International Trade, Enforcement & Compliance Recent Developments Update (January 17, 2024)

One of the most consistent messages coming from the U.S. government is that multinational companies need to take control of their supply chains. Forced labor, human trafficking, supply chain transparency, OFAC sanctions, even conflict minerals — all are areas in which the best defense against potential violations is strong compliance and due diligence to ensure that companies properly manage their supply chains, rights down to the last supplier. Today’s mix of enforcement actions and guidance from the U.S. government underscores the importance of doing so.

EXPORT CONTROLS AND HUMAN RIGHTS

The Department of Commerce has stated that it has the authority to put companies on the Entity List (requiring special licensing and restrictions) solely for human rights violations. Does your company conduct full due diligence on its suppliers and sub-suppliers to ensure that they are operating in accordance with U.S. forced labor and human trafficking laws?

FORCED LABOR/UFLPA

The Department of Homeland Security continues to add Chinese and other companies to the Uyghur Forced Labor and Prevention Act (UFLPA) Entity List. Does your organization specifically screen against the UFLPA Entity List, as well as have in place UFLPA compliance and due diligence measures?

FORCED LABOR/UFLPA

The U.S. government has issued a pointed six-agency set of compliance guidelines regarding “the Risks and Considerations for Businesses and Individuals with Exposure to Entities Engaged in Forced Labor and other Human Rights Abuses linked to Xinjiang Uyghur Autonomous Region.” Does your organization maintain a compliance policy, vendor code of conduct, supply chain transparency and due diligence procedures, and other measures designed to ensure your supply chain is free of forced labor, human trafficking, or goods sourced from forced labor in the Xingjian Autonomous Region?

CUSTOMS PENALTY FOR ERRONEOUS USE OF FIRST SALE RULE

Due to the imposition of special Section 301 tariffs on most goods from Customs, many companies have begun to use the first sale rule, which allows the reporting of a lower value where there is a bona fide sale to a middleman. Improper application of the rule, however, can be the basis for substantial penalties, as an apparel company that paid a $1.3 million settlement with the DOJ found out. If your company uses the first sale rule, do you regularly review pricing and relevant circumstances to ensure you are meeting all the requirements for all entries?

EXPORT CONTROLS

Pledging “a new era of trilateral partnership,” the U.S., Japan, and South Korea governments have announced expanded collaboration to fight illegal exports of dual-use products, including high-tech products that might be shipped to China in violation of U.S. export controls. Has your organization performed a recent classification review to confirm it is aware of any restrictions that might adhere to the export of any of its products to sensitive countries, governments, or users?

Privacy Tip #382 – Beware of Fake Package Delivery Scams During Holiday Season

There are lots of package deliveries this time of year. When shopping online, companies are great about telling you when to expect the delivery of your purchase. Fraudsters know this and prey on unsuspecting victims especially during this time of year.

Scammers send smishing texts (smishing is just like phishing, but through a text), that embeds malicious code into a link in the text that can infect your phone or try to get victims to provide personal information or financial information.

It is such a problem, that the Federal Trade Commission (FTC) recently issued an Alert to provide tips to avoid these scams.

The tips include:

What to do

  • If you get a message about an unexpected package delivery that tells you to click on a link for some reason, don’t click.
  • If you think the message might be legitimate, contact the shipping company using a phone number or website you know is real. Don’t use the information in the message.
  • If you think it could be about something you recently ordered, go to the site where you bought the item and look up the shipping and delivery status there.
  • No matter the time of year, it always pays to protect your personal information. Check out these resources to help you weed out spam text messagesphishing emails, and unwanted calls.

These are helpful tips any time of year, but particularly right now.

Algorithmic Pricing Agents and Price-Fixing Facilitators: Antitrust Law’s Latest Conundrum

Are machines doing the collaborating that competitors may not?

