Hunton Retail Law Resource

On January 3, 2023, an Illinois state court entered a preliminary approval order for a settlement of nearly $300,000 in a class action lawsuit against Whole Foods for claims that the company violated the Illinois Biometric Information Privacy Act (“BIPA”). The plaintiffs alleged that Whole Foods unlawfully collected voiceprints from employees who worked at the company’s distribution centers.

On October 19, 2020, the New York State Department of Environmental Conservation (“NYSDEC”) will begin enforcing the state’s ban on single-use carryout plastic bags.  Enforcement was delayed from earlier this year due to a legal challenge, which has since been resolved.  Those persons found to be in violation of the ban face a range of consequences from a simple warning for a first offence and civil penalties thereafter.  Grocery stores, retailers and other establishments in New York that may be the target of enforcement will want to carefully review the provisions of this ban and their obligations going forward.

On August 17, 2018, the Securities and Exchange Commission (“SEC”) voted to adopt amendments to duplicative, overlapping, outdated or superseded disclosure rules for public companies. The new rules take effect on November 5, 2018 and are effective for all SEC filings made on or after that date. 

This month marks the 10th anniversary of the Consumer Product Safety Improvement Act (“CPSIA”), which was signed into law on August 14, 2008. CPSIA was a bipartisan response to unsettling events in the world of consumer products that occurred in 2007. During that landmark year, reports emerged about lead contamination in a wide range of consumer products—including children’s toys—that forced the CPSC into the national spotlight and facilitated over 400 recalls. The CPSIA aimed to significantly enhance the CPSC’s regulatory and enforcement power by doubling its budget, increasing its staff levels, prohibiting the sale of recalled products and increasing its civil penalties. For example, before CPSIA, the CPSC could impose civil penalties in the amount of $8,000 per violation, with a maximum of $1.825 million. But in 2008, CPSIA increased significantly the amount of civil penalties to $100,000 per violation, with a maximum of $15 million, adjusted for inflation.

The Federal Trade Commission announced the opening dates of its Hearings on Competition and Consumer Protection in the 21^st Century, a series of public hearings that discuss whether broad-based changes in the economy, evolving business practices, new technologies or international developments might require adjustments to competition and consumer protection law, enforcement priorities and policy. The FTC and Georgetown University Law Center will co-sponsor two full-day sessions of hearings on September 13 and 14, 2018, to be held at the Georgetown University Law Center ...

This past week, several consumer actions made headlines that affect the retail industry.

FTC Used Car Lot Sweep Finds 70 Percent Compliance with New “Buyers Guide”

Last month, the FTC announced the results of its compliance sweep of 94 car dealerships in 20 cities across the country, conducted after the FTC’s amended Used Car Rule (the “Rule”) took effect earlier this year. The revised Rule requires dealers to display a revised “Buyers Guide” containing warranty and other important information—such as a new description of an “As Is” sale—on the window of each used car offered for sale. According to the FTC, 70 percent of the 2,300 vehicles inspected displayed a buyer’s guide; over half of those with the guide displayed the updated version. As a follow-up, the FTC sent letters to each dealership inspected, detailing their findings and providing businesses with guidance material to help aid in compliance.

Over the past year Hunton & Williams LLP (now Hunton Andrews Kurth LLP) has released articles discussing reform efforts related to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) and the Consumer Financial Protection Bureau (“CFPB”), which was created as a brand-new, start-up independent agency under Dodd-Frank. The first article was a discussion about the questions of the constitutionality of the CFPB due to its arguably unchecked authority to exercise executive power through the CFPB’s investigative and enforcement authority ...

Oregon’s Fair Work Week Act (also known as Oregon’s predictive scheduling law) (the “Act”) is proceeding full speed ahead and will add significant challenges and costs for retailers. The majority of the Act goes into effect on July 1, 2018. Following similar ordinances regulating employee hours passed at municipal levels in Emeryville, California; New York City; San Francisco; San Jose; Seattle; and Washington, D.C., Oregon becomes the latest jurisdiction and the first state to enact a predictive scheduling law. 

California is the land of employment legislation, and 2018 is shaping up to be another year of change. We are less than six months into the year, and already several bills that could significantly impact California businesses—for better or for worse—are pending in the California legislature.

Bumble Bee Foods’ woes continue to mount as its CEO, Christopher Lischewski, has been indicted for price fixing. The indictment alleges that Lischewski participated in the price fixing conspiracy from approximately November 2010 until about December 2013. Lischewski is not the first Bumble Bee executive to be charged: in late 2016 and early 2017, two Bumble Bee Senior Vice Presidents pled guilty to price fixing, and in May 2017, Bumble Bee agreed to pay $25 million in fines for price fixing. 

In a speech to the New York City Bar White Collar Crime Institute on May 9, 2018, Deputy Attorney General Rod Rosenstein announced a new Department of Justice (“DOJ”) policy intended to ensure coordination among DOJ departments and other enforcement agencies when pursuing penalties against corporations for violations arising out of the same conduct. The policy, incorporated into the U.S. Attorneys’ Manual at § 1-12.100, seeks to avoid imposition of duplicative penalties by “instructing Department components to appropriately coordinate with one another and with other enforcement agencies in imposing multiple penalties on a company in relation to investigations of the same misconduct.”

This past week, several self-regulatory advertising decisions made retail headlines.

