Retail & Consumer Products Law Observer

Retail & Consumer Products Law Observer

Legal Insight for the Retail and Consumer Products Industry

President Nominates Attorney Dana Baiocco to Consumer Product Safety Commission

By Chalana Williams and Matthew Cohen on Posted in Product Liability & Torts

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President Trump has nominated Dana Baiocco to be Commissioner of the Consumer Product Safety Commission. The appointment is for a term of seven years beginning on October 27, 2017. Ms. Baiocco is currently a litigator at Jones Day. According to her firm’s bio, she has litigated cases involving “mass torts, consumer and industrial products and medical devices” and has counseled clients on “minimizing risks, regulatory and reporting obligations, warranties, and CPSC product recalls.”

This nomination is significant. With the expiration of Democratic Commissioner Marietta Robinson’s term in late October, Baiocco’s eventual Senate confirmation will shift the Commission’s balance of power. Specifically, it will mark an end to the unusual dynamic of the Commission being led by a “Minority Chair” (Republican Commissioner Ann Marie Buerkle), who does not command a 3-2 voting majority based on political party. Upon Baiocco’s confirmation, Republicans will regain the Commission’s majority.

Our prior blog posts have reflected on Acting Chair Buerkle’s philosophy and priorities for the Commission, which may now start to come into fruition. Assuming Acting Chair Buerkle is confirmed as Chairman later this month, with the new Republican majority, we can now expect the Commission under the Trump Administration to come into focus and likely reflect some of the Administration’s regulatory priorities.

We congratulate Dana Baiocco on her nomination, and expect her confirmation in the coming months.

FTC Announces First Enforcement Action Against Social Media Influencers and Updates FAQs Rejecting Common Disclosure Practices

By Lauren B. Aronson on Posted in Advertising & Product Risk Management

© Getty Images

The FTC is closely watching influencers to remind them to clearly disclose material connections to brands. In June 2017, the Commission settled with a trampoline manufacturer for relying on misleading endorsements and, in March, the Commission sent more than 90 letters to influencers and brands to remind them to clearly disclose relationships. The FTC has now made clear that it will target influencers who fail to comply with its Endorsement Guides. While the FTC had previously settled claims against various advertising networks, advertising agencies, and brands for failing to comply with the Endorsement Guides, the FTC has announced that it has settled its first ever enforcement action against social media influencers. In the same press release, the FTC simultaneously stated that it sent follow-up warning letters to 21 influencers that first received letters in March.

The message is clear: influencers that fail to disclose a material connection to brands do so at their own peril—and brands are responsible for implementing clear measures to make sure that the influencers they work with comply with disclosure requirements. Furthermore, the FTC has also made clear that many commonly used disclosure methods and practices are inadequate in its newly revised Endorsement Guides FAQs. Brands and the influencers they work with should take note of these recommendations and ensure that their disclosure practices comply.

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CPSC Targets Retailer Home Depot in Rare Sale of Recalled Goods Civil Penalty

By Matthew Cohen on Posted in Advertising & Product Risk Management

Last week, the U.S. Consumer Product Safety Commission announced that Home Depot U.S.A., Inc. has entered into a settlement agreement with the agency to resolve allegations that the retailer knowingly sold and distributed recalled consumer products over a four year period. The Company will pay a civil penalty of $5.7 million. This penalty is significant because it involves claims against a retailer who allegedly sold recalled products in violation of Section 19(a)(2)(B) of the Consumer Product Safety Act which makes it unlawful to sell a recalled product – and not the more typical “failure to timely report” claims against a manufacturer under Section 19(a)(4). This penalty is just the third such penalty in recent years (see Meijer 2014 civil penalty and Best Buy 2016 civil penalty).

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Dueling Interests at CPSC and FDA “Deem” E-cigarette Battery Safety a Priority

By Cheryl A. Falvey on Posted in Advertising & Product Risk Management

The regulation of e-cigarettes and other electronic nicotine delivery systems (“ENDS”) presents complex regulatory and scientific challenges. Two key federal agencies with product safety mandates and overlapping jurisdiction – the Consumer Product Safety Commission and the Food and Drug Administration – have turned their attention onto the specific area of e-cigarette battery-related fires and explosions in the last few months.

