Nearly fifteen years after a class of merchants first brought suit against Visa, MasterCard, and their member banks in the MasterCard/Visa Interchange Fee Litigation, retailers can finally see the light at the end of the tunnel.  For years, the increasingly cashless economy has put pressure on retailers to accept credit cards for payment, but mounting “swipe fees” made card acceptance one of the highest costs of doing business.  But on December 13, 2019, Judge Margo Brodie granted final approval of the multi-billion dollar class action settlement – the largest antitrust settlement in U.S. history – giving merchants an opportunity for some cash relief.

More details on the history of the Interchange Fee litigation can be found in our last post from May 2019. As appeals are pending, no claims deadline has been set and claims forms are not currently available; however, merchants can pre-register online to receive the form upon court approval. Class members do not need to sign up with a third-party service in order to participate in the class. Additional information regarding the class settlement can be found at the court-approved website.

Since the settlement was first announced in October 2018, approximately 26 percent of merchants have opted out, leaving behind upwards of $5 billion for retailers nationwide. As anticipated, the fifteen-year battle between merchants and the card networks will continue in the Second Circuit, with a number of class members appealing the final approval order.  However, many observers believe that the settlement will be affirmed.

This is not the first time that a deal between the card networks and merchants has been challenged on appeal.  In 2016, the Second Circuit vacated a proposed $7.25 billion settlement that bound merchants to a perpetual release of all future claims relating to the merchant rules.  Since then, the parties have limited the release to five years to address the numerous objections by retailers and merchants nationwide.  Meanwhile, an injunctive relief class continues to litigate in the hopes of achieving rules relief, an objective that retail industry groups, such as the National Retail Federation, have been closely monitoring.

What’s Next for Retailers?

Although the $5 billion settlement fund will not be paid out until the appeals process concludes, the claims administrator has allowed merchants to preregister their claims until the court can set a formal claims deadline.

But even though distribution of the class settlement fund appears to be on hold, retailers should not wait on the sidelines.  There are a number of opportunities to consider that can impact the value of a given retailer’s claim and timeframe for relief.  Outside legal counsel can help retailers take a tailored approach to evaluating their options and select a strategy that will further the business objectives of each individual retailer.  Some of these strategies for recovery include, but are not limited to:

  • Remaining in the Class. Retailers may elect to remain in the class and file a claim as a member of the class settlement.  This option may be the least burdensome for retailers as it does not require merchants to independently verify their transactional data. Nonetheless, it is advisable for merchants to carefully consider the nuances of their business that may not be captured during the claims administration process and to take action to correct that.  Additionally, retailers remaining in the class will likely be forced to wait a minimum of 2–3 years before a payout is realized, due to the size and complexity of the claims administration process.  Furthermore, there is a continued risk that the settlement will be rejected on appeal for a second time.
  • Sale of Claim. If increasing cash flow in the short term is a priority, retailers may want to consider monetization through a sale and assignment of their claims.  A market for these claims has been increasingly developing since the parties have reached their current class settlement, and a number of third-party funders are now making offers for good value on these claims.  This option provides more certainty of recovery on an accelerated timetable.  There are also many ways for retailers to structure a sale that will generate interest among multiple bidders and obtain competitive offers.
  • Exploring Related Cases in Other Jurisdictions. Retailers with business operations outside of the U.S. should also track recovery opportunities that may be present abroad. In 2018, various Canadian courts approved settlements totaling CAD $68.5 million.  In Europe, the UK Supreme Court agreed to hear MasterCard’s appeal of a $17.5 billion lawsuit, challenging the Court of Appeal’s ruling that permitted a consumer class action lawsuit against MasterCard to proceed.

It is important for retailers to examine their options early on, engaging in a cost-benefit analysis for expected recoveries and potential timeframes for relief.  Retailers can benefit significantly by developing a strategy that is consistent with their business goals and maximizes the value of their claims.

