Retailers and consumer products companies need to be aware of a new law affecting negative online reviews. On December 14, 2016, President Obama signed the Consumer Review Fairness Act of 2016 (H.R. 5111) into law. The Act voids “non-disparagement clauses” in form contracts designed to prevent consumers from posting negative comments and online reviews of products and services. The Act also makes it unlawful for companies to include these clauses in their form contracts. The Federal Trade Commission will enforce the Act in the same way it enforces against unfair or deceptive trade practices under its jurisdiction; state attorneys general may also enforce the Act under certain conditions. For existing contracts, the Act will take effect in 90 days and FTC/state enforcement may commence one year from now.
As the slow days of summer draw to a close, school children are not the only ones facing a busy fall workload. The U.S. Consumer Product Safety Commission has a packed agenda this fall, and heading into 2015. Here are some of the issues consumer product manufacturers, distributors, and retailers should be following:
- 1110 Hearing: The CPSC hearing on September 18 was scheduled as a result of significant comments filed on the proposed 110 rule in order to review “stakeholders” anticipated challenges in meeting an electronic filing requirement. It provides members of the industry an opportunity to explain to the CPSC the practical logistics involved in creating certificates that “accompany” products they ship globally. The announcement for the hearing signaled CPSC’s desire to get into the details, such as understanding the difference between document imaging and searchable data elements. Many companies have already developed systems for meeting certificate of compliance requirements, and the rule changes would necessitate reengineering of existing IT systems to meet new requirements.
- Magnet Rule: The Commission moved forward with a hearing on the proposed rule to ban small rare earth magnets, despite concerns raised by Commissioner Buerkle that the rulemaking was premature and could affect the ability of the Commission to serve as the appellate review body with respect to current administrative cases alleging the magnets present a substantial product hazard. The matter is not set for a ballot vote and a decisional meeting is scheduled for September 24, 2014.
Continue Reading What’s Happening at CPSC This Fall
On July 27, 2012, California released a revised draft of its Safer Consumer Products Regulations—commonly known as the "Green Chemistry Initiative." The proposed regulations establish a process for California’s Department of Toxic Substances Control (DTSC) and product manufacturers to assess whether consumer products containing certain "chemicals of concern" can be made with safer ingredients. Once implemented, the regulations will empower DTSC to order companies to use substitute chemicals when manufacturing certain consumer products or face a ban on the sale of those products in California. Moreover, manufacturers that currently sell products only outside of California will have to be increasingly vigilant about whether their products end up being sold in California, and subject to these regulations.
Manufacturers, importers and retailers of consumer goods—defined as "responsible entities"—should be aware of that:
- All consumer products will be impacted: Regardless of whether the product is named a “priority product” by DTSC or contains one of the 1,200 “chemicals of concern,” responsible entities will be required to provide information on the source, ingredients, and toxicity characteristics of each of their consumer products sold in California. Responsible entities with a "priority product" in the stream of commerce will have a heightened obligation to produce detailed reports—known as "alternatives assessments"—to DTSC, which DTSC will use to determine whether manufacturers will need to reformulate certain products to continue sales in California. Companies that do not comply will be named on a publicly accessible "failure to comply" list on DTSC’s website.
- All entities in the distribution chain should remain vigilant: While the obligations for responsible entities under the regulations are tiered, no level of commerce is exempt. Primary reporting and compliance responsibility will lie with the manufacturer. The importer will have responsibility if the manufacturer fails to comply, and retailers will be required to comply only if the manufacturer and importer (if any) fail to comply. Retailers will be responsible for tracking information posted on a "Failure to Comply" list on DTSC’s website, and ensuring compliance for listed products.
The proposed regulations are presently undergoing a 45-day public comment period. DTSC intends to issue final regulations by the end of this year or early 2013. DTSC will hold a hearing on the proposed regulations on September 10, 2012, and written comments are due by September 11 at 5 PM PST.
For more information and to read the full client alert, please click on this link.
Content for this post was provided by the following product risk management attorneys: Kevin C. Mayer (partner in Crowell & Moring’s Los Angeles office), Monica M. Welt (counsel in Crowell & Moring’s DC office), and Lynn R. Levitan (counsel in Crowell & Moring’s Los Angeles office).
The Obama Administration has released its Framework for Business Tax Reform, a broad-brush look at where it would want to take business taxes. The Framework would eliminate a number of targeted tax benefits and would tighten the rules relating to taxation of foreign operations, with the goal of using the revenue produced to reduce the overall corporate tax rate. The proposal would not be a tax cut but would raise revenue. However, there would be winners and losers. On balance, the proposal could be favorable to many retailers.
Crowell & Moring is pleased to invite you to join us on October 19, 2011 for a dynamic conference entitled Product Risk Management: A Product Lifecycle Approach to Identifying, Mitigating and Managing Legal Risks. This one-day event will provide updates and guidance on the myriad legal issues related to product development, manufacturing and distribution and will be of particular value to In-house Counsel, Executive Officers and Compliance Officers.
Speakers scheduled to participate include representatives from the Federal Trade Commission, National Highway Traffic Safety Administration, U.S. Environmental Protection Agency, Crowell & Moring, the American Cleaning Institute, and companies such as Avaya, Inc., Graco Children’s Products, Inc., Dell, FMC Corporation, Oneida and Tesla Motors.