In August 2016, the Food and Drug Administration finalized its so-called Deeming Rule to bring e-cigarettes and ENDS, as well as their components and parts such as batteries, under its authority to regulate tobacco products. Under this newly granted authority to regulate e-cigarettes and ENDS, FDA held a public workshop in April on “Battery Safety Concerns in Electronic Nicotine Delivery Systems.” Through the workshop and also through other channels, FDA is seeking data and other information on explosions, fires, and overheating of e-cigarettes. FDA also has initiated a public safety campaign of “Tips to Help Avoid Vape Battery Explosions.”

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Government Blocks Companies from Importing and Selling Children’s Products after Alleged Non-Compliance with Product Safety Laws

By Cheryl A. Falvey and Matthew Cohen on Posted in Import/Export, Product Liability & Torts

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The U.S. Department of Justice and Consumer Product Safety Commission recently announced that they had entered into consent decrees with three New York-based toy companies and five individuals for importing and selling products that violate the Federal Hazardous Substances Act and the Consumer Product Safety Act. The consent decrees enter permanent injunctions against the companies from importing and selling toys until certain remedial actions are implemented and monitored by the CPSC. The decrees can be read here and here.

The DOJ and CPSC alleged that the individuals and companies – Everbright Trading Inc., Lily Popular Varieties & Gifts Inc., and Great Great Corporation – imported and sold numerous children’s toys and products that contained high levels lead content, lead paint, and phthalates; contained small parts; and violated the mandatory toy safety standard (ASTM F-963), bicycle helmet safety standard, and labeling of art material (LHAMA) requirements.

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Laura Brett Named New NAD Director

By Lauren B. Aronson on Posted in Advertising & Product Risk Management

On August 1, 2017, the Advertising Self-Regulatory Council (ASRC) and Council of Better Business Bureaus (CBBB) announced that Laura Brett has been appointed as director of the National Advertising Division (NAD). Ms. Brett has served as Acting Director of NAD since Andrea Levine, former Director of NAD, retired after 20 years as NAD Director. She joined NAD as a Staff Attorney in 2012 and was later an Assistant Director. Prior to joining NAD, Ms. Brett was a litigator at Willkie Farr & Gallagher and a solo practitioner. She was also a member of the Rye City Council and Deputy Mayor of Rye, NY.

At NAD, Ms. Brett has authored decisions in numerous cases challenging the adequacy of disclosures in native advertising formats, sponsored content, and other online and social media advertising issue. Before the FTC adopted its long-awaited native advertising guidance, Ms. Brett used the NAD’s self-monitoring authority to fill a regulatory gap and bring several challenges of native advertising. In her decisions, she pushed for improved disclosures and provided detailed guidance for companies engaged in novel forms of online advertising. She has not shied away from using NAD’ s authority to challenge the advertising practices of well-known tastemakers with large social media followings, challenging the Kardashians and Kate Hudson this year.

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President Trump Nominates CPSC Acting Chair Buerkle to Serve as Permanent Chair

By Matthew Cohen on Posted in Advertising & Product Risk Management

On Monday, President Trump nominated Ann Marie Buerkle, who has served as Acting Chair of the U.S. Consumer Product Safety Commission since February 9, 2017, to serve as permanent Chair of the Commission.  The appointment is for a term of seven years beginning on October 27, 2018 when her current term expires.  Acting Chair Buerkle’s statement on her nomination can be read here.

This nomination must be confirmed by the Senate.  Even if confirmed expeditiously (and that is a big if), the current minority-majority political dynamic at the Commission will not change until President Trump is able to appoint a third Republican Commissioner once Commissioner Marietta Robinson’s term expires in October later this year.

Acting Chair Buerkle’s regulatory philosophy and priorities for the Commission have been well documented, including in our prior blog posts.  In fact, she reiterated some of those thoughts as they pertain to product recalls in opening remarks at the CPSC’s Recall Effectiveness Workshop yesterday, July 25.  Acting Chair Buerkle stated that the Commission and its staff:

  • need to continue engaging all product safety stakeholders and listen to ideas, problems, and solutions concerning product recalls;
  • should not have a “one size fits all” approach to product recalls;
  • should not expect recalling companies to bankrupt themselves in undertaking a voluntary product recall; and
  • should look at proportionality and risk when effectuating a product recall.