Yesterday, President Trump announced his intention to nominate Dr. Nancy Beck as Chairman of the U.S. Consumer Product Safety Commission (CPSC).  Dr. Beck’s nomination had been rumored amongst product safety stakeholders ever since the Washington Post profiled Dr. Beck in December and raised the likelihood of her nomination.  This nomination is significant as it will restore the Republican majority (3-2) on the five member commission assuming the Senate confirms Dr. Beck to the chair in the coming months.

For those unfamiliar with Dr. Beck’s background and credentials, she currently serves as the Principal Deputy Assistant Administrator of the Office of Chemical Safety and Pollution Prevention at the Environmental Protection Agency (EPA).  Prior to her appointment at the EPA, Dr. Beck was Senior Director for Science Regulatory Policy at the American Chemistry Council.  The White House’s announcement also highlighted Dr. Beck’s work in federal government as a career employee in various capacities at the EPA and Office of Management and Budget during the Bush and Obama Administrations.

Notably, once confirmed, Dr. Beck will restore the 3-2 Republican majority on the Commission that had been lost when former Acting Chair Ann Marie Buerkle departed the agency on October 1, 2019.  Not only will the Republican majority be restored, but the chair will no longer be held by a Democratic commissioner—Robert Adler.  As we reported in September, prior to her departure from the agency, Acting Chair Buerkle voted with Democratic commissioners Adler and Kaye to install Commissioner Adler as the interim chair of the Commissioner.  Such a change in the political leadership of the CPSC will certainly have an impact on agency priorities and practices.

With impeachment proceedings in the rearview mirror, we expect Dr. Beck’s nomination to begin working its way through the Senate rather quickly with at least a committee hearing.  Of course, the Democrats may well seek to delay consideration of the pending nomination through procedural maneuvers until after the election.  Moreover, we expect fierce opposition to the nomination from key Senate Democrats such as Senators Maria Cantwell (D-WA), Richard Blumenthal (D-CT), and Ed Markey (D-MA).  Although the House does not have a formal role in the nomination and confirmation process, the Chairman of the House’s Energy and Commerce Committee, Rep. Frank Pallone (D-NJ), immediately issued a scathing statement in opposition to the nomination.

We will continue to update our readers on developments related to this important nomination.

Last week, we attended the annual conference of the International Consumer Product Health and Safety Organization (ICPHSO), where Robert Adler, Acting Chairman of the U.S. Consumer Product Safety Commission (CPSC) addressed the conference in his capacity as interim chairman of the agency. Acting Chairman Adler began his remarks by acknowledging that he is an “acting” chair who “doesn’t intend to do a lot,” as an expression of his desire for continuity at the agency and “a steady approach.” Notably, however, Chairman Adler then announced in the same remarks that he has directed the Office of Compliance to “renew efforts” to (1) issue unilateral safety warnings; and (2) seek civil penalties in his quest to “make sure that the CPSC uses every tool it has to promote public safety.” These directives are a departure from recent agency practice under the prior chair and confirm a more aggressive agency approach to compliance and enforcement.

Since January 8, 2020, the CPSC has issued three separate “unilateral” press releases warning consumers about a perceived hazard related to a specific product. While the Commission has been known to threaten issuance of unilateral releases at least in part to convince firms to conduct voluntary joint recalls, their actual publication is exceedingly rare. In fact, we are aware of only two unilateral releases issued by the agency in the past nine years—one from 2011 and the other from 2017.

Although the Commission is required to afford subject firms the opportunity to comment on any draft unilateral press release to ensure fairness and accuracy pursuant to Section 6(b) of the Consumer Product Safety Act, there is little that companies can do to stop their issuance short of seeking an injunction in federal court (a means of court relief, incidentally, which would be eliminated should Congress pass the SHARE Act introduced last month by Representative Bobby Rush (D-IL)). And going to court likely means the draft press release enters the public record, defeating much of the purpose of the relief sought.

Time will tell whether the agency’s re-introduction of the unilateral safety warning becomes a new enforcement trend. In the meantime, industry members should take notice.