It is an application of artificial intelligence (“AI”) that many businesses, agencies, legislators, lawyers, and antitrust law enforcers around the world are only beginning to confront. It is also among the top concerns of in-house counsel across industries. Competitors are increasingly setting prices through the use of communal, AI-enhanced algorithms that analyze data that are private, public, or a mix of both.

Allegations in private and public litigation describe “algorithmic price fixing” in which the antitrust violation occurs when competitors feed and access the same database platform and use the same analytical tools. Then, as some allege, the violations continue when competitors agree to the prices produced by the algorithms. Right now, renters and prosecutors are teeing off on the poster child for algorithmic pricing, RealPage Inc., and the many landlords and property managers who use it.

PRIVATE AND PUBLIC LITIGATION

A Nov. 1, 2023 complaint filed by the Washington, DC, Attorney General’s office described RealPage’s offerings this way: “[A] variety of technology-based services to real estate owners and property managers including revenue management products that employ statistical models that use data—including non-public, competitively sensitive data—to estimate supply and demand for multifamily housing that is specific to particular geographic areas and unit types, and then generate a ‘price’ to charge for renting those units that maximizes the landlord’s revenue.”

The complaint alleges that more than 30% of apartments in multifamily buildings and 60% of units in large multifamily buildings nationwide are priced using the RealPage software. In the Washington-Arlington-Alexandria Metropolitan Area that number leaps to more than 90% of units in large buildings. The complaint alleges that landlords have agreed to set their rates using RealPage.

Private actions against RealPage have also been filed in federal courts across the country and have been centralized in multi-district litigation in the Middle District of Tennessee (In re: RealPage, Inc., Rental Software Antitrust Litigation [NO. II], Case No. 3:23-md-3071, MDL No. 3071). The Antitrust Division of the Department of Justice filed a Statement of Interest and a Memorandum in Support in the case urging the court to deny the defendants’ motion to dismiss.

Even before the MDL, RealPage had attracted the Antitrust Division’s attention when the company acquired its largest competitor, Lease Rent Options for $300 million, Axiometrics for $75 million, and On-Site Manager, Inc. for $250 million.

The Antitrust Division has been pursuing the use of algorithms in other industries, including airlines and online retailers. The DOJ and FTC are both studying the issue and reaching out to experts to learn more.

JOURNALISTS AND SENATORS

Additionally, three senators urged DOJ  to investigate RealPage after reporters at ProPublica wrote an investigative report in October 2022. The journalists claim that RealPage’s price-setting software “uses nearby competitors’ nonpublic rent data to feed an algorithm that suggests what landlords should charge for available apartments each day.” ProPublica speculated that the algorithm is enabling landlords to coordinate prices and in the process push rents above competitive levels in violation of the antitrust laws.

Senators Amy Klobuchar (D-MN), Dick Durban (D-IL) and Cory Booker (D-NJ) wrote to the DOJ concerned that the RealPage enables “a cartel to artificially inflate rental rates in multifamily residential buildings.”

Sen. Sherrod Brown (D-OH) also wrote to the Federal Trade Commission with concerns “about collusion in the rental market,” urging the FTC to “review whether rent setting algorithms that analyze rent prices through the use of competitors’ private data … violate antitrust laws.” The Ohio senator specifically mentioned RealPage’s YieldStar and AI Revenue Management programs.

THE EUROPEANS

The European Commission has enacted the Artificial Intelligence Act, which includes provisions on algorithmic pricing, requiring algorithmic pricing systems be transparent, explainable, and non-discriminatory with regard to consumers. Companies that use algorithmic pricing systems will be required to implement compliance procedures, including audits, data governance, and human oversight.

THE LEGAL CONUNDRUM

An essential element of any claimed case of price-fixing under the U.S. antitrust laws is the element of agreement: a plaintiff alleging price-fixing must prove the existence of an agreement between two or more competitors who should be setting their prices independently but aren’t. Consumer harm from collusion occurs when competitors set prices to achieve their maximum joint profit instead of setting prices to maximize individual profits. To condemn algorithmic pricing as collusion, therefore, requires proof of agreement.