Finish Quantum Dishwasher Detergent Beaten by “Unbeatable” Claim

In response to a challenge brought by P&G, the NAD recommended that Reckitt Benckiser LLC, manufacturer of dishwasher detergent brand Finish Quantum, discontinue its claims that the detergent provides an “unbeatable clean.” After reviewing Finish Quantum’s test data, the NAD determined that the “evidence was not sufficiently reliable to support the challenged ‘unbeatable clean’ claim.” Finish Quantum can, however, continue use of its value claim that its product provides “25% more loads,” so long as the claim is qualified by adding the phrase, “based on retail pack size comparison” between Finish Quantum and leading alternatives such as Cascade Platinum. Reckitt Benckiser stated that it will comply with the NAD’s recommendations.

This past week, several consumer actions made headlines that affect the retail industry.

Nectar Brand to Put Its “Made in America” Claims to Bed

Nectar Brand LLC has agreed to stop making unqualified claims that its mattresses were made in the United States. According to the FTC’s complaint, Nectar Brand sells mattresses under several brand names, including Nectar Sleep, DreamCloud LLC and DreamCloud Brand LLC. Nectar Brand’s ads and product labeling included statements that the products were “Designed and Assembled in USA.” In fact, the FTC alleged that the mattresses all are imported from China and that Nectar Brand has no assembly operations in the U.S.

Under the settlement terms, Nectar Brand is prohibited from representing that its products are made in the United States unless it can substantiate its claims. Further, Nectar Brand’s officers are prohibited from misrepresenting the country of origin of its products.

In June, new laws will go into effect that restrict employers’ ability to request and use criminal history information about applicants in three jurisdictions: Kansas City, Missouri; the State of Washington; and the city of Spokane, Washington. Below are summaries of the new restrictions and links to the laws.

From the outset it was clear that Mr. Mulvaney’s tenure as acting director of the CFPB would be a political flashpoint. His contentious appointment set the stage for a potential sea change in the agency’s enforcement and rulemaking agenda. Many anticipated that the former South Carolina congressman and current director of the Office of Management and Budget would completely overhaul the CFPB. After only three months on the job, Acting Director Mulvaney has already made several moves indicative of his intent to temper the aggressive stances taken by his predecessor, Richard ...

This past week, several consumer actions made headlines that affect the retail industry.

FTC Crack Down on “American Made” Marketing Claims Continues in Settlement with Bollman Hat Company

The FTC announced a settlement in the third case in the last 12 months involving deceptive “Made in USA” claims. Here, the FTC alleged that the Bollman Hat Company and its subsidiary deceived consumers with marketing campaign slogans of “Made In USA,” “American Made Matters,” and “Choose American” for its hats and third-party products, despite more than 70 percent of their hat styles being wholly imported finished products. The FTC also alleged that Bollman launched an “American Made Matters” seal campaign in 2010 that misled consumers in which and how many products Bollman and the companies that leased the seal were actually made in America.

Businesses, financial institutions and governmental entities (state and local) are required to file tax information returns with the U.S. Social Security Administration (“SSA”) or Internal Revenue Service (“IRS”). Common information returns include W-2 and 1099 forms for employees and contractors, 1098s for mortgage interest, and various 1099s for dividends, interest and miscellaneous income. Some organizations file hundreds of thousands of these forms on a regular basis.

The Initial Coin Offering (“ICO”) market exploded in 2017 with almost $4 billion of investments. Securities regulators in the United States have responded first with a series of public warnings and, more recently, by bringing enforcement actions against promoters of ICOs and other digital currency investments. We survey some of the recent regulatory developments in this rapidly evolving field.

On December 11, 2017, the SEC issued a cease-and-desist order against Munchee Inc. after finding that the company’s initial coin offering (“ICO”) constituted unregistered offers and sales of securities. Munchee sought to raise $15 million for its blockchain-based food review and social platform by selling digital tokens to users that could be used to buy and sell goods and services through an iPhone app. Munchee and others promoting the ICO told investors that the tokens could be expected to increase in value as the company implemented improvements to the app and said that the company would work to support a secondary market for the tokens. 

On October 23, 2017, the Federal Trade Commission issued a policy enforcement statement providing additional guidance on the applicability of the Children’s Online Privacy Protection Rule (“COPPA Rule”) to the collection of children’s audio voice recordings. The FTC previously updated the COPPA Rule in 2013, adding voice recordings to the definition of personal information, which led to questions about how the COPPA Rule would be enforced against organizations who collect a child’s voice recording for the sole purpose of issuing a command or request.

It is no secret that California has had appliance efficiency standards in place for some time now. And it is no secret that the California Energy Commission (“CEC”) has been responsible for crafting those standards. According to the CEC and the California State Legislature, however, compliance with those standards has been hit-or-miss. In 2011, the Legislature found that “significant quantities of appliances are sold and offered for sale in California that do not meet the state’s energy efficiency standards,” and the CEC itself has stated that nearly half of all regulated appliances are non-compliant, and that certain product categories are entirely non-compliant. The broad range of products covered by the CEC’s efficiency standards may be partly to blame for the lack of compliance, as manufacturers may not even realize their product must comply. For example, the efficiency standards encompass nearly every device with a rechargeable battery and that rechargeable battery system, meaning everything from cell phones to laptops to tablets to golf carts must be tested, certified and listed in the CEC’s database before being offered for sale in California. 

On June 1, 2017, the new Cybersecurity Law went into effect in China. This post takes stock of (1) which measures have been passed so far, (2) which ones go into effect on June 1 and (3) which ones are in progress but have yet to be promulgated.

Earlier this month, Jay Clayton was sworn in as Chairman of the Securities and Exchange Commission (“SEC”). He has begun assembling his front office staff, and wasted no time in appointing William Hinman as director of the Division of Corporation Finance and Robert Stebbins as general counsel. Each of the three were previously partners at prominent corporate law firms, and each has substantial experience in corporate governance, capital markets transactions and mergers and acquisitions.

