Retail & Consumer Products Law Observer

Retail & Consumer Products Law Observer

Legal Insight for the Retail and Consumer Products Industry

Peter A. Feldman Nominated to CPSC; Republican Majority in Sight

Posted in Advertising & Product Risk Management

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Two weeks ago, after the Senate confirmed Dana Baiocco to the U.S. Consumer Product Safety Commission (CPSC), we wrote that it would not be a surprise if President Trump appointed a fifth commissioner in the coming weeks to give the Republicans a 3-2 voting majority on the Commission. Well, on June 4, the President nominated Peter A. Feldman to be a Commissioner of the CPSC. This is a very significant development. If confirmed, Feldman will fill the remainder of former Commissioner Joe Mohorovic’s term, which expires in October 2019, and give the Republicans their first majority at the Commission in nearly twelve years. The confirmation would also allow Acting Chair Ann Marie Buerkle to start to move the agency in a direction that reflects her regulatory priorities, as well as those of the Administration.

Mr. Feldman is known to many in the product safety community. Having served as legal counsel at the Senate Committee on Commerce, Science, and Transportation since 2011 (most recently as Senior Counsel), he is knowledgeable and well-versed in consumer product safety law and the activities of the Commission. He is a graduate of American University’s Washington College of Law.

Upon his nomination, Senate Commerce Committee Chairman John Thune (R-SD) stated the following:

“Peter has been part of the Commerce Committee team and an invaluable resource during my entire tenure as ranking member and chairman. While I will miss his steady hand in our committee’s bipartisan efforts to fight for consumer safety and fairness, the Consumer Product Safety Commission will benefit from his expertise and leadership. Once the committee receives the formal nomination and other required submissions, I expect we will move quickly to convene a confirmation hearing.”

We expect Feldman’s nomination to move faster than that of Commissioner Baiocco. Should Feldman be confirmed to fill former Commissioner Mohorovic’s term, we also expect President Trump to re-nominate him for a new seven-year term in October 2019. In the meantime, until Feldman’s confirmation, the Commission remains in a 2-2 voting “tie.”

Who You Gonna Call? (Just Don’t Use an Autodialer!)

Posted in Advertising & Product Risk Management

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Multiple class actions have alleged violations of the Telephone Consumer Protection Act (TCPA) for use of automated dialing systems (auto-dialer). In a 2015 Order, the Federal Communications Commission (FCC) defined an auto-dialer under the TCPA to mean any device with the theoretical “capacity” to place autodialed calls, even if had the potential to be transformed into an auto-dialer. Importantly, the FCC’s definition was prospective and applied even if additional software was required. However, several recent cases have narrowed the scope of the definition of “auto-dialer,” creating a potential hurdle for plaintiffs and creating confusion about the viability of class actions that hinge on whether the marketing platforms used to send messages to consumers qualify as “auto-dialers.”

In March, in ACA International v. Federal Communications Commission, No. 15-1211 (D.C. Cir. Mar. 16, 2018), the D.C. Circuit limited the FCC’s 2015’s broad prospective definition of auto-dialer, stating that it would “subject ordinary calls from any conventional smartphone to the act’s coverage” and that the statute did not necessitate such a “sweeping swoop.”  Instead, the court reasoned, the proper analysis of whether a device is an auto-dialer under the TCPA should turn on the capacity of a device to behave as an auto-dialer, as well as the amount of effort required to turn a device into an auto-dialer.

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Democrats Lose Voting Majority at CPSC with Baiocco Confirmation

Posted in Advertising & Product Risk Management

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The 3-1 Democratic majority at the U.S. Consumer Product Safety Commission has officially come to an end one and a half years after the election of President Trump and eight months after the nomination of Dana Baiocco as a commissioner of the CPSC. This afternoon, the United States Senate voted 50-45, mostly along party lines, to confirm Ms. Baiocco to the Commission. This confirmation is significant.

As of today, Ms. Baiocco will be able to take her seat on the Commission, and Commissioner Marietta Robinson, currently in her “hold-over” year as her term expired last October, will depart the agency. Commissioner Baiocco’s arrival at the CPSC will shift—or at least begin to shift—the Commission’s balance of power from Democratic to Republican control.

With Ms. Baiocco’s confirmation, Republicans will hold two seats on the Commission currently occupied by Acting Chair Ann Marie Buerkle and Commissioner Baiocco. They will serve alongside Democratic Commissioners Robert Adler and Elliot Kaye. The fifth seat on the Commission has remained vacant since former Republican Commissioner Joe Mohorovic resigned from the agency last October.

