Category: Consumer Protection

So…Everyone’s Been Compromised? What To Do In The Wake of the Equifax Breach

By now, you’ve probably heard that over 143 million records containing highly sensitive personal information have been compromised in the Equifax data breach. With numbers exceeding 40% of the population of the United States at risk, chances are good that you or someone you know – or more precisely, many people you know – will be affected. But until you know for certain, you are probably wondering what to do until you find out.

To be sure, there has been a lot of confusion. Many feel there was an unreasonable delay in reporting the breach. And now that it has been reported, some have suggested that people who sign up with the Equifax website to determine if they were in the breach might be bound to an arbitration clause and thereby waive their right to file suit if necessary later (although Equifax has since said that is not the case). Others have reported that the “personal identification number” (PIN) provided by Equifax for those who do register with the site is nothing more than a date and time stamp, which could be subject to a brute-force attack, which is not necessarily reassuring when dealing with personal information. Still others have reported that the site itself is subject to vulnerabilities such as cross-site scripting (XSS), which could give hackers another mechanism to steal personal information. And some have even questioned the validity of the responses provided by Equifax when people query to see if they might have been impacted.

In all the chaos, it’s hard to know how to best proceed. Fortunately, you have options other than using Equifax’s website.

1. Place a Credit Freeze

Know that if you are a victim of the breach, you will be notified by Equifax eventually. In the meantime, consider placing a credit freeze on your accounts with the three major credit reporting bureaus. All three major credit reporting bureaus allow consumers to freeze their credit reports for a small fee, and you will need to place a freeze with each credit bureau. If you are the victim of identity fraud, or if your state’s law mandates, a credit freeze can be implemented without charge. In some states, you may incur a small fee. Lists of fees for residents of various states can be found at the TransUnion, Experian, and Equifax websites. Placing a freeze on your credit reports will restrict access to your information and make it more difficult for identity thieves to open accounts in your name. This will not affect your credit score but there may be a second fee associated with lifting a credit freeze, so it is important to research your options before proceeding. Also, know that you will likely face a delay period before a freeze can be lifted, so spur-of-the-moment credit opportunities might suffer.

Here is information for freezing your credit with each credit bureau:

Equifax Credit Freeze

  • You may do a credit freeze online or by certified mail (return receipt requested) to:

            Equifax Security Freeze

            P.O. Box 105788

            Atlanta, GA 30348

  • To unfreeze, you must do a temporary thaw by regular mail, online or by calling 1-800-685-1111 (for New York residents call 1-800-349-9960).

Experian Credit Freeze

  • You may do a credit freeze online, by calling 1-888-EXPERIAN (1-888-397-3742) or by certified mail (return receipt requested) to:

            Experian

            P.O. Box 9554

            Allen, TX 75013

  • To unfreeze, you must do a temporary thaw online or by calling 1-888-397-3742.

TransUnion Credit Freeze

  • You may do a credit freeze online, by phone (1-888-909-8872) or by certified mail (return receipt requested) to:

            TransUnion LLC

            P.O. Box 2000

            Chester, PA 19016

  • To unfreeze, you must do a temporary thaw online or by calling 1-888-909-8872.

After you complete a freeze, make sure you have a pen and paper handy because you will be given a PIN code to keep in a safe place.

2. Obtain a Free Copy of Your Credit Report

Consider setting up a schedule to obtain a copy of your free annual credit report from each of the reporting bureaus on a staggered basis. By obtaining and reviewing a report from one of the credit reporting bureaus every three or four months, you can better position yourself to respond to unusual or fraudulent activity more frequently. Admittedly, there is a chance that one of the reporting bureaus might miss an account that is reported by the other two but the benefit offsets the risk.

3. Notify Law Enforcement and Obtain a Police Report

If you find you are the victim of identity fraud (that is, actual fraudulent activity – not just being a member of the class of affected persons), notify your local law enforcement agency to file a police report. Having a police report will help you to challenge fraudulent activity, will provide you with verification of the fraud to provide to credit companies’ fraud investigators, and will be beneficial if future fraud occurs. To that end, be aware that additional fraud may arise closer to the federal tax filing deadline and having a police report already on file can help you resolve identity fraud problems with the Internal Revenue Service if false tax returns are filed under your identity.

4. Obtain an IRS IP PIN

Given the nature of the information involved in the breach, an additional option for individuals residing in Florida, Georgia, and Washington, D.C. is to obtain an IRS IP PIN, which is a 6-digit number assigned to eligible taxpayers to help prevent the misuse of Social Security numbers in federal tax filings. An IP PIN helps the IRS verify a taxpayer’s identity and accept their electronic or paper tax return. When a taxpayer has an IP PIN, it prevents someone else from filing a tax return with the taxpayer’s SSN.

If a return is e-filed with a taxpayer’s SSN and an incorrect or missing IP PIN, the IRS’s system will reject it until the taxpayer submits it with the correct IP PIN or the taxpayer files on paper. If the same conditions occur on a paper filed return, the IRS will delay its processing and any refund the taxpayer may be due for the taxpayer’s protection while the IRS determines if it is truly the taxpayer’s.

Information regarding eligibility for an IRS IP PIN and instructions is available here and to access the IRS’s FAQs on the issue, please go here.

