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

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

The demand for consumer exercise equipment soared over the past year as Americans sought out ways to stay in shape while spending more time at home.  As more Americans create their own “home gyms” and purchase exercise equipment such as stationary bikes, treadmills, weights, and resistance bands, we will likely see an increase in the number of injuries typically associated with such products.  According to CPSC Spokeswoman Patty Davis, treadmill injuries were already common before the start of the coronavirus pandemic: an estimated 22,500 treadmill-related injuries were treated at emergency rooms in the U.S. in 2019 alone.[1]

Like many other consumer products, the CPSC has regulated exercise equipment at a fairly consistent rate since the 1990s.  At least 82 recalls of exercise equipment have been conducted since 2000, with only one slight enforcement “spike” occurring in 2006.  Unlike the enforcement spikes we have observed for other products—such as hoverboards in 2016 and essential oils in 2020—the Commission’s recall efforts in 2006 targeted a wide variety of exercise equipment rather than a single product.

Just last month, the CPSC issued a civil penalty of $7.95 Million against Cybex International—which is the largest civil penalty related to exercise equipment to date.  According to the settlement agreement, Cybex failed to timely report known defects or risks for two different products after receiving numerous consumer complaints.  The CPSC has issued eleven total civil penalties related to exercise equipment.  All of the penalties were issued due to the firms’ failure to timely report a known defect or risk to the CPSC.  The fines for the remaining ten civil penalties involving exercise equipment are somewhat dated and ranged from $100,000 to $3,000,000.

Exercise equipment recalls have targeted a wide variety of equipment over the years.  The most frequently recalled type of equipment is weights-based strength training equipment—ranging from large exercise towers to weightlifting bars to dumbbells.  Other frequently recalled types of exercise equipment include mini- and full-sized trampolines, treadmills, elliptical and glider machines, resistance bands and tubes, and exercise or weight benches.

According to information provided by the CPSC recall announcements, approximately forty-one percent of exercise equipment recalls address a fall risk.  And this makes sense—many exercise machines and towers are quite large and need to be able to support a user’s body weight without breaking, collapsing, or falling over.  Similarly, approximately thirty-five percent of recalls address unspecified injury risks.

A smaller number of the recalls address a risk of laceration (10%), fire (6%), impact injuries (4%), and crushing or amputation (3%).  The recalls addressing a risk of fire all involve electrically-powered cardio machines, such as treadmills, ellipticals, and a step climber.  Only one recall of exercise equipment conducted since 2000 has addressed a violation of the lead paint standard.

Consumers who keep exercise equipment in their home—or who use such equipment in a gym setting—should stay up to date on product recalls and follow any applicable recall instructions to avoid potential injury.  The most common remedy offered by recalling firms is a free replacement product (or relevant product component).

Unlike many other consumer products, exercise equipment can be particularly bulky and difficult to transport in the event of a recall.  Accordingly, recalling firms frequently elect to send consumers a repair kit to fix their equipment at home, provide free “on site” repair of the equipment, or simply provide consumers with new instructions and warnings regarding how the product should be operated.  Less often, the remedy may be limited to refund or store credit.

* * * * *

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 customer 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 though Recalls in Review.

[1] Melissa Repko, Peleton CEO says child died in treadmill accident, federal consumer watchdog starts probe, CNBC.com (Mar. 19, 2021, 9:49 AM ET), https://www.cnbc.com/2021/03/19/peloton-ceo-says-child-died-in-treadmill-accident-federal-consumer-watchdog-starts-probe.html.

California Governor Newsom signed into law a new bill, SB 95, that provides for up to 80 new hours of COVID-19 supplemental paid sick leave to covered employees. The law applies to all businesses with more than 25 employees, and goes into effect on March 29 through September 30, 2021. SB 95 retroactively applies to qualifying leave taken on or after January 1, 2021. Employers are not required to review sick leaves granted since January 1 to determine whether they qualify for retroactive supplemental leave payment, and instead can assess requests for such retroactive payment as employees make them.

