Recalls in Review: A monthly spotlight on trending regulatory enforcement issues at the CPSC.

As people increasingly turn to online shopping over traditional brick-and-mortar stores, consumers, safety advocacy groups, and regulators alike have begun to pay more attention to the authenticity and safety of products.  One particular concern is the presence of lead in consumer products, which is toxic if ingested and can cause adverse health issues.

The Consumer Product Safety Commission has regulated lead in consumer products since the 1970s.  However, the Commission’s ability to regulate lead in children’s products was strengthened in 2008 with the enactment of the Consumer Product Safety Improvement Act (“CPSIA”).  CPSIA Section 101 limits lead content in accessible component parts  children’s products (15 U.S.C. § 1278a).  Section 101 and CPSC regulations (16 CFR Part 1303) also govern the use of lead in paints and other surface coatings on all children’s products and certain furniture products.  Movable pieces of furniture that contain surface coatings—such as beds, bookcases, and chairs—are covered by the regulation.

The CPSC very actively regulates and monitors products for violations of the federal safety standards regarding lead.  Nearly four hundred lead-related recalls have been conducted, with 317 of those recalls occurring since 2001.  As you can see from the below chart, the Commission paid great attention to excessive levels of lead in consumer products from 2006 to 2010.  The steep increase in lead-related recalls resulted in the enactment of the CPSIA in 2008.

Shockingly, the issue of lead in children’s products persists despite aggressive Commission action and strong congressional mandates.  In just the first two months of 2021, the CPSC issued 16 notices of violation for excess lead in children’s products.  Most of those actions involved publication of the product at issue as well as an immediate stop sale and agreement to correct future production but did not involve a consumer level recall.

Although not nearly as drastic as the last “enforcement spike,” the Commission may be turning its focus towards lead in consumer products once again.  Nine lead-related recalls were conducted in 2020, which is up from only one such recall in 2019, six in 2018, and four in 2017.  This increase occurred despite a sharp reduction in the overall number of toys recalled in fiscal year 2020—discussed in a November 2020 CPSC News Release.

Lead-related recalls have targeted a wide variety of products over the years.  Unsurprisingly, the most commonly recalls product types include toys (37%) and children’s jewelry (25%).  Other more frequently recalled product types include furniture, clothing, sports equipment, and art supplies.

According to information provided by the CPSC recall announcements, seventy percent of the recalls address violations of standard for lead in paint and surface coatings and thirty percent address violations of the standard for total lead content.  In addition to addressing lead paint violations, one 2006 recall also addresses a laceration hazard and a 2014 recall addresses choking and injury hazards.

The public can monitor children’s product recalls on CPSC.gov or SaferProducts.gov for violations of the federal lead standards.  According to the CPSC recall announcements, the vast majority of products (97%) are recalled despite having no reported incidents involving consumers.  Of the ten recalls that had reported incidents involving consumers, six involved reports of elevated blood-lead levels in children, two involved reports of lead poisoning, and two involved reports of the product breaking.

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About Recalls in Review:  As with all things, but particularly in retail, it is important to keep your finger on the pulse of what’s trending with consumers.  Regulatory enforcement is not different—it can also be subject to pop culture trends and social media fervor.  And this makes sense, as sales increase for a “trending” product, the likelihood of discovering a product defect or common consumer misuse also increases.  Regulators focus on popular products when monitoring the marketplace for safety issues.

As product safety lawyers, we follow the products that are likely targets for regulatory attention.  We share our observations with you through Recalls in Review.

Could the end of Section 6(b) of the Consumer Product Safety Act (CPSA) actually be near?  Time will tell.  But last week’s development on Capitol Hill in the saga of “Section 6(b)” is noteworthy, and, one day in the not-so-distant future, may be recognized as the beginning of the end for this controversial provision of the law.

On April 22, Senator Richard Blumenthal (D-CT) and Representatives Jan Schakowsky (D-IL) and Bobby Rush (D-IL) introduced legislation—the Sunshine in Product Safety Act—to fully repeal Section 6(b) of the CPSA.  This is the first time in recent memory that Members of Congress have introduced legislation to do away with Section 6(b) altogether.  For example, in the last Congress, Representative Rush introduced the “SHARE Act,” which sought primarily to scale back one of Section 6(b)’s most important protections for firms—allowing a company to judicially challenge the U.S. Consumer Product Safety Commission’s (“CPSC” or “the Commission”) decision to release information about a firm, or one of its products, prior to its disclosure.  But that legislation left the rest of Section 6(b)’s procedures and protections intact.  This current bill, therefore, is much more ambitious, and stakeholders should take note.