It may be difficult for the RealPage plaintiffs to prove that the RealPage’s users agreed among themselves to adhere to any particular price or pricing formula, but not impossible. End users are likely to argue that RealPage’s pricing recommendations are merely aggregate market signals that RealPage is collecting and disseminating. The use of the same information service, their argument will go, does not prove the existence of an agreement for purposes of Section 1 of the Sherman Act.

The parties and courts embroiled in the RealPage litigation are constrained to live under the law as it presently exists, so the solution proposed by Michal Gal, Professor and Director of the Forum on Law and Markets at the University of Haifa, is out of reach. In her 2018 paper, “Algorithms as Illegal Agreements,” Professor Gal confronts the agreement problem when algorithms set prices and concludes that it is time to “rethink our laws and focus on reducing harms to social welfare rather than on what constitutes an agreement.” Academics have been critical of the agreement element of Section 1 for years, but it is unlikely to change anytime soon, even with the added inconvenience it poses where competitors rely on a common vendor of machine-generated pricing recommendations.

Nonetheless, there is some evidence that autonomous machines, just like humans, can learn that collusion allows sellers to charge monopoly prices. In their December 2019 paper, “Artificial Intelligence, Algorithmic Pricing and Collusion,” Emilio Calvano, Giacomo Calzolari, Vincenzo Denicolo, and Sergio Pastorello at the Department of Economics at the University of Bologna showed with computer simulations that machines autonomously analyzing prices can develop collusive strategies “from scratch, engaging in active experimentation and adapting to changing environments.” The authors say indications from their models “suggest that algorithmic collusion is more than a remote theoretical possibility.” They find that “relatively simple [machine learning] pricing algorithms systematically learn to play collusive strategies.” The authors claim to be the first to “clearly document the emergence of collusive strategies among autonomous pricing agents.”

THE AGREEMENT ELEMENT IN THE MACHINE PRICING CASE

For three main reasons, the element of agreement need not be an obstacle to successfully prosecuting a price-fixing claim against competitors that use a common or similar vendor of algorithmic pricing data and software.

First, there is significant precedent for inferring the existence of an agreement among parties that knowingly participate in a collusive arrangement even if they do not directly interact, sometimes imprecisely referred to as a “rimless wheel hub-and-spoke” conspiracy. For example, in Toys “R” Us, Inc. v. F.T.C., 221 F.3d 928 (9th Cir. 2000), the court inferred the necessary concerted action from a series of individual agreements between toy manufacturers and Toys “R” Us in which the manufacturers promised not to sell the toys sold to Toys “R” Us and other toy stores to big box stores in the same packaging. The FTC found that each of the manufacturers entered into the restraint on the condition that the others also did so. The court found that Toys “R” Us had engineered a horizontal boycott against a competitor in violation of Section 1, despite the absence of evidence of any “privity” between the boycotting manufacturers.

The Toys “R” Us case relied on the Supreme Court’s decision in Interstate Circuit v. United States, 306 U.S. 208 (1939), in which movie theater chains sent an identical letter to eight movie studios asking them to restrict secondary runs of certain films. The letter disclosed that each of the eight were receiving the same letter. The Court held that a direct agreement was not a prerequisite for an unlawful conspiracy. “It was enough that, knowing that concerted action was contemplated and invited, the distributors gave their adherence to the scheme and participated in it.”

The analogous issue in the algorithmic pricing scenario is whether the vendor’s end users that their competitors are also end users. If so, the inquiry can consider the agreement element satisfied if the algorithm does, in fact, jointly maximize the end users’ profits.

The second factor overcoming the agreement element is related to the first. Whether software that recommends prices has interacted with the prices set by competitors to achieve joint profit maximization—that is, whether the machines have learned to collude without human intervention—is an empirical question. The same techniques used to uncover machine-learned collusion by simulation can be used to determine the extent of interdependence in historical price setting. If statistical evidence of collusive pricing is available, it is enough that the end users knowingly accepted the offer to set its prices guided by the algorithm. The economics underlying the agreement element in the first place lies in prohibition of joint rather than individual profit maximization, so direct evidence that market participants are jointly profit maximizing should obviate the need for further evidence of agreement.

