Tuesday, October 5, 2021

Advertising and Marketing & Privacy and Security

  • The FTC approved a settlement with the operators of MoviePass over allegations that they took steps to block subscribers from using the service as advertised, while also failing to secure subscribers’ personal data. The FTC alleged that MoviePass Inc.—along with CEO Mitchell Lowe, and MoviePass’ parent company and its CEO, deceptively marketed its “one movie per day” service, then deployed deceptive tactics aimed at preventing subscribers from using the service as advertised —actions the FTC alleged violated both the FTC Act and the Restore Online Shoppers’ Confidence Act. The FTC also alleged MoviePass’s operators left a database containing large amounts of subscribers’ personal information unencrypted and exposed, leading to unauthorized access.


Continue Reading FTC Updates – October 2021

On October 13, President Biden issued a Fact Sheet entitled Biden Administration Efforts to Address Bottlenecks at Ports of Los Angeles and Long Beach, Moving Goods from Ship to Shelf to help address the “delays and congestion” across the transportation supply chain. As has been widely reported in recent weeks and months, the global supply chain has been hard hit by large increases in e-commerce and delays and shutdowns implemented to curb the spread of COVID-19. The release confirms public and private commitments to move goods more quickly and to secure the resiliency of American and global supply chains. To do so, the Biden Administration is focusing on the Ports of Los Angeles and Long Beach, which act as the ports of entry to the United States for 40% of containers received. The President, together with leadership from these ports, are undertaking a series of public and private commitments as noted below.
Continue Reading Biden Administration Works with Industry Stakeholders to Address Supply Chain Delays at the Ports of Los Angeles and Long Beach

On October 1, 2021, the California Department of Toxic Substances Control (“DTSC”) published a proposed regulation that would list Nail Products Containing Toluene as a Priority Pollutant under its Safer Consumer Products (“SCP”) program.

Comments will be accepted by the DTSC respecting the proposed regulation until November 18, 2021.

The proposed regulation is aimed specifically at nail salon workers as well as pregnant women and their fetuses, infants, children and adolescents.

The rationale behind DTSC taking this action at this time, in part, is that these populations, within the specific context of nail salons currently under consideration, are deemed “sensitive subpopulations” pursuant to 22 Cal. Code Regs. § 69501.1(a)(64), as well as comprising a significant percentage of persons of color and/or persons of lower socioeconomic status, as set forth in Cal. Gov’t Code 65040.12(e) (“Environmental Justice”).

The proposed regulation covers nail coatings and nail polish thinners, including an array of specific types of coatings, including solvent or UV base coating, top coating, lacquer, gel nail polish, hard gel, shellac, nail art paint, and nail polish thinner, and thus is quite comprehensive in scope.
Continue Reading DTSC Proposes Adding Toluene-Containing Nail Products To SCP Priority Pollutants

Here’s a brief review of key developments concerning the U.S. Consumer Product Safety Commission (“CPSC”) from the past month or so to help you stay aware of important product safety legislative and regulatory happenings.

Commissioner Elliot Kaye Departs the Commission.  In late August, Commissioner (and former Chairman) Elliot Kaye announced his departure from the agency to assume a senior position at Jose Andres’ World Central Kitchen.  Kaye, whose term had expired in October 2020, was serving in his “hold-over” year pending the confirmation of a new commissioner.  As a result of Kaye’s departure, there are currently two Republicans on the Commission (Dana Baiocco and Peter Feldman) and one Democrat—Acting Chairman Robert Adler.  This political dynamic, similar to when the Democrats held a majority of commissioner seats during the Trump Administration, has already caused some partisan maneuvering and angst at the agency (see Vote on FY22 Operations Plan story below).  However, this 2-1 split in favor of the Republicans will not last for long.  Read on!
Continue Reading CPSC Insights – September 2021

A new trend in false advertising lawsuits targets specific characterizing flavor claims on the labels of foods and beverages. For example, Frito-Lay was recently sued in California federal court alleging the company’s “Tostito’s Hint of Lime” tortilla chips falsely implies that natural lime is a primary flavoring ingredient and that consumers were misled by various misrepresentations of lime on the product packaging. Kellogg, Hershey, and Bimbo Bakeries were all sued because the “fudge” in their respective products allegedly are produced with vegetable oil substitutes instead of butter and milk, which the complaint alleges is known to consumers as the traditional way of making fudge.

Typically, in these false or misleading flavoring ingredient lawsuits, a plaintiff attempts to represent a class of consumers and alleges they were charged a premium price for the products because of the specific ingredient, based on the misleading representation.  The plaintiff generally must also allege that they would not have purchased the product in the first place if they had known that the specific ingredient was missing.


Continue Reading Despite the Pandemic, Food-Related False Advertising Lawsuits Continue to be Frequent Filers

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