliance with the Unruh Act. The purpose of the recommendations is “designed to enhance the customer experience” and meet the individual consumer’s needs.
The legal issue raised by these claims is whether a company that uses demographic information to generate personalized recommendations amounts to illegal racial and age discrimination under state law. As companies increasingly use automated data analytics to personalize the consumer shopping experience, this issue is likely to resurface.
The Unruh Civil Rights Act prohibits businesses in California from discriminating against individuals based on protected characteristics. These characteristics include race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, sex, sexual orientation, and citizenship. Courts also have extended the Unruh Act to age discrimination in some cases.
Sephora is seeking declaratory judgments to hopefully forestall the individual arbitration claims against it. The terms and conditions of the company’s loyalty program include a waiver of class or consolidated actions, jury trials, and forums outside of California. The beauty giant reports a 75% increase in Beauty Insider members over the past five years, reaching 46 million as of late 2025.
The outcome of the declaratory judgment actions could significantly impact the automated mechanisms and data collection that companies use to generate personalized recommendations for consumers.
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