A third reason the agreement element need not stymie a Section 1 action against defendants engaged in algorithmic pricing is based on the Supreme Court’s decision in American Needle v. NFL, 560 U.S. 183 (2010). In that case the Court made clear that arrangements that remove independent centers of decision-making from the market run afoul of Section 1, if the net effect of the algorithm is to displace individual decision-making with decisions outsourced to a centralized pricing agent, the mechanism should be immaterial.

The rimless wheel of the so-called hub-and-spoke conspiracy is an inadequate analogy because the wheel in these cases does have a rim, i.e., a connection between the conspirators. In the scenarios above in which the courts have found Section 1 liability i) each of the participants knew that its rivals were also entering into the same or similar arrangements, ii) the participants devolved pricing authority away from themselves down to an algorithmic pricing agent, and iii) historical prices could be shown statistically to have exceeded the competitive level in a way consistent with collusive pricing. These elements connect the participants in the scheme, supplying the “rim” to the spokes of the wheel. If the plaintiffs in the RealPage litigation can establish these elements, they will have met their burden of establishing the requisite element of agreement in their Section 1 claim.

FTC to Send Nearly $100 Million in Refunds in Vonage Settlement

On October 30, 2023, the Federal Trade Commission announced that it is sending nearly $100 million in refunds to consumers who were harmed as a result of internet phone service provider Vonage’s alleged use of dark patterns and other obstacles that made it difficult for users to cancel their service.

In its November 2022 complaint against Vonage, the FTC alleged that Vonage made its cancellation process more difficult to navigate than its enrollment process. In particular, Vonage allegedly restricted users to a single method of cancellation, charged unexpected early termination fees, continued to charge users after they canceled, and issued only partial refunds for overbilled amounts. Vonage and the FTC subsequently reached a settlement where Vonage agreed to pay $100 million in refunds to consumers harmed by the company’s actions, implement a simple and transparent cancellation process, and stop charging consumers without their consent.

The FTC is now in the process of sending payments to 389,106 consumers. Eligible consumers will receive refunds by check or PayPal.

 

Listen this post.

For more news on Federal Trade Commission Refunds, visit the NLR Antitrust & Trade Regulation section.

FTC Junk Fee Ban Proposed Rule Released

The Federal Trade Commission (FTC) released a new proposed rule to ban junk fees, which are unexpected, hidden, and “bogus” charges that are often applied later in a transaction. The FTC announced the proposed rule on October 11, 2023 after receiving 12,000 comments from consumers about how these fees impact them. The FTC is currently “seeking a new round of comments on a proposed junk fee rule,” according to a press release issued by the agency.

Junk fees include charges added when purchasing concert tickets online, making hotel and resort reservations, changing airline booking and seat choice fees, paying utility bills and renting an apartment. Junk fees are sometimes called partitioned pricing, drip pricing or shrouded pricing, according to Ashish Pradhan of Cornerstone Research. Consumers told the FTC that sellers often don’t say what the fees are for, and if they’re getting anything in return for paying them.

“All too often, Americans are plagued with unexpected and unnecessary fees they can’t escape. These junk fees now cost Americans tens of billions of dollars per year—money that corporations are extracting from working families just because they can,”  FTC Chair Lina M. Khan stated today. “By hiding the total price, these junk fees make it harder for consumers to shop for the best product or service and punish businesses who are honest upfront. The FTC’s proposed rule to ban junk fees will save people money and time and make our markets fairer and more competitive.”

The FTC estimates that junk fees can result in “tens of billions of dollars per year in unexpected costs” for consumers, and more than 50 million hours of time spent searching for the total price of short-term lodging and tickets for live events per year.

What Is the FTC Junk Fee Proposed Rule?