Retailers will soon be in violation of a new consumer product safety rule if they are found to be selling children’s upper outerwear containing drawstrings. On July 1, the Consumer Product Safety Commission (“CPSC”) voted to approve a new consumer product safety rule listing children’s upper outerwear containing drawstrings to be a substantial product hazard pursuant to Section 15(j) of the Consumer Product Safety Act (“CPSA”). The new rule will go into effect 30 days after it is published in the Federal Register.
Recent months have shown a dramatic increase in suits against retailers by cashiers seeking seats at work. The influx results from two California Court of Appeal decisions in late 2010 that permitted the plaintiff cashiers to pursue suits against their employers for not providing seating. Several suits filed since then come from cashiers seeking to require employers to provide them with seats at work. But a lawsuit filed in Los Angeles last Thursday shows that the issue does not just concern cashiers.
That suit, filed against Banana Republic and Gap, alleges that the clothing manufacturers should have provided employees in their retail stores with adequate seating accommodations. Like the cashier lawsuits, the complaint cites on California Labor Code section 1198 and Industrial Wage Commission ("IWC") Wage Order 7-2001. Labor Code section 1198 prohibits employers from violating IWC wage orders. Wage Order 7-2001 requires employers within the "mercantile" industry to provide employees with suitable seats if the nature of their work allows. Specifically, Section 14 of the Wage Order requires employers to provide suitable seats to all employees "when the nature of the work reasonably permits the use of seats" and, when the nature of the work requires standing, provide seats close to the work area for employees to use "when it does not interfere with the performance of their duties."
Wage Order 7-2001 broadly defines the mercantile industry to include "any industry, business, or establishment operated for the purpose of purchasing, selling, or distributing goods or commodities at wholesale or retail; or for the purpose of renting goods or commodities."
The cashier cases all contend that cashier work reasonably permits the use of seats. The Banana Republic and Gap case does the same, but also expands beyond cashiers to include other employees who may wish to sit down when not engaged in active duties. So the net effect is that plaintiffs are now pursuing seating violations as they apply to every employee, not just those at the cash register. And they are seeking civil penalties under the Private Attorney General Act of 2004 that potentially number in the millions.
So what can employers do? First, employers can assess the nature of employees’ work duties and make determinations about whether the nature of the respective jobs reasonably permits the use of seats, and whether there is some reason that seating cannot reasonably be provided to employees awaiting active engagement. Where employers deem standing to be essential for a job, they can make sure that the job description accurately reflects that determination. These decisions and the basis for them should be documented. Second, employers may consider making seats available upon request, on a case-by-case basis; this could bolster the argument,should litigation later arise, that the case should not proceed as a class action. Third, employers can make seats available near the employee work area, such as in a break room, and allow employees to use these seats when doing so does not interfere with the performance of their duties.
Content for this post was provided by the following labor and employment attorneys in Crowell & Moring’s Orange County office: partner Mark A. Romeo, counsel Wendy A. Sugg, and associate Samuel P. Nielson.
On May 5th, Crowell & Moring’s Retail Law partnered with the Association of Corporate Counsel (ACC) to host the first webcast of a 3-part retail law series: “Recovery Opportunities for Retailers: Turning A Retail Law Department Into A Profit Center in Retail Leasing, Global Sourcing and Antitrust Litigation.” The webcast was moderated by the chair of Crowell & Moring’s Retail Law practice, Greg Call, joined by Vice President and General Counsel of Hino Motors, Sanford “Sandy” Ring, Esq., and fellow Crowell & Moring Retail Law attorneys Jen Romano, Patty Wu, John Brew, and Dan Sasse. Thank you to those of you who joined us.
At the link is the PowerPoint presentation that accompanied the webcast. We will be announcing additional webcasts on retail issues in the near future.
2011 is rapidly becoming the year that the patent plaintiffs turned their attention to retailers. As previously reported, GeoTag, Inc., recently brought a patent infringement lawsuit in the Eastern District of Texas against more than three hundred retailers alleging that store locator functions on the retailers’ websites infringed its patent. Now, another frequent patent plaintiff, SFA Systems, LLC (“SFA”) has filed a patent infringement suit in the Eastern District of Texas against 27 retailers with websites. The lawsuit is captioned SFA Systems, LLC v. Amazon.com, Inc. At issue is U.S. Patent No. 6,067,525 (the “‘525 Patent”), issued on May 25, 2000 and entitled “Integrated Computerized Sales Force Automation System.” The ‘525 Patent purports to claim methods for facilitating processes relating to the sale of products and services online, including using such systems for personalizing the online experience of users, such as by making personalized recommendations, engaging in personalized marketing, providing personalized customer care, and helping online customers find compatible products. This is the third lawsuit brought asserting the ‘525 Patent and the second directed at retailers.
This year, the United States Supreme Court is expected to decide whether a retailer can protect itself against class action lawsuits by including a single claim arbitration provision in its contracts with customers.
At issue before the United States Supreme Court is the case of AT&T Mobility v. Concepcion. The question to be decided is whether a retailer can enforce a provision in its contracts with customers that states all disputes will be handled through single-party arbitration, as opposed to class action litigation. This decision is particulary relevant to retailers that commonly use customer agreements to sell products and services, such as banks, fitness clubs, car rental companies, and Internet companies.