San Francisco District Attorney Files Civil Consumer Protection Case Against Drone Company, Lily Robotics, and Obtains a Temporary Restraining Order to Protect Customers
News from the Office of District Attorney George Gascón
FOR IMMEDIATE RELEASE
January 12, 2017
CONTACT: Alex Bastian (415) 553-1931
Maxwell Szabo (415) 553-9089
SAN FRANCISCO DISTRICT ATTORNEY FILES CIVIL CONSUMER PROTECTION CASE AGAINST DRONE COMPANY, LILY ROBOTICS, AND OBTAINS A TEMPORARY RESTRAINING ORDER TO PROTECT CUSTOMERS
San Francisco—Today, San Francisco District Attorney George Gascón filed a civil law enforcement action against Lily Robotics, Inc., a drone company, for false advertising and unfair business practices. The District Attorney’s Office also obtained a court order today, requiring that the millions of dollars that Lily Robotics received from its customers be used for refunds, and nothing else. Lily Robotics has failed to ship a single unit even though the first units were to be shipped nearly one year ago in February 2016. This law enforcement action is a result of an investigation that took place over several months.
“It does not matter if a company is established or if it is a startup,” said District Attorney George Gascón. “Everyone in the market must follow the rules. By protecting consumers, we protect confidence in our system of commerce.”
Lily Robotics was aware of the investigation and was informed yesterday by the District Attorney’s Office that this action would be filed today. Late last night, Lily Robotics announced that it would begin issuing refunds to all of its customers.
In May 2015, Lily Robotics began accepting “preorders” for its purportedly autonomous “flying camera,” also known as the “Lily” or “Lily Camera.” The premise of the Lily was that the user could throw the camera drone in the air and it would begin recording. The Lily would follow a tracking device carried by the user. The Lily was originally offered for preorder sale for $499 with a suggested retail price of $999.
Along with the preorder campaign, Lily Robotics released a promotional video that purportedly showed the Lily in use and “Lily Shots” from the perspective of the Lily Camera. According to court documents, the promotional video was false and misleading because the images that appear to have been filmed with the Lily Camera were actually filmed by a much more expensive, professional camera drone that requires two people to operate. Based on the fraudulent video, Lily Robotics received 60,000 preorders, with customers paying Lily Robotics $34 million upfront, while they waited for the Lily Camera to ship.
In addition to releasing a false and misleading promotional video, court documents also allege that Lily Robotics violated several provisions of regulations governing the sale of merchandise via the Internet. The regulations require that when a company substantially delays the shipping date for the product, the company must automatically refund the customer’s money unless the customer specifically agrees to the delay. Lily Robotics encountered almost a year of shipping delays, but did not ask its customers for their consent to these delays. As a result, Lily Robotics was required to refund all of the $34 million in preorder money. Instead, Lily kept the money.
Today, at the District Attorney’s request, the Honorable Harold Kahn, Judge of the Superior Court, ordered that Lily Robotics could use the money it received from its preorder customers to pay refunds, and for no other purpose. The District Attorney’s Office requested the order because of information that the Office received showing that Lily Robotics used its customers’ preorder money to secure a $ 4 million bank loan. It was also based upon information that over the last year and a half, customers requesting refunds from Lily have had considerable trouble getting their money back, and that Lily Robotics has lost contact with a high percentage of its preorder customers.
The parties are due back in court on January 18, 2017, in Department 302 for further proceedings.