The proposed rule requires businesses to include all mandatory fees to be disclosed in pricing and prohibits sellers from applying any hidden fees during the transaction. The FTC said that this would help consumers “know exactly how much they are paying and what they are getting and spur companies to compete on offering the lowest price.”

Specifically, the Junk Fee Proposed Rule bans:

  • Hidden fees. These fees drive up the price of purchases, often before the transaction is complete. The proposed rule also bars businesses from advertising prices that exclude or hide mandatory fees.
  • Bogus fees. The FTC said that companies often charge “bogus fees.” The agency characterizes these fees as charges that consumers are asked to pay without knowing what their purpose is. The proposed rule requires businesses to tell consumers what these fees are for, what the amount is up front and if the fees can be refunded.

The proposed rule allows the FTC to issue monetary penalties against noncompliant companies and provide refunds to affected consumers.

Junk Fee Regulatory Measures from Other Federal Agencies

The Federal Communications Commission (FCC)

The FTC isn’t the only federal agency targeting junk fees. Other federal agencies are also acting against a variety of add on fees. The Federal Communications Commission (FCC) started implementing its Broadband Consumer Labels tool aimed at increasing price transparency.

“No one likes surprise charges on their bill. Consumers deserve to know exactly what they are paying for when they sign up for communications services. But when it comes to these bills, what you see isn’t always what you get,” said FCC Chairwoman Jessica Rosenworcel on March 23, 2023. “Instead, consumers have often been saddled with additional junk fees that may exorbitantly raise the price of their previously agreed-to monthly charges. To combat this, we’re implementing Broadband Consumer Labels, a new tool that will increase price transparency and reduce cost confusion, help consumers compare services, and provide ‘all-in-pricing’ so that every American can understand upfront and without any surprises how much they can expect to be paying for these services.”

The Consumer Financial Protection Bureau (CFPB)

Additionally, in March, the Consumer Financial Protection Bureau (CFPB) released a report on the use of junk fees “in deposit accounts and in multiple loan servicing markets, including the auto, mortgage, student, and payday/small loan sectors,” according to Greenberg Traurig.

“Americans are fed up with the junk fees that are creeping across the economy,” said CFPB Director Rohit Chopra in the FTC press release. “The FTC’s proposed rule will protect families and honest businesses from race-to-the-bottom abuses that cost us billions of dollars each year. If finalized, the CFPB will enforce the rule against violators in the financial industry and ensure that these firms play fairly.”\

The Department of Housing and Urban Development (HUD)

The Biden Administration and the Department of Housing and Urban Development in a July 19, 2023, press release, specifically address add-on fees in rental housing. “Earlier this year, we called for reform in the housing industry to increase transparency for renters across the country, reflecting the Biden-Harris administration and the Department of Housing and Urban Development’s commitment,” said HUD Secretary Marcia L. Fudge in the FTC press release.

According to HUD rental application fees can be up to $100 or more per application, and, importantly, they often exceed the cost of conducting the background and credit checks. Given that prospective renters often apply for multiple units over the course of their housing search, these application fees can add up to hundreds of dollars.

The Department of Transportation (DOT)

The Department of Transportation in a March 2023 press release addressed aggravating airline fees: after DOT secured commitments from major U.S. airlines to provide free rebooking, meals, and hotels when they are responsible for stranding passengers. Dot stated that they were working to stop airlines from forcing parents to pay to sit next to their kids by requiring airlines to disclose hidden fees for things like extra bags. DOT stated that they helped secure billions of dollars in refunds for passengers whose flights are canceled.

In 2022, Secretary Buttigieg pressed U.S. airlines to do more for passengers who had a flight canceled or delayed because of the airline, by informing the CEOs of the 10 largest U.S. airlines that the DOT would publish a dashboard on amenities and services provided such as rebooking, meals, or hotels in the event of a controllable delay or cancellation. Prior to Buttigieg’s urging, none of the 10 largest U.S. airlines guaranteed meals or hotels when a delay or cancellation was within the airlines’ control, and only one offered free rebooking.   As of March 2023, all of the 10 largest U.S. airlines guarantee meals and rebooking, and nine guarantee hotels when an airline issue causes a cancellation or delay.