In his remarks, Acting Chair Adler also expressed his desire to see more civil penalties levied against companies who violate product safety laws. Adler noted that in 2008, Congress boosted civil penalties (from $1.825 million for a related series of violations to $15 million for the same) in the Consumer Product Safety Improvement Act –“a mandate to the agency to act to protect the public.” The comments were eerily reminiscent of then-Chairman Elliot Kaye’s remarks at the 2015 and 2016 ICPHSO conferences about his direction to staff to seek stiffer higher civil penalties—soon followed by the agency’s first ten-figure civil penalty settlement. Activity on the civil penalty front under Acting Chairman Adler could result in the first civil penalty announcement since October 2018. This, too, is a material change in enforcement approach from the prior chair, who was a skeptic on civil penalties being the best means of securing consumer product safety.

Acting Chairman Adler also discussed the creation of a new consumer ombudsman position; addition of new staff focused on voluntary standards; the reorganization of the Office of Compliance; his dislike of Section 6(b)’s confidentiality provisions; and desire for cooperation amongst commissioners. He noted that the Commission’s current priorities include a focus on hazards to children – children’s products, crib bumpers, infant sleepers, window blind cords, and furniture tip-over. He explained that tip-over statistics are “gruesome and terrifying,” and the agency is working diligently to remedy the issue as it believes many items of furniture can comply with the current standard with simple and inexpensive redesigns.

Nevertheless, the hall chatter for the rest of the conference focused on Adler’s glaring remarks about unilateral press releases and civil penalties.

The Acting Chairman may indeed be a mere temporary “caretaker” of the chair until President Trump nominates a new chairman. His words, and deeds, suggest that he nonetheless intends to wield significant power in shaping the agency organizational structure and approach to wielding enforcement power.

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

If you manufacture or sell strollers—or use a stroller to transport children under your care—headlines regarding CPSC litigation over the Britax BOB jogging stroller are likely fresh in your memory.  In today’s installment of “Recalls in Review,” we look back at CPSC regulatory actions involving strollers.

The CPSC very actively regulates and monitors strollers – approximately 80 recalls of strollers have been conducted since 1977, with 64 of those recalls occurring since 2000.  As you can see from the below chart, there is no focus on one key hazard or category, but all aspects of stroller safety are on the agency’s radar: wheels, brakes, handle bars, hinges, locking mechanisms, and seats.

The number of stroller recalls rose substantially between 2010 and 2013, leading up to a mandatory federal safety standard for strollers implemented in March 2014 (16 CFR 1227).  The new standard attempted to address many of the common reasons for stroller recalls between 2010-2013, including: pinching and laceration of fingers by strollers’ hinge mechanisms, detaching wheels, defective brakes, and restraints that posed a strangulation hazard or could be undone, allowing a child to slip through the gap between the seat and the tray or grab bar.

Three civil penalties have been enforced against stroller manufacturers and retailers, ranging from $100,000 in to $1.3 million. The last civil penalty fine was levied in 2001.

 

 

 

 

 

 

 

 

 

* * * * *

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 no 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 present “hot” issues or are likely targets for regulatory attention.  Through Recalls in Review, we share our observations with you. 

Crowell & Moring has released its Regulatory Forecast 2020: What Corporate Counsel Need to Know for the Coming Year, a report that explores the impact of regulatory changes on the technology industry and other sectors, and provides insight into that in-house counsel can expect to face in the coming year.

For 2020, the Forecast highlights the driving forces behind the increased regulatory focus, including access to the data, online platforms, and cutting-edge technologies that define competitive advantage. It explores regulatory trends in antitrust, environment and natural resources, and public affairs.

The article focused on advertising, “Social Media Platforms Face Charges of Political Bias,” discusses how even as social platforms try to ensure that content is trustworthy, their own policies — and political pressures — could undermine their efforts.

Be sure to read the full report and follow the conversation on social media with #RegulatoryForecast.