On May 12, 2017, a massive ransomware attack began affecting tens of thousands of computer systems in over 100 countries. The ransomware, known as “WannaCry,” leverages a Windows vulnerability and encrypts files on infected systems and demands payment for their release. If payment is not received within a specified time frame, the ransomware automatically deletes the files. A wide range of industries have been impacted by the attack, including retailers and other businesses, hospitals, utilities and government entities around the world.

This past week, several consumer actions made headlines that affect the retail industry.

The NAD Refers Sports Drink Maker to FTC

The NAD has referred BA Sports Nutrition, the maker of BodyArmor sports drinks, to the FTC after the advertiser failed to alter certain comparative ads. The ad at issue implores customers to “Ditch artificial Sports Drink[s]: artificial flavors, artificial sweeteners, artificial colors” and depicts a bottle of a competing sports drink. The NAD found that the ad implied that the competing sports drink contained artificial flavors, sweeteners and colors when, in fact, many of the competitor’s sports drinks did not.

On April 19, 2017, the Federal Trade Commission issued warnings to more than 90 brands and “influencers” that their social media posts should more clearly and conspicuously disclose brand connections. The warning letters follow petitions filed by consumer advocacy groups aimed at influencer advertising on Instagram. The FTC’s warning letters show that the agency is committed to capitalizing on its recent enforcement actions against brands and influencers, and will continue to scrutinize social media compliance with the Endorsement Guides.

Read the full client alert.

As posted on the Hunton Privacy and Information Security Law blog, recently, Virginia passed an amendment to its data breach notification law that adds state income tax information to the types of data that require notification to the Virginia Office of the Attorney General in the event of unauthorized access and acquisition of such data. Under the amended law, an employer or payroll service provider must notify the Virginia Office of the Attorney General after the discovery or notification of unauthorized access and acquisition of unencrypted and unredacted computerized data containing a Virginia resident’s taxpayer identification number in combination with the income tax withheld for that taxpayer.

Since the beginning of 2017, the SEC has announced three enforcement actions charging companies, activist hedge funds and related individuals with violating the Securities Exchange Act of 1934. These enforcement actions targeted parties who allegedly failed to comply with disclosure obligations in the context of hostile takeovers and shareholder activism campaigns.

Read the full alert.

On March 17, 2017, retailer Neiman Marcus agreed to pay $1.6 million as part of a proposed settlement (the “Settlement”) to a consumer class action lawsuit stemming from a 2013 data breach that allegedly compromised the credit card data of approximately 350,000 customers.

On March 9, 2017, Home Depot Inc. (“Home Depot”) reached an agreement that includes the payment of $25 million and the implementation of new data security measures to resolve a putative class action brought by financial institutions impacted by the company’s 2014 data breach.

Gearing Up For Change in Antitrust Merger Enforcement

“Litigation readiness” was the unofficial theme of antitrust enforcement at the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission over the past eight years. Although determining whether this “litigation readiness” actually resulted in the two antitrust enforcement agencies’ bringing more merger cases than we might have otherwise seen is a complicated question, the practical effect was that deal review took longer, faced increased scrutiny, involved more non-parties, was more expensive and faced more uncertainty than in prior administrations. These effects were evident in the recent number of large-scale, high-profile litigated deals involving retail and consumer products companies, including the FTC’s challenges to the proposed mergers of Staples/Office Depot, Sysco/U.S. Foods and Dollar Tree/Family Dollar, and the Antitrust Division’s challenge to the proposed acquisition of GE’s appliances business by Electrolux.

This past week, several consumer actions made headlines that affect the retail industry.

The Federal Trade Commission Announced Class Action Settlement of VW 3.0-Liter Claims

The FTC announced a settlement with Volkswagen Group of America (“VW”) requiring VW to fully compensate consumers who purchased its 3.0-liter TDI diesel vehicles. The settlement stems from VW’s installation of emissions defeat devices in its diesel TDI vehicles that deceived consumers and emissions testers. The settlement package requires a combination of repairs, monetary compensation and buyback of certain models. It is estimated that VW will pay at least $1 billion under the settlement but could pay as much as $4 billion if it is unable to provide consumers with an adequate emissions repair. The FTC previously obtained a separate $10 billion judgment against VW to compensate consumer who purchased 2.0-liter TDI diesel vehicles with the defeat device.

On January 22, 2017, the City of Los Angeles will ‘ban the box’ when the Los Angeles Fair Chance Initiative for Hiring (Ban the Box) (the “Initiative”) goes into effect, prohibiting private employers in Los Angeles “from inquiring into or seeking a job applicant’s criminal history unless and until a conditional offer of employment” is made to the individual. In doing so, Los Angeles will become the fourth California city to ‘ban the box’ with greater protections than the state statute, and the second to do so with respect to private employers. If an employer makes a conditional offer of employment and then receives information about an applicant’s criminal history, the employer cannot take an adverse employment action against the applicant based on that history until (1) a written assessment has taken place and (2) a Fair Chance Process has occurred.

This past week, several consumer actions made headlines that affect the retail industry.

On October 11, 2016, the SEC announced its enforcement results for the fiscal year which ended on September 30, 2016. A total of 868 enforcement actions were filed, which set a new record for the most actions in a single year. The SEC filed 61 more actions in 2016 than in 2015, representing a year-over-year increase of almost 7.6 percent. The actions resulted in total disgorgements and penalties of over $4 billion, down slightly from last year’s $4.19 billion.