What’s Next?

Consumers can submit comments to the FTC electronically for 60 days once the notice of proposed rulemaking is published in the Federal Register. Consumers can also send written comments to the FTC—instructions on how to do this can be found in the Federal Register notice under the “Supplementary Information” section.

For more articles on the FTC, visit the NLR Antitrust and Trade section.

How to Succeed in Environmental Marketing Claims

Environmental marketing claims often present something of a Catch-22—companies that are doing actual good for the environment deserve to reap the benefits of their efforts, and consumers deserve to know, while at the same time, heightened scrutiny from the Federal Trade Commission (FTC), the National Advertising Division (NAD), state regulators and the plaintiffs’ bar have made such claims increasingly risky.

In 2012, the FTC issued the Green Guides for the use of environmental marketing claims to protect consumers and to help advertisers avoid deceptive environmental marketing. Compliance with the Green Guides may provide a safe harbor from FTC enforcement, and from liability under state laws, such as California’s Environmental Marketing Claims Act, that incorporate the Green Guides. The FTC has started a process to revise the Green Guides, including a request for comments about the meaning of “sustainable.” In the meantime, any business considering touting the environmental attributes of its products should consider the following essential takeaways from the Green Guides in their current form:

    • Substantiation: Substantiation is key! Advertisers should have a reasonable basis for their environmental claims. Substantiation is the support for a claim, which helps ensure that the claim is truthful and not misleading or deceptive. Among other things, substantiation requires documentation sufficient to verify environmental claims.
    • General benefit claims: Advertisers should avoid making unqualified claims of general benefit because substantiation is required for each reasonable interpretation of the claim. The more narrowly tailored the claim, the easier it is to substantiate.
    • Comparative claims: Advertisers should be careful and specific when making comparative claims. For example, a claim that states “20% more recycled content” begs the question: “compared to what?” A prior version of the same product? A competing product? Without further detail, the advertiser would be responsible for the reasonable interpretation that the product has 20% more recycled content than other brands, as well as the interpretation that the product has 20% more recycled content than the advertiser’s older products.
    • General greenwashing terms: Advertisers should be very cautious when using general environmental benefit terms such as “eco-friendly,” “sustainable,” “green,” and “planet-friendly.” Those kinds of claims feature prominently in many complaints alleging greenwashing, and they should only be used where the advertiser knows and explains what the term means, and can substantiate every reasonable interpretation of the claim.

Putting it into Practice: Given the scrutiny that environmental claims tend to attract, advertisers should exercise care when making environmental benefit claims about their products and services. They should narrowly tailor their claims to the specific environmental attributes they want to promote, and perhaps most important, they should ensure they have adequate backup to substantiate their claims. While the FTC Green Guides are due for a refresh (which we will surely report on), for the time being, they will continue to serve as important guidance for advertisers seeking to inform consumers without exposing their business to FTC scrutiny or class action litigation.

FTC Launches New Office of Technology

On February 17, 2023, the Federal Trade Commission announced the launch of their new Office of Technology. The Office of Technology will assist the FTC by strengthening and supporting law enforcement investigations and actions, advising and engaging with staff and the Commission on policy and research initiatives, and engaging with the public and relevant experts to identify market trends, emerging technologies and best practices. The Office will have dedicated staff and resources and be headed by Chief Technology Officer Stephanie T. Nguyen.

Article By Hunton Andrews Kurth’s Privacy and Cybersecurity Practice Group

For more privacy and cybersecurity legal news, click here to visit the National Law Review.

Copyright © 2023, Hunton Andrews Kurth LLP. All Rights Reserved.