By way of background, Section 6(b) requires the CPSC to engage in certain procedural steps before publicly disclosing information from which the identity of a manufacturer of a product can be readily ascertained.  Those include taking reasonable steps to ensure that the information to be disclosed publicly is fair, accurate, and reasonable related to effectuating the purpose of the product safety laws.  Practically speaking, this means notifying the manufacturer of the potential disclosure, providing either a summary of what the agency intends to disclose, or the actual disclosure itself, and providing the company with the opportunity to comment, typically 15 days, though that time period can be shortened by the CPSC with a “public health and safety finding.”  Other regulators, like FDA and NHTSA, do not have similar statutory constraints on the release of product information nor do they have due process protections around data release, whether those be adverse events or vehicle accidents. Continue Reading New Bills Seek to Repeal Controversial Provision of Product Safety Act

Last week the Supreme Court unanimously held that §13(b) of the Federal Trade Commission Act does not give the Federal Trade Commission the power to seek equitable monetary relief such as disgorgement or restitution. The Court’s opinion in AMG Capital Management LLC v. Federal Trade Commission removes a powerful tool that the FTC has long relied on to pursue monetary relief for consumers in both consumer protection and competition matters.

By way of background, the FTC has authority to protect consumers from unfair or deceptive acts or practice (“UDAP”) and unfair methods of competition (“UMC”) with an overlapping but distinct set of tools it can use to pursue its dual consumer protection and competition missions:

  • Administrative Proceeding: The FTC can initiate an administrative proceeding to seek a cease and desist order for either a UDAP or UMC violation from an administrative law judge. If necessary, the FTC can later bring a contempt proceeding in federal court seeking to enforce the terms of an administrative order. A defendant may respond by arguing that it has “substantially complied” with the terms of the order. If the FTC prevails in such a case, it can seek civil penalties and other equitable relief necessary to enforce the order (however monetary relief only applies to UDAP violations).
  • Rulemaking: The FTC has authority to promulgate rules that define UDAP with specificity. Generally, this requires a lengthy, formal rulemaking process that allows for public comment, and a final rule can be challenged in federal court. If a defendant later violates a duly enacted UDAP rule, the FTC can seek civil penalties for a knowing violation. The FTC can also file suit in federal court and obtain monetary relief “to redress consumer injury,” including an order compelling “refund of money or return of property,” but only if “a reasonable man would have known under the circumstances [that the challenged conduct] was dishonest or fraudulent.”
  • Federal Court: The FTC can sue in federal court under §13(b) of the FTC Act to enjoin a defendant when the defendant “is violating, or is about to violate” a law that the FTC enforces and such an injunction is in the public’s interest. While courts have historically read §13(b) as giving the FTC an implied right to recover equitable monetary relief in addition to injunctive relief, the Supreme Court’s ruling now limits the FTC to seeking injunctive relief only.

Continue Reading The Supreme Court Limits FTC’s §13(b) Powers

On April 15, 2021, the FTC filed its first complaint under the COVID-19 Consumer Protection Act (the CCP Act). The complaint, filed in the United States District Court for the Eastern District of Missouri, alleges that an in-state chiropractor and his company violated both the CCP Act and the FTC Act by deceptively marketing Vitamin D and Zinc products to treat COVID-19.

According to the complaint, St. Louis-based Eric A. Nepute and his company, Quickwork LLC, promote scientifically proven representations that the Wellness Warrior products containing Vitamin D and Zinc will provide equal or better protection against COVID-19 than currently available COVID-19 vaccines.  Additionally, Nepute’s videos claimed that “COVID-19 Patients who get enough Vitamin D are 52% less likely to die” and that people who consume enough Vitamin D3 “have a 77% less chance of getting infected in the first place.”

In May 2020, Nepute received a warning letter advising him to review the claims for his products and to cease making representations unsupported by reliable scientific evidence. According to the complaint, despite the warning letter, the defendants “ramped up their unsubstantiated claims regarding Vitamin D and Zinc.” The FTC is now seeking monetary penalties and a preliminary injunction that bars defendants from making health claims unless they are true and can be substantiated by competent and reliable scientific evidence.