The current process for creating voluntary product safety standards has recently been criticized in the media in connection with a debate over whether rare-earth magnets can be adequately regulated through the voluntary standard process in order to protect children from swallowing the magnets. Regardless of opinions about how the process works, the CPSC treats them as a “floor” for consumer safety measures, so manufacturers should incorporate any applicable voluntary standards into safety compliance programs to guarantee compliance. Here’s a refresher on what voluntary standards are and how they are used.

Voluntary Standards: FAQs

What are voluntary standards?

A voluntary consensus safety standard (also known as a “non-government consensus standard”) is a safety standard for consumer products that establishes consumer product safety practices recommended to be followed by product manufacturers, distributors, and sellers. Voluntary standards can provide much-needed consistency and buy-in from industry stakeholders.

Who makes voluntary standards?

Voluntary standards are established by collaboration between industry groups, consumer groups, government agencies, and a private-sector body like ANSI, ASTM International, CSA Group, UL, etc. The CPSC commonly engages in the creation of voluntary standards, and a list of which voluntary standard activities CPSC staff is currently involved in can be found on the CPSC’s website. Summary reports on the status of CPSC’s staff involvement on each of the voluntary standards that CPSC staff is tracking are also available on the CPSC’s website.

Why are voluntary standards important?

While voluntary standards are not a mandatory requirement, product manufacturers, distributors, and sellers should be aware of and comply with voluntary standards for the products they make.  CPSC staff considers the guidance contained in voluntary standards to be a safety floor from which products are designed, and staff representatives have said: “The commission expects all consumer products – including promotional products – to be fully compliant with applicable voluntary standards.”  While voluntary standards are not mandatory laws enforceable by the CPSC in all instances, the agency sometimes enforces them through recalls of noncompliant products.  If no voluntary standard exists, the CPSC still expects companies to consider voluntary standards in place for any similar products.

From a tort liability standpoint, voluntary standards are frequently the basis for expert testimony in court as to what is customary in industry. In products liability, voluntary standards can serve as an important defense to negligence claims, and a failure to use them is customarily used to indicate a manufacturer is not following industry standards.

How should voluntary standards be used?

  1. When designing a consumer product, companies should review voluntary standards available for that product (and any similar products).
  2. Companies should make sure that their product conforms to the standards that exist. The CPSC expects companies to consider the guidance contained in voluntary standards and use the standard as a “floor” for consumer safety measures.
  3. Companies should think through the use or foreseeable misuse of their product’s design and determine if there are additional safety standards that should be put into place above and beyond those included in the voluntary standards.

The “clean” beauty movement is picking up steam. Health-conscious consumers are paying more attention to ingredients applied to their bodies and are looking for products made without harmful chemicals. In response to the demand, some popular cosmetics companies are now offering so-called, “clean” beauty lines. Companies considering joining this trend should take into account the substantial legal risks.

A look at the food industry’s use of the adjectives like “natural”, “clean”, “simple,” and “wholesome” illustrates the kinds of risks the beauty industry may face. When consumers began paying more attention to ingredients, companies began marketing their products with these health driven adjectives. However, this led to a barrage of class action lawsuits for false advertising under state consumer protection laws as plaintiffs lawyers argued that the claims made on the front of the label did not match the ingredients on the back of the label.

The food industry started to use the word “clean” after the use of “natural” resulted in a barrage of consumer lawsuits. As it turned out, however, the alternative claim also resulted in consumer class action lawsuits. The theory behind these suits is that “clean” is just a synonym of “all-natural” and signifies to consumers the absence of any synthetic chemicals. Similarly, it is argued that “wholesome” and “simple” are misleading consumers as to the real nutritional value of food products. This is at best an idiosyncratic view, not backed by legitimate consumer evidence. However, merely making the allegation is sometimes sufficient to survive a motion to dismiss, where the court must consider whether “no reasonable consumer” could share the plaintiff’s alleged interpretation.

Adding to the complexity is the difficulty of placing a sufficiently prominent and clear explanation, or definition, for such adjectives in an unavoidable location where the plaintiff cannot reasonably allege she failed to notice it. Courts have sometimes held that consumers need not be expected to turn around the bottle or package to read textual information on the back label before purchase.