EU PFAS Ban Should Raise U.S. Corporate Concerns

On February 7, 2023, the European Chemical Agency (ECHA) unveiled a 200 page proposal that would ban the use of any PFAS in the EU. While the proposal was anticipated by many, the scope of the ban nonetheless drew reactions from a myriad of sectors – from environmentalists to scientists to corporations. U.S. based companies that have any industrial or business interests in the EU must absolutely pay close attention to the EU PFAS ban and consider the impact on business interests.

EU PFAS Ban Proposal

The EU PFAS ban currently proposed would take effect 18 months from the date of enactment; however, the ECHA is contemplating phased-in restrictions of up to 12 years for uses that the group considers challenging to replace in certain applications. The proposal is only the inception of the ECHA regulatory process, which next turns to a public comment period that opens on March 22, 2023 and will run for at least six months. ECHA’s scientific committees to review the proposal and provide feedback. Given the magnitude of comments expected and the likely hurdles that the ECHA will face in finalizing the proposal, it is not expected that the proposal would be finalized prior to 2025.

The EU PFAS ban seeks to prohibit the use of over 10,000 PFAS types, excluding only a sub-class of PFAS that have been deemed “fully degradable.” The proposal indicates: “…the restriction proposal is tailored to address the manufactureplacing on the market, as well as the use of PFASs as such and as constituents in other substances, in mixtures and in articles above a certain concentration. All uses of PFASs are covered by this restriction proposal, regardless of whether they have been specifically assessed by the Dossier Submitters and/or are mentioned in this report or not, unless a specific derogation has been formulated.” (emphasis added) Several specific types of uses and consumer product applicability would be included in the first phase of the proposed ban, including cosmetics, food packaging, clothing and cookware. This first phase of the ban implementation would include uses where alternatives are known, but not yet widely available, which is the reason why the first phase would take effect within 5 years. The second phase of the ban anticipates a 12 year period of time for ban implementation and encompasses uses where alternatives to PFAS are not currently known. Significantly for U.S. business, the proposed ban includes imported goods.

Impact On U.S. Companies

In 2022, U.S. companies exported just shy of $350 billion in goods to the EU. In many instances, companies do not deliberately, intentionally, or knowingly add or utilize PFAS in finished products that are sent to the EU. However, PFAS may be used in manufacturing processes that inadvertently contaminate goods with PFAS. In addition, many U.S. companies rely on overseas companies for supply chain sourcing. Quite commonly, supply chain sources outside of the U.S. do not voluntarily provide chemical composition information for components or goods that they supply. Inquiring of those companies for such information, or certifications that the good contain no PFAS, can be extremely difficult. Getting overseas companies to provide such information often proves impossible and even when certifications are made, the devil may be in the details in terms of what is actually being certified. For example, certifying that goods contain “no hazardous substances” or “no hazardous PFAS” sound reassuring, but by what measure of “hazardous” is the statement being made? Under what country’s regulations? Using which scientific definition? The result of all of these complexities may be that many U.S. based companies need to test their products themselves, which not only increases time to market issues and financial costs associated with production, but also risks to the companies doing business in the U.S. that they may open themselves up to environmental pollution or personal injury lawsuits by conducting such testing. In addition, alternatives may not be as cost effective as PFAS, which impacts businesses and has the potential trickle-down impact of passing some of the costs on to consumers.

While debate continues in the U.S. as to the scientific validity of the “whole class” approach to regulating PFAS (of which there are over 12,000 types according to the EPA), the EU PFAS ban leapfrogs the U.S. debate stage and goes directly to proposing a regulation that would embrace such a “whole class” regulatory scheme. Without a doubt, chemical manufacturers, industrial and manufacturing companies, and some in the science community are expected to strenuously oppose such an approach to regulations for PFAS. The underlying arguments will follow ones advanced and debated already in the U.S. – i.e., not all chemicals act identically, nor have the vast majority of PFAS been shown to date to present health concerns. Proper scientific method does not permit sweeping attributions of testing on legacy PFAS like PFOA and PFOS to be extrapolated and applied to all PFAS. The EU’s response to this via their proposal is that the costs of remediating PFAS from the environment are significant enough that it warrants regulating PFAS as a class to avoid costly, decades-long, and potentially repetitive remediation work in the EU.

