Last month, U.S. Representative Grace Meng (D-NY) announced that she has reintroduced legislation—the Total Recall Act—to change the way that businesses notify the public about recalls.  The text of the legislation can be found here.

H.R. 3724, entitled the “Total Recall Act,” requires firms engaged in a product recall to post recall notices on their websites and all social media accounts, and also spend a defined amount of money on publicizing the recall depending upon whether it is mandatory or voluntary.  For a mandatory recall, which is an incredibly rare event, businesses would be required to expend a sum of money that equals at least 25% of what the firm spent on marketing the product prior to its recall.  On the other hand, for common voluntary recalls, firms would be required to use at least 25% of the product’s original marketing budget as well as 100% of the product’s social media marketing budget on publicizing the recall.  The bill would also mandate that the U.S. Consumer Product Safety Commission provide an annual report to Congress on participation rates for each recall.
Continue Reading Product Recall Notification Legislation Reintroduced in Congress

On May 21, 2021, the U.S. Consumer Products Safety Commission (“CPSC”) published a report on artificial intelligence (AI) and machine learning (ML) in consumer products. The report highlights recent CPSC staff activity concerning AI and ML, proposes a framework for evaluating the potential safety impact of AI and ML capabilities in consumer products, and makes several recommendations that the CPSC can take in identifying and addressing potential hazards related to AI and ML capabilities in consumer products.

Concerning staff activity, CPSC recently hired a Chief Technologist with a background in AI and ML to address the use of AI in consumer products. The CPSC also recently established an “AI/ML Working Group” and held a virtual forum on AI and ML in March 2021.

Informed by the discussions held with various stakeholders at this forum, the CPSC staff has proposed a framework in the report for evaluating the potential safety impact of AI and ML in consumer products. The framework’s first step involves screening products for AI and ML “components.” The CPSC and stakeholders have identified the following components to be essential to producing an AI capability: data sources, algorithms, computations, and connections. Likewise, the CPSC and stakeholders have found the following components to define ML capabilities: assessing and monitoring outputs, analyzing and modeling changes, and adjusting and adapting behavior over time. The framework’s second step involves assessing the functions and features of consumer products’ AI and ML capabilities. The third step involves understanding how products’ AI and ML capabilities may impact consumers, which can be accomplished by studying the nature of the technology, how it is implemented in the product, and how the consumer might use the product. The final step involves ascertaining if, and to what extent, AI and ML capabilities may transform the product and/or its use over time.
Continue Reading CPSC Publishes Report on Artificial Intelligence and Machine Learning

Earlier this year, the Attorney General Alliance (AGA) conducted an important webinar highlighting the risks of organized retail crime (ORC) to retail organizations, employees, and customers. ORC presents substantial dangers in both the online and brick-and-mortar settings, necessitating cooperative efforts between businesses and government actors to combat this illicit activity. Retail clients should be aware of pandemic-driven upticks in ORC, increased safety risks to employees and customers, and proposed solutions like the INFORM Act that may impose new business obligations in the effort to prevent ORC.

An Increase in ORC

ORC refers to acts of theft by professional criminals both in-store and online. ORC is much more serious than casual shoplifting and is closely linked to dangerous crimes like human trafficking and money laundering. Participants in ORC are generally extremely well-organized and intentional. In stark contrast to the casual shoplifter who likely engages in his or her crime of choice no more than a few times per week, organized retail criminals can easily hit several stores in a single day. Moreover, because their aim is resale, rather than personal use, these criminals tend to target in-demand products. These include cosmetics, fragrances, allergy medications, razor blades, designer clothing, batteries, drills, over-the-counter drugs, and baby formula.

While ORC has existed for decades, shifts in purchaser behavior during the coronavirus pandemic appear to have dangerously increased its felt effects; retailers, for one, are taking a substantial financial hit. Scott Draher, an asset protection and safety executive for Lowe’s, noted that while maybe 25% of all Lowe’s losses in 2015 resulted from ORC, that number is now around 60%. Although the exact cause of this spike in ORC activity is unclear, it may be that pandemic-era buyers, in their efforts to avoid in-person shopping, are more willing to purchase products from questionable sources, creating increased resale opportunities for ORC participants.

The increase in demand for certain goods—even from uncertain sources—has also fueled another troubling ORC trend: An increase in violence. It appears that ORC criminals are becoming more brazen and aggressive. Many will do anything to get out the door with their stolen goods, including harming people in their way. Employees, in particular, have been regularly threatened with mace and other weapons. According to Ben Dugan, part of the ORC investigations team for CVS Health, the key driver of this increased aggression is the desire to meet escalating demand; the recent increase in online sales of the products targeted by ORC criminals, about 30%, roughly mirror the increase in theft.

ORC also creates troubling consumer safety risks apart from the risk of altercation with a fleeing criminal. Consider an organized retail criminal who steals and resells baby formula. This sensitive product may not be stored the right way prior to resale, or the thief may tamper with the contents or change expiration dates on the packaging. More generally, third-party sellers are simply not held to the same product integrity and safety standards that would otherwise apply. These risks are particularly high in the context of online sales, where consumers have less information about the product and the seller—and thus less opportunity to obtain legal redress.
Continue Reading AG Alliance Highlights New Trends in Organized Retail Crime

The Consumer Product Safety Commission has issued new guidance and labeling instructions for the nationwide standard for upholstered furniture flammability.  On May 19, 2021, the CPSC published an online Q&A that provides important information to industry and previews the agency’s enforcement outlook.

The Q&A guidance confirms that the standard is effective as of June 25, 2021 but does not apply to items manufactured, imported, or reupholstered before June 25, 2021.  Industry has more time to implement the new labeling requirements:  the Q&A restates that the labeling requirement begins on June 25, 2022 and only applies to upholstered furniture manufactured, imported, or reupholstered on or after that date.


Continue Reading CPSC Issues Guidance on New Upholstered Furniture Flammability Standard

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

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

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