Commissioner Baiocco’s confirmation marks an end to the unusual dynamic whereby the Commission’s leader, Acting Chairman Ann Marie Buerkle, a Republican, was in the minority, and generally unable to implement the regulatory priorities of the Administration. Although Acting Chairman Buerkle will not command a 3-2 majority until the President appoints a fifth commissioner (who must also be confirmed by the Senate), the Democrats will no longer have a de facto majority to control the agency’s agenda.

While Ms. Baiocco’s confirmation certainly changes the balance of power at the Commission, some political limbo and uncertainty remains. Acting Chairman Buerkle’s nomination to be permanent Chairman remains pending—and there is no indication from the Senate that it plans to move the nomination forward as it has just done with Ms. Baiocco’s nomination. Moreover, although the Democrats have lost their 3-2 majority on the Commission, a 2-2 voting “tie,” may result in stalemate as Acting Chairman Buerkle does not have any tie-breaking authority as Chairman.

Nevertheless, we can now expect the Commission to start to move in a direction that reflects some of the Administration’s regulatory priorities and agenda. Furthermore, we would not be surprised if President Trump appointed a fifth commissioner in the coming weeks to once again shift the balance of power—this time, giving the Republicans a 3-2 voting majority.

Check Your Spam Filters!: CPSC Has Automated FOIA Communications

Posted in Advertising & Product Risk Management, Product Liability & Torts

You may have received an e-mail notice this week from the CPSC about the FOIA office’s new “Electronic Manufacturer Notification Collaboration Portal.”  The main purpose of the Portal is to reduce costs by using e-mail instead of snail mail for Section 6(b) and other FOIA-related notifications. 

Generally, automation of this process shouldn’t result in any meaningful changes in the FOIA notification and objection process.  The Commission’s regulations allow firms to submit information with a request for confidential treatment.  If the Commission receives a FOIA request for information previously designated confidential, the person who previously submitted the request for confidentiality is notified of the FOIA request and the need for quick response to protect that information from disclosure.

Given the quick turnaround time on requesting exemption from disclosure under FOIA, it is imperative for all industry players to make sure that the right contact is assigned – including someone in the Legal Department – to receive Portal notifications so your team can make quick decisions and take action if filing an objection with the CPSC is necessary.  The same contact person used for the Clearinghouse or Saferproducts.gov is a good bet.  But requesting an exemption under FOIA takes some analysis of the regulations.  Was the information submitted under section 15?  Is it a trade secret?  And so, companies would be well advised to make sure they have a process in place and conduct a training program to protect confidential data from disclosure.

If you haven’t yet received any notifications about the new automated Portal, you should check in with the CPSC at cpsc-foia@cpsc.gov and provide contact information for the proper registration person.  The full text of the notification recently sent by the CPSC is below:

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CPSC Reaction to Consumer Misuse – Human Factors Design Process

Posted in Advertising & Product Risk Management

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Product liability suits and regulatory product defect enforcement actions associated with consumer foreseeable – and unforeseeable – misuse have become the norm. Consumer product companies can mitigate these risks by focusing on use-related hazards and user-centered designs in an effort to reduce injuries and improve the usability of products. But the real question is how far to go with these efforts — at what cost and for what incremental benefit.

On March 15, 2018, the Consumer Product Safety Commission published Draft Guidance on the Application of Human Factors to Consumer Products for industry comment by May 14, 2018. The draft guidance was developed in conjunction with Health Canada’s Consumer Product Safety Directorate. CPSC and Health Canada aim to increase product safety by explaining to product designers and manufacturers how to incorporate human factors[1] into the design process.

The draft guidance describes the product design process and provides guidance on human factors considerations at each stage and then summarized in the graphic depictions collected at the end of this post. Because the guidance is not an enforceable rule, no cost benefit analysis accompanies the myriad of product design recommendations proposed.

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FTC Targets Cryptocurrency Pyramid Schemes

Posted in Advertising & Product Risk Management

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The FTC’s Consumer Protection Division has long targeted advertisements for “work-at-home,” business and investment opportunities that exaggerate the earning potential and downplay risks. Recently, the FTC announced that it filed a complaint against four individuals doing business as “Bitcoin Funding Team” in the U.S. District Court for the Southern District of Florida for deceptively advertising a cryptocurrency scheme that promised consumers that they could turn a cryptocurrency payment of approximately $100 into $80,000 in monthly income. Specifically, the complaint alleges two counts: 1) that Defendants’ representations that the programs are structured to operate as bona fide money-making opportunities are false or misleading and violate Section 5(a) of the FTC Act, and 2) that Defendants’ representations that consumers who participate in the programs are likely to earn substantial income are also false or misleading, violating Section 5(a). On March 16th, the Commission secured a temporary restraining order against, and froze the assets of pending trial, the defendants it alleges who were operating and promoting cryptocurrency pyramid schemes.