We have seen false advertising claims creeping into the skincare industry as well, and this, coupled with the history of the food industry, should put the beauty industry on notice of the legal risks. For example, just last month, a lawsuit was filed in California State Court against the makers of Coppertone sunscreen. Prescott, et al. v. Bayer Healthcare Pharmaceuticals Inc., et al., No. 5:20-cv-00102 (N.D. Cal. filed Jan. 3, 2020). The suit alleges that Coppertone deceived consumers by labeling certain sunscreens as “mineral-based” when in fact chemicals make up a significant portion of its active ingredients. The plaintiff’s theory is that the headline “mineral-based” claim suggests to consumers that the product protects skin from sun damage exclusively with minerals.

In the “all-or-nothing” world of the plaintiffs’ lawyers, any ingredient call-out or characterization creates legal peril by negative implication. If the label says “clean,” the product can contain no synthetic substances. If the label says “plant-based,” the product should not have any synthetic or animal components – even if trivial in amount. Plaintiffs are routinely sending products to labs for rote chromatographic analysis, and the tiniest detectable amounts of disfavored chemicals can trigger lawsuits. In California, the consumer protection laws include California’s Unfair Competition Law, False Advertising law, and the Consumer Remedies Act. Companies making sales in California also need to be mindful of Proposition 65 which requires warning labels on products that contain any enumerated chemicals identified by the State to cause cancer, birth defects, or reproductive harm.

Since there are no regulations mandating the definition of such descriptive terms on cosmetic labels, these definitions (e.g., “clean”) can vary from company to company. The beauty industry should heed caution when using “clean” beauty claims. In order to avoid consumer confusion— and ultimately litigation— companies should define “clean” in a way that they can, and do, meet, and that definition should be available at the point of sale.

On February 7, 2020, California’s Office of the Attorney General (OAG) released proposed revisions to the California Consumer Privacy Act (CCPA) draft regulations of 2019.

The proposed revisions, available here, are substantial and come in response to public comments submitted to the OAG last year. The revisions and a new deadline of February 24, 2020 for additional public comments suggest some sensitivity to concerns raised by industry and policy advocates.

See the link below for an overview of key proposed revisions that, if adopted, could have a significant impact on companies’ compliance efforts. These proposed revisions cover the following topics:

  • Definitions
  • Notice at Collection of Personal Information
  • Notice of Right to Opt-Out of Sale of Personal Information
  • Privacy Policies
  • Requests to Know and Requests to Delete
  • Service Providers
  • Special Reporting Requirements

Click here to continue reading the full version of this article.

On January 31, 2020, the Trump administration issued an executive order cracking down on U.S. businesses that import directly or facilitate the import of counterfeit or pirated goods, illegal narcotics and other contraband. The order, entitled “Ensuring Safe & Lawful E-Commerce for US Consumers, Business, Government Supply Chains and Intellectual Property Rights,” directs various government departments and agencies to undertake a series of measures to carry out the president’s effort to combat illegal imports. The initiative has far-reaching implications not only for importers and brand owners but also for e-commerce platforms, government contractors, and service providers in the global supply chain that provide warehouse, customs brokerage and transportation services. Parties that fail to comply with the new measures may be barred from participation in certain transactions involving the federal government and/or banned from importing goods into the United States. Additionally, the Department of Justice will be notified of custom violations that are actionable under the False Claims Act, thus another implication is the potential for increased civil and criminal enforcement actions.

Background & Content

This executive order is a culmination of the president’s “call to action” to combat infringing goods set forth in his April 2019 “Memorandum on Combating Trafficking Counterfeit and Pirated Goods.” The Memorandum outlined the impact that illicit goods are having on U.S. businesses and consumers and set in motion the administration’s effort to study and establish a plan to address the issue. The Department of Commerce subsequently issued a Federal Register notice on July 10, 2919 (84 FR 3281), soliciting public comment from IP rights holders, online third-party marketplaces, and other interested parties. The Department of Homeland Security followed up with its recent report, “Combating Trafficking in Counterfeit and Pirated Goods” on January 24, 2020.