The COVID-19 Consumer Protection Act 

Titled the “COVID-19 Consumer Protection Act” (see page 2094 here), the law lasts for the duration of the COVID-19 public health emergency declared pursuant to section 319 of the Public Health Service Act (42 U.S.C. 247d).

The Act makes it unlawful under Section 5 of the Federal Trade Commission Act for any person, partnership, or corporation to engage in a deceptive act or practice in or affecting commerce associated with the treatment, cure, prevention, mitigation, or diagnosis of COVID–19 or a government benefit related to COVID–19. The Act provides that such a violation shall be treated as a violation of a rule defining an unfair or deceptive act or practice prescribed under Sec. 18(a)(1)(B) of the FTC Act enabling the FTC to obtain civil penalties.

The FTC’s Efforts to Enforce the COVID-19 Consumer Protection Act 

The FTC has made it clear by sending hundreds of warning letters during the COVID-19 pandemic that it is closely monitoring deceptive COVID-19 acts and practices. Advertisers cannot make any express or implied claims that their products or services are effective against preventing or curing coronavirus absent competent and reliable scientific evidence. Now, the FTC is armed with the power to seek civil penalties and we should expect additional lawsuits under the CCP Act as  it continues to monitor the marketplace.

After more than two years of deliberation, the Eleventh Circuit issued its decision in Gil v. Winn-Dixie on April 7, 2021.  Writing for the majority, Judge Elizabeth Branch reversed a trial court decision and found that Winn-Dixie’s website, which is incompatible with screen reading software used by the plaintiff, who is blind, did not violate Title III of the Americans with Disabilities Act (“ADA”).  In doing so, the court’s opinion in this closely-watched case advances the law in several frequently litigated issues in ADA Title III website accessibility disputes.

The Appellate Court’s Opinion

The Eleventh Circuit’s decision includes two key takeaways: (1) that websites are not “places of public accommodation” under the ADA; and (2) a rejection of the “nexus” standard, notably adopted by the Ninth Circuit.  In what it described as a strict textual reading of the ADA, the majority concluded that the retailer’s website was not a “place of public accommodation” within the meaning of the ADA.  Judge Branch emphasized that the statute includes an “expansive list” of examples of public accommodations—all of which are physical locations, not websites.  The court further reasoned that the website’s functionality did not interfere with the plaintiff’s right to “full and equal enjoyment” of a place of public accommodation, because he had visited its physical locations on many occasions.

The majority also rejected the plaintiff’s theory that the grocery store violated the ADA because its website was a “nexus” to its physical locations, and thus must be accessible to people with disabilities.  Among other courts, the Ninth Circuit adopted the “nexus” theory in its widely-publicized 2019 opinion in  Robles v. Domino’s.

The Eleventh Circuit also rejected the plaintiff’s alternative theory of liability under the ADA.  Gil argued that the website’s inaccessibility created an “intangible barrier” to the goods and services at the brick-and-mortar store.  The court rejected this claim, focusing on the fact that the website had “limited use” and was not the sole access point to the store.  Language in the majority opinion supports a relatively narrow interpretation of the statutory “auxiliary service” issue that is frequently litigated in ADA Title III cases.  See 42 U.S.C. § 12182(b)(2)(A)(i)-(ii).

Penning a dissent as long as the majority’s opinion, Judge Jill Pryor explained, “[t]he ADA is a sweeping piece of legislation; it is hardly surprising that its terms prohibiting discrimination are broad and inclusive.”  By narrowing the applicability of the ADA, Judge Pryor worried about the unintended consequences.  “As I read it, the majority opinion gives stores and restaurants license to provide websites and apps that are inaccessible to visually-impaired customers so long as those customers can access an inferior version of these public accommodations’ offerings.” Continue Reading Website Wars: Eleventh Circuit Rules in a Split Decision That Websites are Not Public Accommodations for Purposes of the Americans With Disabilities Act

Promotional products seller Gennex Media LLC and its owner, Akil Kurji, have settled Federal Trade Commission (“FTC”) charges that they made false, misleading, or unsupported advertising claims that their “Brandnex” customizable promotional products were “all or virtually all” made in the United States. Despite numerous claims that the company’s novelty items were “Made in the USA,” “USA Made,” and “Manufactured Right Here in America!”, the items were wholly imported from China.