This past week, several consumer actions made headlines:

Claims Against Advertisers for the Misuse of “Natural” Gain Traction

Claims that Nature’s Bounty's “natural” menopause remedy is ineffective and contains synthetic ingredients and lead survived a motion to dismiss and may proceed as a class action, according to a judge in the Eastern District of New York. The named plaintiff accuses Nature’s Bounty of advertising its black cohosh menopause remedy as “natural” and “nonsynthetic”; she also alleges that the effectiveness of the remedy is not supported by scientific evidence. A key issue before the court was whether a reasonable consumer would assume that the product – labeled as “natural” with a disclaimer that it contains “other ingredients” – contained only natural ingredients. The court found that a reasonable consumer would make this assumption and allowed the plaintiff’s advertising claims to proceed on that basis.

This past week, several regulatory and self-regulatory enforcement actions made headlines:

FTC Settles with NutraClick Over Deceptive Billing Practices

The FTC has settled claims that supplement maker NutraClick engaged in deceptive billing practices. According to the FTC, NutraClick offered “free” samples through its website, but consumers who ordered these samples were then enrolled into a membership program with monthly bills of $29.99 - $79.99. Over 70,000 people registered complaints about these practices with the FTC.

The Department of Justice has cleared Anheuser-Busch InBev’s (“AB InBev’s”) acquisition of SABMiller. Approval of the $107 billion deal came with substantial divestitures, including SABMiller’s U.S. business. That business, which includes the Miller Lite and Miller High Life products, will be sold to Molson Coors for $12 billion. As part of the approval, AB InBev is also prohibited from conducting incentive programs that would discourage independent distributors from selling competitors’ import or craft beers. According to the Department of Justice, this will preserve the ability of small brewers, such as craft brewers, to compete against AB InBev.

If you live in an urban environment, you have likely seen food trucks on city streets, in parking lots or at any number of local events. The mobile food industry has grown significantly over the last few years and, with that growth, vendors and their brick-and-mortar competition have been faced with a changing regulatory landscape. 

On June 28, 2016, in two related settlements, German auto-manufacturer, Volkswagen AG (“VW”), has agreed to pay $14.7 billion to resolve allegations that the company cheated diesel emissions tests for nearly 500,000 2.0 liter diesel vehicles sold over six years. One settlement partially resolves EPA allegations for alleged violations of the Clean Air Act’s federal emissions standard; the other partially resolves FTC claims that VW violated the FTC Act by deceptively and unfairly advertising its “clean diesel” vehicles. VW also will pay damages to 44 states, Washington, D.C., and Puerto Rico. The announced settlements do not resolve pending civil claims concerning VW’s 3.0 liter diesel vehicles, or potential criminal liability.

As we reported on the Hunton Employment & Labor Law blog, the recently enacted Defend Trade Secrets Act of 2016 (“DTSA”) provides a new form of expedited relief in federal court for owners of misappropriated trade secrets through an ex parte seizure of property. In “extraordinary circumstances,” DTSA permits a court to issue an order to authorize law enforcement officials to seize property – without advanced notice to the accused – in order to prevent the propagation or dissemination of the trade secret. The utilization of this ex parte seizure does not come without risk. Section 2(b)(2)(G) provides that in the case of wrongful or excessive seizure, a person who suffers damages has a cause of action against the applicant and can seek reasonable attorneys’ fees, damages for lost profits, cost of materials, loss of good will and punitive damages.

This week, the following consumer protection actions made headlines:

Teavana Settles with Consumer Product Safety Commission

Teavana, a Starbucks-owned tea retailer, settled allegations with the Consumer Product Safety Commission (“Commission”) that Starbucks failed to report complaints of exploded tea tumblers. The settlement split the Commission on a company’s obligation to report complaints to the agency. Commissioner Joseph P. Mohorovic, who opposed the settlement with its $3.75 million civil penalty, said that Teavana did not have a clear obligation to report the complaints saying, “The [Consumer Product Safety Act] and our rules under it do not establish a clear line for when a company must report, but at best blurred zone of indecision.”

This past week, several consumer protection and regulatory actions made headlines:

FTC to Host Consumer Disclosure Workshop in September

The Federal Trade Commission has announced that it will be hosting a September 15, 2016 workshop, “Putting Disclosures to the Test,” on the efficacy and costs of consumer disclosures in advertising and in privacy policies. Planned discussion topics include examining disclosures meant to avoid deception in advertising, disclosures designed to inform consumers of data tracking, and industry-specific disclosures for jewelry, environmental and fuel-saving claims. The workshop is open to the public and will take place at the FTC’s Constitution Center offices in Washington, D.C. The FTC currently is soliciting presentation proposals for the workshop; submissions may be sent to disclosuretesting@ftc.gov.

This past week, the following regulatory and consumer actions made headlines:

Cheez-It Whole Grain Crackers ‘Not Ready,’ lawsuit claims

The Kellogg Company is being sued over its “whole grain” Cheez-It crackers. According to the complaint filed in U.S. District Court for the Eastern District of New York, the claim that these crackers are whole grain is “false and misleading, because the primary ingredient in Cheez-It Whole Grain crackers is enriched white flour.”

While the Cheez-It Whole Grain crackers do contain some whole wheat flour, plaintiffs argue it is almost negligible. A comparison of the Cheez-It Original crackers and the Cheez-It Whole Grain crackers shows identical nutritional values in every category, except fiber. The Original crackers contain “less than 1g,” while the Whole Grain crackers contain 1 gram.

Plaintiffs argue the Cheez-It claims are thus misleading, and have caused consumers to purchase or pay a premium for a product, that they otherwise would not have paid. The Kellogg Company has denied any misconduct, including any alleged impropriety in its labeling.