The DHS report provides a roadmap on how the administration will accomplish the goals set forth in the president’s January 31st order. The report analyzes how e-commerce platforms, online third-party marketplaces and other parties in the global supply chain facilitate the import and sale of infringing goods. DHS states that it has devised a plan to “fundamentally realign incentive structures and thereby encourage the private sector to increase self-policing efforts” to fight the import of counterfeit and pirated goods. DHS will implement regulations to include:

  • Ensuring that “all appropriate parties to import transactions are held responsible for exercising a duty of reasonable care.” This effort will include extending liability to parties well beyond the traditional importer of record, including warehouses, fulfillments centers, and e-commerce platforms that handle infringing goods. DHS explicitly stated that CBP would be charged with advising the Department of Justice on the types of customs violations that are actionable under the False Claims Act and publishing information on successful FCA claims.
  • Increasing scrutiny on so-called “Section 321” import entries (entries with a value of $800 or less). E-Commerce platforms and other online vendors are responsible for the vast majority of these low-valued imports that generally have avoided government inspection when imported by express couriers and the U.S. Postal Service (USPS).
  • Prohibiting non-compliant companies and individuals from participating in CBP’s Importer of Record Program. This prohibition could have a lasting impact, as the government “shall consider all appropriate action” to ensure that persons or entities debarred or suspended by CBP are excluded from the Importer of Record Program. This effort will require express consignment operations, carriers, and hub facilities to verify and refuse to engage in activities requiring an importer of record number with persons or entities that have been suspended, debarred, or ineligible for the Program under the criteria to be established. There will be increased scrutiny of international mail posts and efforts to reduce the international shipment of illicit goods.
  • Pursuing civil and criminal fines, penalties, and injunctive actions against third party intermediaries dealing in infringing goods. This pursuit not only addresses enforcement actions under existing laws and regulations, but also indicates that DHS will seek statutory changes to enhance its enforcement power.
  • Analyzing whether the fees collected by CBP are sufficient to cover the costs associated with processing, inspecting, and collecting duties, taxes, and fees for courier packages.

In the executive order, the president adopts the DHS measures and directs the appropriate government departments and agencies to begin implementation. The president states that the government will impose significant penalties on parties that fail to comply with the new measures. Any parties or person “who knowingly, or with gross negligence, imports, or facilitates the importation of, merchandise into the United States in material violation of Federal law evidences conduct of so serious and compelling a nature” will be referred to CBP to determine whether the parties should be allowed to participate in procurement and non-procurement transactions with the federal government. The order further states that CBP will be enforcing its discretionary authority to suspend and debar parties that run afoul the customs laws and ban them from importing goods into the United States.

Specific actions outlined in the order include:

  • Instructing DHS to initiate a notice of proposed rulemaking establishing criteria for importers to obtain an importer of record number, and impose requirements for express couriers, hub facilities, and customs brokers to report parties that attempt to circumvent the new importer of record program.
  • Directing the USPS, in conjunction with the Department of State, to extend the importer of record requirements to international postal shipments and monitor non-compliance by international posts.
  • Requiring CBP and ICE to publish information about seizures of goods involving intellectual property violations, illegal drugs and other contraband, incorrect country of origin, undervaluation, and other violations of law.

Ramifications

The effect of the president’s executive order will be wide ranging on e-commerce platforms, service providers, and government contractors. Up until now, the importer of record has been the primary party liable for penalties and enforcement actions associated with infringing imported goods. CBP usually would pursue parties such as customs brokers, warehouse operators, or e-commerce platforms only if they knowingly aided or abetted an importer in the importation of illegal goods. The initiative seeks to extend liability beyond the importer of record for gross negligent actions by a service provider that “facilitated” the import of such goods, an effort that likely would require additional statutory authority. The executive order makes clear that the government will consider criminal enforcement actions where appropriate.