The settlement requires Gennex and Kurji to pay the FTC a monetary judgment of $146,249.24. In addition to the payment, the parties are required to follow post-settlement remediation measures. Some of these measures include: (1) providing customer information to the FTC in order to ensure proper customer redress; (2) submitting compliance reports to the FTC one year post-settlement; and (3) maintaining certain business records for five years. Continue Reading Made in USA Settlement for Chinese Imports

NFTs (non-fungible tokens) hit the scene in 2017 with CryptoKitties, a game on the Ethereum blockchain for buying, selling, and breeding digital cats. Clearly, CryptoKitties represents a humble start for NFTs, the technology that has since captured astonishing public and media attention. More recent NFTs—like the NFT-based digital artwork by Beeple that sold at Christie’s for $69 million last month—demonstrate the rising importance of these novel digital assets.

Each NFT is a one-of-a-kind digital information file typically associated with a digital image, like an artwork, video, gif, tweet, or even event ticket. At least in theory, NFTs can also be created for physical objects, a possibility just beginning to gain meaningful attention.

Where associated with a digital image, the NFT does not generally contain the image but functions like an integrated smart contract with a link to the image file. This smart contract uses blockchain technology to track changes in ownership and affirm authenticity, much like a digital provenance. NFTs also contain a feature that can disseminate royalties whenever the NFT is sold, exemplifying the design flexibility and diverse functionality of these assets.

NFTs are a new form of non-tangible property with substantial implications in the art, entertainment, fashion, and marketing/advertising realms. Individuals and businesses operating in these spaces should carefully consider the merits of NFT platform or portfolio ownership and should anticipate new applications of and perhaps changes to existing bodies of law, like copyright and false advertising, that will address NFT issues. Continue Reading NFT Risks and Opportunities in the IP, Advertising, and Brand Management Spaces

The Consumer Product Safety Commission (CPSC) voted to promulgate a Direct Final Rule clarifying deadlines for the new nationwide standard for upholstered furniture flammability.  The new rule codifies the effective dates for compliance with the new national flammability standard (which incorporated California’s flammability testing standard already in effect) and allows for affected parties to comment if they are significantly adversely affected by the new rule.

Continue Reading CPSC Rulemaking Clarifies June 25, 2021 Deadline to Comply with Furniture Flammability Standard, Extends Labeling Requirement Deadline Until 2022

On March 25th, the Federal Trade Commission (FTC) announced that the agency is creating a new and dedicated “rulemaking group” within the FTC’s Office of the General Counsel.  Currently, rulemaking within the FTC is decentralized and individual bureaus are responsible for promulgating particular rules.  With this new group in place, Acting Chairwoman Rebecca Slaughter explained, the FTC can take a harmonized approach to rulemaking across its different authorities in order to prohibit unfair and deceptive trade practices and unfair methods of competition.  This move is significant because, although the FTC has declined to engage in rulemaking for many years, it has signaled its desire for stricter enforcement for some time.  Just last year, the FTC promulgated a new “Made in USA” labeling rule in order to make the standards clear and to enable the Commission to seek civil penalties for any violations.

Continue Reading Harmonized Approach to Rulemaking: FTC Announces New Rulemaking Group

The Federal Trade Commission (“FTC”) is distributing more than $6 million to Fashion Nova customers after the popular retailer did not “properly notify [them] or give them the chance to cancel their orders when [it did not] ship merchandise in a timely manner.” On the heels of a settlement entered into between the FTC and the Southern California-based fast fashion company almost a year ago, the government agency revealed that it “is sending refunds to more than 500,000 people,” noting that in addition to failing to ship products within the “fast shipping” time frame it promised, Fashion Nova further ran afoul of federal law when it “did not offer customers the option to cancel [the delayed] orders, and opted to issue gift cards to compensate customers for unshipped merchandise instead of providing refunds.”

In a statement on Thursday, the FTC asserted that it is “providing more than $6.5 million in payments to 518,552 consumers, including more than 40,000 consumers who live outside the United States in 169 different countries.” The distribution of the refunds – which amount to $12.60 per individual consumer – follows from an agreement between Fashion Nova and the FTC that settled charges lodged against Fashion Nova. Continue Reading The FTC is Paying Out $6.5 Million to Consumers in Connection with Fashion Nova Settlement