As we previously reported, Judge Emmet Sullivan of the U.S. District Court of the District of Columbia had granted the FTC’s request for a preliminary injunction blocking the proposed Staples-Office Depot merger. Earlier this week, Judge Sullivan released a public version of the opinion supporting his decision.

This week, the following consumer protection actions made headlines:

Mortgage Scammer Under Water After FTC Settlement

On May 9, 2016, the FTC announced that it is returning $1.87 million to 1,630 consumers who lost money in the Expense Management America telemarketing scheme that never provided debt or mortgage relief services after absconding with homeowners’ up-front fees. The repayment to consumers is a capstone on a three and a half year joint effort with the DOJ, FBI and HUD to crack down on mortgage scammers taking advantage of distressed homeowners. Related efforts, underway since 2008, resulted in a new FTC rule providing increased protection to homeowners by prohibiting any collection of fees until the homeowner has an acceptable written offer from their lender. In prosecuting Expense Management America, the FTC worked closely with various enforcement agencies in Canada to track down and prosecute the scammers.

We previously reported on the proposed regulations initiated by the California Office of Environmental Health Hazard Assessment and its impact on retailers. Retailers should take steps to ensure that they are protected from Prop 65 claims, particularly with the proposed regulations in the pipeline. As with any regulatory requirements that impact businesses, often the best defense is a good offense -- forethought, assessment and implementation of a compliance program can minimize the costs, headaches, business disruption and negative publicity that may otherwise occur.

Mars, Inc. and its M&M’s Minis candy are the latest targets in a wave of “slack-fill” litigation.

Slack-fill is empty space in product packaging – i.e., the difference between the maximum capacity of a product’s container and the actual volume of product inside. Slack-fill litigation has increased in recent years as class plaintiffs allege that companies are deliberately including empty space in their packaging to deceive consumers into paying higher prices for lower product quantities.

This past week, several consumer protection actions made headlines:

FTC to Let the Sun Shine on Consumer Protection Issues in Rooftop Solar Panel Businesses

The FTC announced that it will be holding a workshop focused on competition and consumer protection in the growing industry of consumer-oriented rooftop solar panels. The workshop, which will take place in Washington D.C. on June 21, 2016, is meant to expand the FTC’s understanding and approach to the growing consumer solar panel industry. Planned topics of discussion include: (1) how consumers can get needed information when deciding whether to install rooftop solar panels; (2) how utility regulators currently approach compensating consumers for power generated on their solar panels; and (3) competition in the solar power generation industry.

On April 14, 2016, after four years of drafting and negotiations, the long awaited EU General Data Protection Regulation (“GDPR”) has been adopted at the EU level. Following the EU Parliament’s Committee on Civil Liberties, Justice and Home Affairs’ vote earlier this week and the EU Parliament in plenary session, the GDPR is now officially EU law and will directly apply in all EU countries, replacing EU and national data protection legislation.

As we previously reported, the Prop 65 statute prohibits businesses from exposing people in California to any of the over 800 listed chemicals without first providing a “clear and reasonable” warning. Currently, California’s Office of Environmental Health Hazard Assessment is working to repeal existing Prop 65 warning regulations and adopt new requirements. However, the proposed regulations contain several problematic provisions regarding the content and method of transmission for required warnings. Retailers need to be aware of proposed provisions which clearly apportion responsibility for providing warnings throughout the chain of commerce. Though purportedly aimed at reducing retailers’ Prop 65 warning burden, if implemented as written, the provisions will actually increase retailers’ risks and allow manufacturers to insulate themselves from liability at retailers’ expense.

This past week, the following regulatory and consumer actions made headlines:

FDA Scratches Out Shionogi’s Misleading Labeling on its Children’s Head Lice Lotion

On April 1, 2016, the Food & Drug Administration (“FDA”) hit Shionogi & Co. Ltd. with a warning letter stating that it had mislabeled its Ulesifa children’s head lice lotion because the labeling failed to inform patients that it should not be used on children under six months old and that it does not eliminate lice eggs. The labeling was in Shionogi & Co.’s recently issued customer co-pay assistance voucher that offered patients discounts to bring their co-pays down to $10. The FDA acknowledged that the voucher’s fine print stated it was only indicated for children over six months of age, but the FDA said that was not enough to avoid mislabeling violations. The agency requested that Shionogi & Co. cease the mislabeling immediately and submit a written response within two weeks.

On April 4, 2016, the Commodity Futures Trading Commission (“CFTC”) announced a $10 million whistleblower bounty, its largest to date.

Similar to a program administered by the Securities and Exchange Commission (“SEC”), CFTC whistleblowers are eligible for an award worth 10 to 30 percent of an enforcement penalty if they bring original information to the CFTC which leads to an enforcement action that nets more than $1 million in sanctions.

On March 29, 2016, the Federal Trade Commission (“FTC”) filed suit against Volkswagen Group of America (“VW”), which includes Volkswagen of America and Audi of America, for its “Clean Diesel” advertisements.

The complaint alleges VW’s “Clean Diesel” ads made various deceptive claims, including that its diesel technology produced “30% fewer emissions” and reduced “nitrogen-oxide emissions by 90%.” The FTC alleges that the vehicles with VW’s “Clean Diesel” technology were also equipped with a “defeat device” designed to calibrate the vehicle’s emission system to produce legally-compliant emissions during standard emissions testing.

For retailers operating in California, the state’s Safe Drinking Water and Toxic Enforcement Act of 1986 (“Prop 65”) is a constant and often costly headache. Among other requirements, Prop 65 prohibits businesses with ten or more employees, including those that ship products into California, from exposing people in California to any of the over 800 listed chemicals without first providing a “clear and reasonable” warning. The statute also contains a prohibition against discharging or releasing listed chemicals to “sources of drinking water” in the state, but those provisions are not discussed here. The list of over 800 chemicals is revised and updated annually.