International Trade Supply Chain – E-Commerce Platforms and Service Providers

The administration’s executive order will impact e-commerce and other online third-party platform businesses. The platform business often requires sellers to serve as the importer of record of goods sold on their platforms, thereby avoiding duty and penalty liability for illegally imported goods. The new initiative likely will impose requirements that may limit the ability of non-resident importers to serve as the importer of record, such as increased bonding requirements and more extensive information reporting requirements. More importantly, the crackdown on Section 321 shipments will slow down their entry due to increased inspections and enforcement measures by CBP, thereby delaying the fulfillment of online orders to customers.

The liability of platforms and service providers could also increase. A company other than the importer of record could face enforcement liability for infringing imports even if it is not the importer of record if it “facilitates” the imports by grossly negligent actions. It isn’t a stretch to predict that CBP would find that most companies in the global supply chain – customs brokers, carriers, warehouse operators, and e-commerce platforms – facilitate the entry of goods imported by their customers. The lower level of culpability sought by the administration will increase the liability of companies and require new procedures and business structures to mitigate risk.

Government Contractors and Present Responsibility

The administration’s executive order will particularly impact government contractors that are also importers of record. Those entities that have a dual role must ensure that they do not “flout the customs law,” or engage in any other activity whereby they could be found not presently responsible, as such acts could lead to debarment or suspension by CBP. Such a finding is required to be published in the System for Awards Management (SAM), the electronic roster of suspended and debarred individuals or companies excluded from Federal procurement and non‐procurement programs throughout the U.S. Government. Conversely a government contractor that is suspended or debarred will likely not be able to be an importer of record. This additional layer will likely require additional review to one’s supply chain to ensure that the presently responsible entities can be deemed importers of record and/or be limited by the CBP as the agency considers various criteria consistent with applicable law.

Additionally, the CBP is required to develop new standards to measure efforts by foreign postal services providers to reduce counterfeit shipments. Foreign postal services that fail these standards may be subject to greater inspection of their shipments or be blocked from importing into the U.S. This could affect government contractors that ship goods through non-compliant international posts as their goods may be swept into the inspection or they may need to redirect shipments through compliant posts.

With the recent rise of federal Food & Drug Administration (FDA) warning letters to the manufacturers of various ingestible cannabidiol (“CBD”) products, we can expect an increase in false advertising claims against manufacturers, distributers and sellers of those products. Nonetheless, in an important case of first impression in this arena, a federal trial court in the Southern District of Florida recently stayed a false advertising class action against a seller of CBD products under the “primary jurisdiction” doctrine.

The primary jurisdiction doctrine applies when a plaintiff’s claims require a federal agency’s expertise or guidance with respect to a regulated product. Cases are often stayed under the doctrine when relevant federal legislation is pending or applicable regulations are under review. However, other courts have declined to stay cases under primary jurisdiction when the government’s timing for issuing its guidance is unclear, or regulatory review has been pending for an overlong period.

Regulatory oversight of CBD ingestible products is currently vested in the FDA. Thus, although the state of Florida had established labelling requirements for CBD products (effective January 1, 2020), the district court emphasized that (1) the FDA had clearly expressed its concern with respect to CBD (or other hemp-derived) product labels, (2) the FDA was under pressure from Congress and the hemp industry to expedite the publication of regulations and policy guidance, and (3) the FDA was actively considering the regulation of CBD products. Therefore, the court declined to rule on the merits of plaintiffs’ class action based solely on the Florida legislation and stayed the case until the FDA completes its rulemaking regarding the labeling of such products.

While it is difficult to predict the content of the FDA’s ultimate labeling requirements for CBD products, manufacturers and sellers of these products have another weapon in their arsenal for responding to potential class actions and mass tort claims, at least in the near term.

The case is Snyder v. Green Roads of Florida, LLC, Case No. 0:19-cv-62342-UU, 2020WL 4239 (S.D. Fl. Jan. 3, 2020).