On October 13, 2023 he FDA announced that two of the requirements set forth in the Modernization of Cosmetics Regulation Act of 2022 (MoCRA)— facility registration and product listing—will be included as part of the Structured Product Labeling (SPL) framework. SPL is a document formatting standard adopted by FDA for exchanging product-related information.
In December 2022, the Modernization of Cosmetics Regulation Act (“MoCRA”)—the most significant expansion of the U.S. Food and Drug Administration’s authority to regulate cosmetics in nearly 85 years—was signed into law. Among other things, MoCRA gives the FDA authority to require facility registration and reporting of serious adverse events, impose certain record-keeping obligations, recall cosmetic products, and establish good manufacturing practices. With many of MoCRA’s provisions going into effect at the end of this year, cosmetics companies need to prepare to address these requirements and regulations, which may also have a considerable impact on the litigation landscape.
Crowell’s Product Risk Management team has written two publications to help cosmetics companies prepare for the big changes ahead.…
In March 2023, the White House published its National Strategy to Advance Privacy-Preserving Data Sharing and Analytics. Buried in the report was a quiet, but notable, concern related to the possibility of deanonymizing a consumer due to “insufficient disassociability”. See Report, pg. 6. A new wave of class action lawsuits in California—already over three dozen at the time of writing—now seeks to turn a spotlight on these practices, claiming that companies are using “grey market” data to match user patterns with personal identifiable information (PII).…
New considerations have emerged for advertisers who publish reviews or endorsements. On June 29, 2023, the FTC finalized its updated Endorsement Guides, which provide insights to businesses on how the use of reviews and endorsements might be considered unfair or deceptive in violation of Section 5 of the FTC Act. Over the past several months, the FTC sought public comments on proposed updates to the Endorsement Guides to accurately reflect the modern landscape of advertising, which includes reliance on social media and content creators.…
The Federal Trade Commission (“FTC” or “Commission”) recently announced that it has adjusted the maximum civil penalty dollar amounts for violations of 16 provisions that the Commission enforces. The increase is required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, and is intended to account for inflation. The act directs agencies to implement annual inflation adjustments based on a prescribed formula. Given the uptick in FTC enforcement actions, companies are likely to begin feeling the impact of the increased penalties in the coming year.
As our readers likely recall, the Supreme Court’s 2021 ruling in AMG Capital Management LLC v. Federal Trade Commission removed a powerful tool that the FTC had previously relied on to pursue monetary relief in federal court. The Supreme Court unanimously held that the Federal Trade Commission cannot obtain equitable monetary relief, such as disgorgement or restitution, when it pursues district court litigation directly under Section 13(b) of the Federal Trade Commission Act (“FTC Act” or “Act”). Rather, to obtain such relief, the FTC must first follow its administrative adjudication procedures under Section 5 of the Act.
On May 20, 2022 the Federal Trade Commission’s (“FTC”) Commissioners unanimously approved a request for public comment on proposed updates to its Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Endorsement Guides” or “Guides”). In the draft revisions, released last week, the FTC seeks to update the Endorsement Guides and provide new examples that reflect advertisers’ growing reliance on social media advertising. The Endorsement Guides were last revised in 2009. See 16 CFR pt 255.
The Endorsement Guides require advertisers that feature endorsements made by endorsers with an unanticipated material connection to the advertiser—for example, monetary payment, a sweepstakes entry, or something else of value—to disclose that connection in the advertising. In addition, endorsements must be truthful and accurate, reflecting the endorser’s actual experience with the product. Marketers that fail to comply with the Endorsement Guides violate Section 5 of the FTC Act.…
In the wake murder of George Floyd in 2020 and the demonstrations that followed, brands pledged to support anti-racism and solidarity with the Black community. Some companies professed that they would make large donations to social justice organizations, leading commentators to ponder whether brands were “woke washing.” At the end of Black History Month, the National Advertising Division (“NAD”) announced that it investigated two companies making express claims committing to sizable charitable contributions to ensure that those claims were substantiated. See Niantic, Inc. (Advertising by Niantic Labs), Report #7037, NAD/CARU Case Reports (February 2022) and DoorDash, Inc. (Advertising by DoorDash, Inc.), Report #7036, NAD/CARU Case Reports (February 2022).
Continue Reading NAD Makes Clear that “Woke Washing” is False Advertising
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.
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
On April 20, 2020, the Federal Trade Commission (FTC) announced a consent order that imposed $9.3 million in consumer refunds to settle allegations that Fashion Nova, Inc. violated the agency’s Mail, Internet, or Telephone Order Merchandise Rule (the “Mail Order Rule”), which applies to merchandise sold to consumers, online, by mail, or by phone. 16…