Over the past two years, Hunton & Williams has been carefully monitoring the application of Daimler AG v. Bauman in trial and appellate courts throughout the country. The U.S. Supreme Court’s landmark Daimler decision articulated a standard that significantly limits the types of contacts sufficient to subject a defendant to general jurisdiction in a particular forum. Under that standard, a plaintiff must demonstrate that the defendant’s contacts with the forum are so continuous and systematic as to render it “essentially at home” there. In most instances, a company is “essentially at home” only in the state where it is incorporated and the state where it operates its principal place of business. Since the opinion was issued, the risk of a company becoming subject to general jurisdiction outside its home states has substantially decreased—a largely positive outcome for companies in the retail products industry that have traditionally been subject to “all purpose” general jurisdiction in each state where they conduct business.

A recent flurry of Texas law changes have local and national retailers considering whether to prohibit customers from openly carrying weapons inside of their stores.

This past January, Texas’s “open carry” law went into effect, allowing gun owners to carry their weapons holstered either at their hip or on their shoulder. The Texas law does have limitations, including an exclusion banning open carry on the premises of restaurants and bars that make more than 51 percent of their gross profits from alcohol sales, and, significant for retailers, a provision that allows businesses to prohibit open carry on their premises, as long as they post certain specified signage alerting customers of the ban.

On March 9, 2016, Hunton & Williams’ Global Privacy and Cybersecurity practice lawyers released a management guide on the EU General Data Protection Regulation (“GDPR”), entitled “Overview of the EU General Data Protection Regulation,” addressing the key impacts the new law will have on businesses. This high-level management guide is intended to provide companies with a roadmap to the Regulation, focusing on topics such as expanded territorial scope, data breach notification rules, the One-Stop Shop concept and the right to be forgotten.

Later this month, we will be ...

Yesterday, the Federal Trade Commission laid down a clear marker for retailers in announcing a settlement with Lord & Taylor. This is the agency’s first native advertising case since issuing its Enforcement Policy Statement on Deceptively Formatted Advertising and its Native Advertising Business Guidance in December 2015.

As reported on the Hunton Employment and Labor Law Blog, the Equal Employment Opportunity Commission (“EEOC”) has implemented nationwide procedures which require all EEOC offices to release copies of an employer’s entire position statement, together with all non-confidential documents submitted in support of the position statement, to an employee who has filed a discrimination charge, or his or her representative (including attorneys). These procedures apply to all position statements requested after January 1, 2016. Previously, such disclosures were made in the discretion of the particular field offices or investigators, and practices were inconsistent. As often as not, EEOC investigators might summarize the employer’s evidence and arguments for the employee, in order to solicit the latter’s response.

This past week, the following consumer protection actions made headlines:

Retail Pricing: Class Action Complaint Against Gap Dismissed

A putative class action, alleging that The Gap, Inc.’s deceptive advertising in stores confuses customers as to what products are actually discounted and tricks many into buying products at full price, was tentatively tossed by a California state judge last week. The Court granted Gap’s demurrer in part because the named plaintiff failed to identify particular advertisements relied upon in her purchases and, more importantly, could not allege that she was actually injured by Gap’s alleged practices. In fact, the Court stated that being “psychologically committed” to an item such that the named plaintiff did not return it was not enough to state a claim. The court gave the plaintiff one last chance to allege an injury.

As reported in the Hunton Employment and Labor Law Blog, on March 1, 2016, the United States Equal Employment Opportunity Commission (“EEOC”) sued employers for the first time for sexual orientation discrimination. The EEOC filed lawsuits in federal courts in Pittsburgh and Baltimore against manufacturing and health care employers for unlawful sex discrimination on behalf of employees alleging they were harassed and discriminated against based on their sexual orientation.

As reported in the Hunton Employment and Labor Law Blog, on March 1, 2016, the Securities and Exchange Commission (“SEC”) settled administrative charges against a popular telecommunications equipment supplier, Qualcomm Incorporated, under the Foreign Corrupt Practices Act (“FCPA”). According to the SEC, in addition to unlawfully providing meals, gifts and entertainment to foreign officials in an effort to win new business, Qualcomm also offered full-time employment and paid internships to family members and friends of foreign government officials in an effort to curry favor. In some cases, it appears these friends and family members would not have otherwise qualified for employment at Qualcomm and special accommodations were made to hire them. To settle the case, Qualcomm agreed to cease and desist from future violations, paid a $7.5 million civil monetary penalty and agreed to other heightened compliance measures.

This past week, the following consumer protection actions in federal courts and agencies made headlines:

The Ninth Circuit

The Ninth Circuit was busy addressing consumer protection issues this week. Two proposed class actions brought against Apple, Inc. were decided in favor of the company. In the first action, Hodges v. Apple, Inc., a three-judge panel affirmed a lower court’s dismissal of a putative class action alleging deceptive practices in the advertising and sale of Apple’s MacBook Pro with retina display computers. The plaintiff was dissatisfied with the quality of his retina display screen, but the Ninth Circuit agreed with the lower court that Apple had not misled consumers about the retina displays in its advertising. In the second case, a three-judge panel again upheld a dismissal of a proposed class action against Apple that accused the company of misrepresenting the speech capabilities of its iPhone 4S product. The majority of the appeals court agreed with the lower court’s assessment that the allegations about the capabilities of the Siri speech recognition software were too broad, and did not meet the pleading requirements under the Federal Rules of Civil Procedure.

