Those luxury Egyptian cotton sheets you own may not be luxurious – or Egyptian

Egyptian cotton, which can be spun into fine, long fiber to make sheets with a high thread count, is synonymous with luxury bedding. But in the last four months, it’s been at the center of a controversy that has caused many Americans to wonder whether the Egyptian cotton sheets they rely on for a good night’s sleep actually contain any cotton from Egypt.

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The controversy involves Welspun India, a giant home textile manufacturer. Target, Walmart and a handful of other big US retailers have pulled hundreds of thousands of bedding sheets off shelves after discovering that Welspun had sold them falsely labeled Egyptian cotton products.

Welspun has seen its stock price tumble since Target led the defection in August when an investigation by the retailer found the 750,000 sheets and pillow cases that Welspun labeled as 100% Egyptian cotton were actually fake. Bed, Bath & Beyond, also one of Welspun’s top customers, is the latest to stop selling the manufacturer’s 100% Egyptian cotton sheets, Bloomberg reported.

Welspun, which sells its goods in more than 50 countries and generated $871.4m in annual revenue, is now facing consumer lawsuits over the fake sheets. Most recently, a suit was filed against Walmart, alleging that the store knew about the problem for years but didn’t pull the sheets until two months ago.

The trouble Welspun is in demonstrates both the difficulties of monitoring a supply chain that stretches around the world and the power of a label to entice consumers to pay more for products they perceive to be superior. The Egyptian cotton label doesn’t present a verified claim of quality – all it signifies is that the cotton is grown in Egypt. The connection to luxury comes from the recognition that the cotton makes for strong, soft and tightly woven fabric. There are around 10 varieties of cotton farmed in Egypt, according to the US Department of Agriculture.

The trouble of verifying a product’s origin and quality pops up in many products, not just bedding. It’s fairly common in the food business: Whole Foods and Safeway, for example, are among the major supermarkets that have gotten in trouble for selling extra virgin oil from Italy that didn’t meet either claim.

Welspun is now facing a credibility check from one of the industry groups it belongs to: the Better Cotton Initiative (BCI), an international group that aims to promote the production of sustainable cotton. Part of the BCI’s role is to set standards to ensure the cotton its members use is in fact sustainably grown and harvested. Matthew Kempen, a spokesperson for the initiative, noted that the phrase “Egyptian cotton” is more of an indicator of quality and sustainability, and that BCI, which includes Ralph Lauren, Nike and Levi Strauss as members, doesn’t verify the origins of cotton.

“As a matter of precaution we shall be contacting Welspun about the incident to request that they share their corrective actions with us, and we shall remind them that members contribute to credibility of BCI as a framework,” said Kempen.

Dishonesty hurts a brand’s reputation as well as sales, said Tulin Erdem, a business and marketing professor who specializes in brand reputation management at New York University’s Stern School of Business. Welspun’s shares dropped by nearly 43% in the week following the announcement from Target, which was the manufacturer’s second largest customer and accounted for $90m, or 10% of the company’s business, in the fiscal year that ended in March.

Retailers play a part in ensuring consumers get what they’re paying for. Although it can be difficult to track every manufacturer’s claim, retailers have a responsibility to take action promptly when they suspect dishonesty, said Erdem.

Walmart’s actions – and whether it reacted quickly enough to protect its customers –are also under scrutiny. The lawsuit against Walmart claims that the company first became suspicious of Welspun’s Egyptian cotton label back in 2008, but only pulled the product off its shelves in September, after Target announced it was doing the same. Walmart declined to comment.

Target said it was phasing out all products manufactured by Welspun under the “Fieldcrest” label after an investigation revealed sheets produced by the company between August 2014 and July 2016 used non-Egyptian cotton.

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“Retailers with a good reputation should be vigilant about whether the claimed quality is indeed the delivered quality,” Erdem said. “The decisions about what brands to carry need to be made carefully, and that is part of quality management for a manufacturer.”

Welspun did not respond to the Guardian’s request for comment. The company said in a statement in September to shareholders that it had hired an accounting firm to investigate its cotton suppliers. “We take the current traceability concerns around some of our product lines very seriously,” the company said.

Welspun said the products under investigation represented 6% of the company’s annual business, and its deal with Walmart accounted for 1.5% of annual sales.

The dwindling supply of Egyptian cotton could be a factor that leads cotton suppliers to cheat. Egyptian cotton production has been on a steady decline over the past decade as the global price for cotton has dropped and the Egyptian government has removed subsidies to help farmers.

According to the US Department of Agriculture, Egypt is expected to produce 395,000 bales of cotton in 2017, down from nearly 940,000 bales in 2005.

While verifying claims on labels can be challenging, technology is making it easier for retailers to at least check the reputation of certain brands, said Erdem. A laboratory outside New York City offers DNA testing to verify whether textiles are made of premium cotton. If they are, a tiny barcode is sprayed on the cotton before it is turned into yarn, allowing it to be tracked throughout the production process.

“Certain claims are almost not verifiable, such as whether a certain cream delays the onset of wrinkles in the long run,” said Erdem. “But some others are easier to verify, such as the origin of the main raw material.”