Covered Employees

Importantly, the new law explicitly extends paid sick leave benefits to employees who are unable to work or telework because they are either attending an appointment to receive a COVID-19 vaccine or experiencing symptoms related to a COVID-19 vaccine. Other qualifying circumstances include quarantine or isolation periods related to COVID-19, experiencing symptoms of COVID-19 and seeking a medical diagnosis, caring for a family member who has been advised to isolate or self-quarantine, and caring for a child whose school or place of care is closed or otherwise unavailable for reasons related to COVID-19.

Payment Calculation

Full-time employees and employees who worked or were scheduled to work at least 40 hours on average during the two weeks prior to the leave are entitled to up to 80 hours of COVID-19 supplemental paid sick leave. Part-time employees are entitled to up to the number of hours the employee regularly works over two weeks.

SB 95 caps COVID-19 supplemental paid leave wages at $511 per day and $5,110 in the aggregate for each covered employee. Within that limit, nonexempt employees must be paid for each hour of supplemental leave at the highest of the following four rates of pay: (1) the employee’s regular rate of pay for the workweek in which leave was taken, regardless of whether the employee worked overtime in that workweek; (2) the covered employee’s total wages, not including overtime premium pay, divided by the employee’s total hours worked in the full pay periods of the prior 90 days of employment; (3) the California minimum wage; or (4) the local minimum wage. Paid leave for exempt covered employees must be calculated in the same manner as the employer calculates wages for other forms of paid leave time.

The law prohibits employers from requiring employees to use any other paid or unpaid leave, paid time off, or vacation time before using COVID-19 supplemental paid sick leave. Employers can, however, require an employee to exhaust leave under this new law before the employer pays exclusion pay under the California Division of Occupational Safety and Health COVID-19 Emergency Temporary Standards.

For any qualifying leave taken since January 1, 2021, if a covered employee was not paid an amount greater than or equal to the amount required under this new law, a covered employer must pay the employee a retroactive payment providing the required compensation upon oral or written request by the employee. This retroactive payment must be paid on or before the payday for the next full pay period after the employee requests it.

Posting Requirements

Covered employers are required to post a notice communicating the requirements of the new law in a conspicuous place in the workplace. The law requires that the Labor Commissioner make a model notice publicly available within seven days of the law’s enactment, which will be on March 26, 2021. If an employer’s covered employees do not frequent a workplace, the employer can satisfy the notice requirement by disseminating notice through electronic means, such as email.

CDC Guidance

California’s extension of paid sick leave time to employees for time taken away from work to receive vaccinations and due to symptoms suffered after receiving a vaccination is in keeping with the Centers for Disease Control and Prevention’s “Workplace Vaccination Program,” which provides recommended best practices to employers concerning COVID-19 vaccines. The guidance specifically recommends that employers “[o]ffer flexible, non-punitive sick leave options (e.g., paid sick leave) for employees with signs and symptoms after vaccination.” The guidance also recommends that employers provide “paid leave and transportation support” for off-site vaccination programs. In enacting SB 95, California has converted this best practice into a legal requirement for many employers.

In anticipation of March 29 when the law goes into effect, employers should train human resources and payroll employees about the requirements of the law and keep a lookout for the publication of the model notice by the Labor Commissioner to allow for efficient dissemination once it issues.

On Tuesday, March 30th Crowell & Moring’s Cheryl Falvey and Matthew Cohen will lead a webinar titled, “The Consumer Product Safety Commission – An Agency in Transition.”

The U.S. Consumer Product Safety Commission (“CPSC”) is in a state of transition. The Democrats will soon have a majority of commissioners. Acting Chairman Bob Adler has announced that he will not seek re-nomination when his current term ends later this year. The Division of Compliance and Field Operations has reorganized, and we have already seen two civil penalty matters announced in 2021, which is two more than the total number of civil penalties announced over the past two years.

In this webinar, we will offer thoughts and predictions about what to expect in the coming years as the Biden Administration takes hold and continued change at the agency takes place.

Click here to register for the event.