Acting Chair Buerkle concluded her remarks by stating that the most effective way to prevent consumer injury is not through product recalls, but through preventing unsafe products from entering the market in the first instance.

We expect Acting Chair Buerkle to be confirmed in the coming months and wish her congratulations on the nomination.  

FTC Focusing on Privacy Risks of Interconnected Toys

By Stephanie Crawford on Posted in Advertising & Product Risk Management, Product Liability & Torts

© Getty Images

Fuzzy talking toys are no longer the annoying, yet benign Christmas gifts they used to be. Many of today’s toys, like refrigerators, cars, and televisions, are “smart,” and may come gift-wrapped with all of the emerging cybersecurity risks the internet has to offer. And as various government agencies grapple with the regulation and enforcement of smart products, the Federal Trade Commission (“FTC”) may be narrowing in on smart toy manufacturers as a potential target. The FBI and FTC issued separate alerts last week highlighting potential threats posed by cuddly friends that collect children’s voices and other identifying information and putting manufacturers on notice of potential enforcement actions for failure to comply with the Children’s Online Privacy Protection Act (“COPPA”), respectively.

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This Week in Digital Advertising: Fake News, Bots, and Implications for Digital Trust

By Christopher A. Cole on Posted in Advertising & Product Risk Management

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Last December, authorities arrested Edgar Welch, a 28-year old man from Salisbury, North Carolina, who had entered Comet Ping Pong, a Washington, D.C. pizza parlor, armed with a shot gun. Mr. Welch reportedly came to Comet Ping Pong on a self-described mission to free child sex slaves that he believed might be imprisoned there at the bidding of Hillary Clinton and her campaign Chief of Staff, John Podesta. After Welch shot his gun into the ceiling, terrified employees fled the building. Then, after encountering swarms of local police, and having found no evidence of the vast conspiracy he had been led by social media to believe existed, he gave himself up peacefully to authorities.

As outlandish as the story may seem, Mr. Welch was not the only one duped by the story. For weeks, dozens of anonymous posters had fanned the flames and pursued the imaginary conspiracy theory on Reddit.com, a hugely popular social news aggregation site.

This fake conspiracy was likely fueled in part by armies of “bots,” which are fake social media accounts often purchased and organized centrally, and mobilized to push a particular opinion or agenda and sway public opinion. It is surprisingly easily to purchase bots online. For example, Russian websites, such as BuyAces, sell empty social media accounts to anyone willing to pay with digital currency. Once purchased, programmers can enable these accounts to disseminate information or respond to news stories en masse. It is widely reported that Special Prosecutor, Robert Mueller, is investigating whether the Russian government used such tactics to influence the last election.

What does this have to do with advertising, you might ask? Everything.

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Webinar: Printer Cartridges & Cheerleading Uniforms: What the Key 2017 IP Supreme Court Decisions Mean for Apparel Companies

By Preetha Chakrabarti on Posted in Events, IP/Brand Protection

On July 27, 2017, Crowell & Moring will be presenting a webinar hosted by the United States Fashion Industry Association on the hottest IP Supreme Court decisions from 2017 that will affect the fashion and retail industries.  Anne Li and Preetha Chakrabarti of Crowell will be discussing Star Athletica, LLC v. Varsity Brands, Inc. and Impression Prods., Inc. v. Lexmark Intl. Inc. The Star Athletica case involving the copyrightability of cheerleader uniform designs will have a significant impact on not only the fashion industry, but other industries that rely on copyright protection, such as consumer product manufacturing and 3D printing.  And the Lexmark decision involved the doctrine of patent exhaustion, and held that a patentee cannot sue for patent infringement after the first sale of a patented item, even if that first sale is outside the United States. Thus this case too will have an impact on any retailer that deals with IP and operations abroad.

For more information and to register for this webinar, please visit Crowell.com.