Finally, a three-judge panel revived a class action that had previously been dismissed by a district judge against Hain Celestial’s Alba Botanica skincare line. Plaintiffs claimed that marketing the products as “natural” misled consumers into buying products that contained synthetic substances at a higher cost.

The National Advertising Division (“NAD”) was busy this past week. The organization recommended that several companies modify or discontinue claims made for the following consumer products:

Disinfecting Wipes

After a challenge by The Clorox Company, NAD recommended that Reckitt Benckiser, Inc., discontinue certain claims made in both print and television ads for Lysol Disinfecting Wipes and Spray products. The claims included statements declaring that Lysol “helps fight the flu before it starts” and kills “45% more types of germs” as compared to other wipes. NAD concluded that these claims were not supported by evidence in the record, and Reckitt Benckiser announced that it plans to appeal NAD’s findings to the National Advertising Review Board. Clorox has been active recently in challenging competitors’ claims–just a few weeks ago, in a challenge brought by Clorox, the NAD recommended that the maker of OxiClean White Revive non-chlorine bleach modify its television ad campaigns.

As we previously reported in Looking Back: Retail Antitrust Enforcement in 2015, last year was a booming year for consumer products mergers (and the antitrust review of those mergers). With a robust market and incentives strongly in favor of further acquisitions, we expect the trend to continue in 2016.

The Securities and Exchange Commission (“SEC”) recently announced it settled charges against the Monsanto Company (“Monsanto”) regarding its accounting practices surrounding the sale of its popular Roundup herbicide. Monsanto “agreed to pay an $80 million penalty and retain an independent compliance consultant to settle charges that it violated accounting rules and misstated company earnings.” Two Monsanto accounting executives and one sales executive also agreed to pay penalties to settle charges that were brought against them. The case underscores for both manufacturers and retailers that financial reporting and disclosures cases continue to be a high priority for the SEC.

On January 20, 2016, the US Department of Labor (“DOL”) became the latest federal agency to advocate for an expansive concept of joint employment. The DOL’s Wage and Hour Administrator took the position that joint employment under the Fair Labor Standards Act “should be defined expansively” and “as broad as possible.” The new Administrator’s Interpretation, along with the National Labor Relations Board’s recent joint employer ruling in Browning-Ferris, suggests a coordinated, federal push to expand joint-employer liability under a host of labor and ...

On January 27, 2016, the National Advertising Review Board (“NARB”) went after dietary supplements, recommending that Novartis Consumer Health, Inc. (“Novartis”) discontinue advertising claims that its supplement Benefiber “Helps Maintain Regularity.” The case was originally brought before the National Advertising Division (“NAD”) by a competitor claim from Proctor & Gamble Co., which argued that the fiber contained in Benefiber, wheat dextrin, is not clinically proven to promote regularity. After NAD recommended Novartis discontinue the claim ...

Late last year, as the holidays approached, the Federal Trade Commission issued enforcement guidance on “native advertising” — ads that purposely are formatted to appear as noncommercial and are integrated into surrounding editorial content. The agency’s guidance took two parts: an Enforcement Policy Statement on deceptively formatted ads, and a Guide for Business on native advertising. These long-awaited guidance documents follow on the FTC’s December 2013 “Blurred Lines” workshop on native advertising. Importantly, the FTC notes that its policy statement does not apply just to advertisers but also to other parties that help create the content: ad agencies, ad networks and potentially, publishers.

As reported in the Hunton Employment & Labor Perspectives blog, the National Labor Relations Board (“NLRB”) held that rules in Whole Foods’ General Information Guide prohibiting unapproved tape and video recording in the workplace violate Section 8(a)(1) of the National Labor Relations Act (“NLRA”).

As reported in the Hunton Employment & Labor Perspectives Blog, Retailer Big Lots Stores, Inc. is facing a putative class action in Philadelphia, wherein the plaintiff alleges that the company “systematically” violated the Fair Credit Reporting Act’s (“FCRA”) “standalone disclosure requirement” by making prospective employees sign a document used as a background check consent form that contained extraneous information. Among other things, the plaintiff alleges that Big Lots’ form violates the FCRA because it includes the following three categories of ...

As reported on the Privacy & Information Security Law blog, the Enforcement Bureau of the Federal Communications Commission (“FCC”) entered into a Consent Decree with cable operator Cox Communications to settle allegations that the company failed to properly protect customer information when the company’s electronic data systems were breached in August 2014 by a hacker. The FCC alleged that Cox failed to properly protect the confidentiality of its customers’ proprietary network information (“CPNI”) and personally identifiable information, and failed to promptly notify law enforcement authorities of security breaches involving CPNI in violation of the Communications Act of 1934 and FCC’s rules.

As reported in the Privacy & Information Security Law blog, the United States District Court for the District of Minnesota, in large part, upheld Target’s assertion of the attorney-client privilege and work-product protections for information associated with a privileged, internal investigation of Target’s 2013 data breach.

As reported in the Privacy & Information Security Law blog, the Seventh Circuit rejected Neiman Marcus’ petition for a rehearing en banc of Remijas v. Neiman Marcus Group, LLC, No. 14-3122. In Remijas, a Seventh Circuit panel found that members of a putative class alleged sufficient facts to establish standing to sue Neiman Marcus following a 2013 data breach that resulted in hackers gaining access to customers’ credit and debit card information. No judge in regular active service requested a vote on the rehearing petition. Additionally, all members of the original panel voted ...

In a ruling of particular importance to the digital currency community, the US Commodity Futures Trading Commission (CFTC) for the first time has definitively ruled that Bitcoin and other digital currencies (also known as virtual currencies or cryptocurrencies) are commodities subject to the CFTC’s jurisdiction. Specifically, in an enforcement action announced on September 17, 2015, the CFTC issued an order against an online platform and its CEO for facilitating the trading of Bitcoin options contracts. We discuss some of the implications of this order below.