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Is the Cambridge Analytica Scandal a Watershed Moment for the Ad-Funded Internet?

Posted in Advertising & Product Risk Management

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The news that Cambridge Analytica, the shadowy, digital political consultancy, may have misused user data obtained from Facebook is reverberating throughout Washington and foreign capitals. The immediate fallout has been calls for Congressional and federal investigations into what happened. The Federal Trade Commission has taken the unusual step of publicly announcing a “non-public” investigation into whether Facebook breached the terms of a 2011 consent agreement with the agency. A coalition of 37 State Attorneys General has also sent a letter to Facebook demanding information about how the company handles information collected by users.

Of course, it doesn’t help that Cambridge Analytica’s Chief Executive Officer was caught on hidden camera pitching outright blackmail and dirty tricks to sway future elections. But, the real scandal appears to be that Cambridge misused information collected from Facebook members and their friends in order to psychologically manipulate them to favor one candidate over another. The ensuing media attention has brought to the fore concerns that have been simmering for years, but which have until now largely been ignored by average consumers.

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Can the Government Foster Innovation While Regulating New Technology? Check Out “Digital Transformation: The Sky’s The Limit” – Part of Crowell & Moring’s 2018 Regulatory Forecast

Posted in Privacy & Data Protection

Crowell & Moring has issued its “Regulatory Forecast 2018: What Corporate Counsel Need to Know for the Coming Year.”

With the development of artificial intelligence, blockchain, 3D printing, the Internet of Things, autonomous vehicles, and other advances in technology, the cover story, “Digital Transformation: The Sky’s the Limit,” provides a look at how technology is helping companies soar to new heights and how regulation can help companies to succeed. While data is a driver for innovation, the article examines how it also carries new and unintended implications for regulatory enforcement, product liability, cybersecurity, and intellectual property.

The overall theme of the fourth-annual Forecast is how digital technology is driving the future of business across a wide range of industries – and how Washington, as well as state and global regulators, is forging the appropriate balance between fostering innovation and protecting consumers. This report is the companion piece to the firm’s 2018 Litigation Forecast, which was published in January and also focused on the opportunities and challenges general counsel face in navigating the Big Data revolution.

Be sure to follow the conversation on Twitter with #RegulatoryForecast.

 

Holding Agencies Accountable: Ad Agency Agrees to Pay Largest Penalty Ever for False Advertising

Posted in Advertising & Product Risk Management

In the largest-ever penalty issued against an ad agency, the Federal Trade Commission announced that Marketing Architects, Inc. (MAI) agreed to pay $2 million dollars to settle a false advertising complaint filed with the FTC and the State of Maine Attorney General’s Office.

The ad agency came to the FTC’s attention after the Commission settled with Direct Alternatives (DA) and Sensa Products, LLC  for more than $16 million and more than $26 million respectively to resolve claims that the companies engaged in the false and deceptive advertising, marketing and sale of weight loss products.  According to the Complaint, MAI created direct response radio ads for Sensa and DA as well as MI6 Holdings, LLC (MI6) and other unidentified clients with toll free numbers inviting consumers to call and purchase weight loss. In addition, for some clients, including DA, MAI created and implemented scripts for its Interactive Voice Response (IVR) system, providing testing, analysis and strategic advice regarding the performance of its IVR scripts and ads as well as collecting payment information.

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Don’t Settle for Less: Ninth Circuit Rules That Courts Must Consider Variations Among State Laws Before Certifying Nationwide Settlement Classes

Posted in Consumer Class Action

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Recent years have seen federal courts applying increased scrutiny to proposed “multistate” class actions that invoke a hodgepodge of state consumer-protection laws. The main reason: The variations among these state laws are not only extensive but often case-determinative, preventing class representatives from proving their claims on a classwide basis.

These decisions have, in turn, raised another question that has divided judges, commentators, and practitioners: Does the same high bar apply to the certification of nationwide classes that are purely vehicles for settlement—meaning that the court will never have to address the practical and legal difficulties of managing an actual classwide trial involving fifty (or more) state laws? In late January the Ninth Circuit weighed in to answer that it does, in a potentially seminal opinion that could, in the words of one dissenting judge, strike a “major blow” to multistate class action settlements.

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