Conclusions

It is of the utmost importance for businesses to evaluate their PFAS risk. Public health and environmental groups urge legislators to regulate these compounds in the U.S. and abroad. One major point of contention among members of various industries is whether to regulate PFAS as a class or as individual compounds.  While each PFAS compound has a unique chemical makeup and impacts the environment and the human body in different ways, some groups argue PFAS should be regulated together as a class because they interact with each other in the body, thereby resulting in a collective impact. Other groups argue that the individual compounds are too diverse and that regulating them as a class would be over restrictive for some chemicals and not restrictive enough for others.

Companies should remain informed so they do not get caught off guard. States are increasingly passing PFAS product bills that differ in scope. For any manufacturers, especially those who sell goods overseas, it is important to understand how the various standards among countries will impact them, whether PFAS is regulated as individual compounds or as a class. Conducting regular self-audits for possible exposure to PFAS risk and potential regulatory violations can result in long term savings for companies and should be commonplace in their own risk assessment.

©2023 CMBG3 Law, LLC. All rights reserved.
For more Environmental Law news, click here to visit the National Law Review

Privacy Tip #359 – GoodRx Settles with FTC for Sharing Health Information for Advertising

The Federal Trade Commission (FTC) announced on February 1, 2023 that it has settled, for $1.5M, its first enforcement action under its Health Breach Notification Rule against GoodRx Holdings, Inc., a telehealth and prescription drug provider.

According to the press release, the FTC alleged that GoodRx failed “to notify consumers and others of its unauthorized disclosures of consumers’ personal health information to Facebook, Google, and other companies.”

In the proposed federal court order (the Order), GoodRx will be “prohibited from sharing user health data with applicable third parties for advertising purposes.” The complaint alleged that GoodRx told consumers that it would not share personal health information, and it monetized users’ personal health information by sharing consumers’ information with third parties such as Facebook and Instagram to help target users with ads for personalized health and medication-specific ads.

The complaint also alleged that GoodRx “compiled lists of its users who had purchased particular medications such as those used to treat heart disease and blood pressure, and uploaded their email addresses, phone numbers, and mobile advertising IDs to Facebook so it could identify their profiles. GoodRx then used that information to target these users with health-related advertisements.” It also alleges that those third parties then used the information received from GoodRx for their own internal purposes to improve the effectiveness of the advertising.

The proposed Order must be approved by a federal court before it can take effect. To address the FTC’s allegations, the Order prohibits the sharing of health data for ads; requires user consent for any other sharing; stipulates that the company must direct third parties to delete consumer health data; limits the retention of data; and implement a mandated privacy program. Click here to read the press release.

Copyright © 2023 Robinson & Cole LLP. All rights reserved.

Future of Non-Competes Up in the Air

Future of Non-Competes Up in the Air

The FTC recently announced its proposal to ban non-compete clauses in employment agreements. That proposal is currently in a 60-day period of public comment, and employers are (understandably) nervous. While many employers rely on these provisions to manage competition and protect their IP and confidential information, companies across the country may soon find themselves in the shoes of California employers, having to work around restrictions on non-competes to maximize protection within the increasingly narrow confines of the law.

Employers are not without options in responding to the potential changes should they become law–more aggressive retention incentives, intelligent data security, and stricter confidentiality agreements should all be part of the conversation. Even deferred compensation could be on the table, as noted in the article, though beware of the tax implications. Employers should also keep in mind that the FTC proposal, should it become law, will doubtless be subject to legal challenges and could be tied up in the courts for a while before becoming effective.

Observers on both sides say that limitations on the clauses will compel employers to get more creative about how they retain talent, using everything from compensation to career advancement to keep workers engaged and loyal to the company. Some companies use deferred compensation—such as retention bonuses or rolling stock options that vest after, say, three years—to give people incentives to stay.”

©1994-2023 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.