As reported in the Privacy & Information Security Law blog, Judge Magnuson of the U.S. District Court for the District of Minnesota certified a Federal Rule of Civil Procedure 23(b)(3) class of financial services institutions claiming damages from Target Corporation’s 2013 data breach. The class consists of “all entities in the United States and its Territories that issued payment cards compromised in the payment card data breach that was publicly disclosed by Target on December 19, 2013.”

The en banc US Court of Appeals for the Federal Circuit issued its opinion today in SCA Hygiene Products Aktiebolag, et al. v. First Quality Baby Products, LLC, et al., Case No. 2013-1564. In a 6-5 decision, the court reaffirmed that laches is a defense to a suit for damages for patent infringement. In reaching this decision, the Federal Circuit distinguished Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014), in which the US Supreme Court held that laches is not a defense to a suit for damages under the Copyright Act.

A federal court in New York recently found that litigation concerning damages related to a third party’s product recall required a defense under a commercial general liability policy. Thruway Produce, Inc. v. Mass. Bay Ins. Co., 2015 U.S. Dist. LEXIS 94846 (S.D.N.Y. July 20, 2015). Thruway Produce sold apples to Milnot Holding Company for use in baby food. The parties’ contract required the apples to be free of certain rodenticides (used to kill rats and mice). After discovering that certain apples were contaminated with rodenticide, Milnot was forced to recall its baby food ...

On April 23, 2015, the Federal Trade Commission (FTC) announced that Nomi Technologies (Nomi) has agreed to settle charges stemming from allegations that the company misled consumers with respect to opting out of the company’s mobile-device tracking service at retail locations. The settlement marks the FTC’s first § 5 enforcement action against a retail tracking company.

As reported on the Privacy & Information Security Law blog, the Federal Communications Commission announced a $25 million settlement with AT&T Services, Inc. (“AT&T”) stemming from allegations that AT&T failed to protect the confidentiality of consumers’ personal information, resulting in data breaches at AT&T call centers in Mexico, Colombia and the Philippines. The breaches, which took place over 168 days from November 2013 to April 2014, involved unauthorized access to customers’ names, full or partial Social Security numbers and certain protected ...

As reported in the Hunton Employment & Labor Law Perspectives blog, the San Francisco Board of Supervisors recently enacted two ordinances – which are being called the “Retail Workers Bill of Rights” – that provide extensive new protections to employees of “formula retail establishments” in San Francisco.  The new ordinances regulate how covered employers manage their workers’ schedules and impose additional financial and administrative burdens on those employers.

Read the full post.

On Friday, January 30, 2015, the U.S. Court of Appeals for the D.C. Circuit issued its opinion in POM Wonderful, LLC, et al. v. Federal Trade Commission, affirming the Federal Trade Commission's ruling in 2013 that a series of advertisements for POM’s pomegranate juice and supplements were deceptive and thus violated the FTC Act. However, the court provided some limited, yet important, relief to POM Wonderful and the other petitioners. The D.C. Circuit’s decision provides important guidance to companies advertising consumer products.

Read the full client alert.

As reported in the Privacy & Information Security Law blog, the Federal Trade Commission announced a settlement of at least $90 million with mobile phone carrier T-Mobile USA, Inc. (“T-Mobile”) stemming from allegations related to mobile cramming. This settlement amount will primarily be used to provide refunds to affected customers who were charged by T-Mobile for unauthorized third party charges. As part of the settlement, T-Mobile also will pay $18 million in fines and penalties to the attorneys general of all 50 states and the District of Columbia, and $4.5 million to the ...

As reported in the Privacy & Information Security Law blog, rent-to-own retailer Aaron’s, Inc. (“Aaron’s”) entered into a $28.4 million settlement with the California Office of the California Attorney General related to charges that the company permitted its franchised stores to unlawfully monitor their customers’ leased laptops.

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The chairwoman of the Federal Trade Commission, Edith Ramirez, has announced that the FTC is significantly increasing scrutiny and enforcement of mainstream advertising by reputable companies. Chairwoman Ramirez recently said that the FTC is increasing enforcement against not only “outright fraud,” but also national advertising campaigns. The FTC’s recent approach of vigorous false advertising enforcement is intended to support the goal that, as the chairwoman stated, “advertising must be truthful and non-deceptive.”

As reported in the Privacy & Information Security Law blog, the Federal Communications Commission announced that Verizon has agreed to pay $7.4 million to settle an FCC Enforcement Bureau investigation into Verizon’s use of personal information for marketing. The investigation revealed that Verizon had used customers’ personal information for marketing purposes over a multiyear period before notifying the customers of their right to opt out of such marketing.

Read the full post.

How much particularity is required to plead a claim under the False Claims Act (“FCA”), a statute designed to root out fraud against the government? While courts purport to apply the requirements of Federal Rule of Civil Procedure 9(b) and its stringent standards for pleading fraud, several circuits take a more flexible approach when assessing claims brought under the FCA. The United States Supreme Court recently declined to take up the matter and resolve this key question. Accordingly, the forum in which an FCA suit is brought continues to have a dramatic impact on whether it will ...

Most marketers and retailers know that the consumer protection laws require that their advertising claims be substantiated, truthful and not misleading. But the new year is a good time to take stock of advertising campaigns, practices and procedures to make sure they pass muster under the Federal Trade Commission’s (FTC’s) latest guidance. The FTC’s recent enforcement actions provide a starting point.