Conclusion

Clearly, the Equifax breach raises many issues about which many individuals need to be concerned – and the pathway forward is uncertain at the moment. But by being proactive, being cautious, and taking appropriate remedial measures available to everyone, you can better position yourself to avoid fraud, protect your rights, and mitigate future fraud that might arise.

 This post was written by Justin L. Root & Sara H. Jodka of Dickinson Wright PLLC © Copyright 2017
For more legal news go to The National Law Review

Trump Administration Issues New Guidance for Automated Driving Systems

The National Highway Traffic Safety Administration (NHTSA) announced yesterday the Trump administration’s first significant guidance concerning autonomous vehicles and Automated Driving Systems (ADS).

The new voluntary guidelines, titled Automated Driving Systems: A Vision for Safety, are intended to encourage innovation in the industry and are being touted as the administration’s “new, non-regulatory approach to promoting the safe testing and development of automated vehicles.” One of the most important aspects of these guidelines is the NHTSA’s clarification of its view of the delineation between the roles of the states and the federal government with respect to ADS technology.

The new guidelines replace the Federal Automated Vehicle Policy (FAVP), which was released by the Obama administration in 2016. A Vision for Safety comprises voluntary guidance for vehicle manufacturers, best practices for state legislatures when drafting ADS legislation, and a request for further comment.

Autonomous-vehicle manufacturers are asked to undertake a voluntary self-assessment addressing 12 safety elements discussed in the new guidance. That is a slight departure from the FAVP, which detailed a 15-point safety assessment. The safety self-assessment remains voluntary, and NHTSA emphasizes that there is no mechanism to compel manufacturers to participate. The agency also stated that the testing or deployment of new ADS technologies need not be delayed to complete a self-assessment.

In what may be the most significant component of the guidance, NHTSA made clear its role as the primary regulator of ADS technology by “strongly encourage[ing] States not to codify th[e] Voluntary Guidance . . . as a legal requirement for any phases of development, testing, or deployment of ADSs.”

Further acknowledging the potential problems associated with a patchwork of state laws, the agency expressed its belief that “[a]llowing NHTSA alone to regulate the safety design and performance aspects of ADS technology will help avoid conflicting Federal and State laws and regulations that could impede deployment.” States are instead tasked by A Vision for Safety with regulating licensing of human drivers, motor vehicle registration, traffic laws, safety inspections, and insurance.

The new guidance comes just one week after the House of Representatives passed the SELF-DRIVE Act designed to eliminate legal obstacles that could interfere with the deployment of autonomous vehicles. However, as NHTSA and Congress are seeking to speed up ADS development by removing regulatory and legal impediments, it is noteworthy that on the same day NHTSA announced A Vision for Safety, the National Transportation Safety Board (NTSB) called for NHTSA to require automakers to install “system safeguards to limit the use of automated vehicle systems to those conditions for which they were designed.”

In an abstract of its forthcoming final report on the 2016 fatal crash involving a Tesla Model S operating in semi-autonomous mode, the NTSB concluded that “operational limitations” in the Tesla’s system played a major role in the fatal crash and that the vehicle’s semi-autonomous system lacked the safeguards necessary to ensure that the system was not misused. These recent developments only underscore the uncertainty facing the industry as regulators attempt to keep pace with fast-developing technology.

This post was written by Neal Walters and Casey G. Watkins of  Ballard Spahr LLP Copyright ©
For more legal analysis go to The National Law Review

Court Orders Monsanto Roundup Safety Documents to be Disclosed

Monsanto is catching a lot of heat now that a court has unsealed documents that cast the company in a negative light and suggest that it was responsible for providing false assertions to the government and public regarding the safety of Roundup. As the most popular herbicide in the world, Roundup and similar products produced by Monsanto are used across the globe for the elimination of pests from lawns, crops, gardens and nurseries. It has provided research that opposes the belief Roundup’s main active ingredient can cause cancer, but the documents unsealed by the court show that these accounts were misleading and, in some cases, false.

Ghostwritten Research

The research that was presented to defend the safety of its products was in fact, ghostwritten and attributed to academics. It also claimed that a senior EPA official attempted to dismiss a report from the United States Department of Health and Human Services that the product could in fact be linked to the deaths of numerous people who suffered from non-Hodgkin’s lymphoma. The evidence tells a story of arguments within the Environmental Protection Agency and conflicting beliefs over whether Roundup and similar products were safe to use.

Emails between Monsanto executives and Jess Rowland of the EPA discuss an effort to disrupt the efforts of the Department of Health and Human Services to make its own determination and review of the product. Rowland states in the emails that he should receive a medal if he is able to succeed in his interference.

World Health Organization Classifies Products as Carcinogenic

The growing litigation over Roundup was sparked off by the classification of Roundup as a carcinogen, due to the discovery of a link between glyphosate and cancer in animals and the destruction of DNA and chromosomes in human cells. Despite the research provided by the WHO, Monsanto went to great lengths to continue the defense of its product and to assert that it was as safe to consume as salt.

While Monsanto claims that glyphosate is safe, those who have come forward with claims against the company allege that Monsanto has repeatedly falsified research and information in order to fool the government and the public. In its defense, Monsanto has claimed that the unsealed documents are being presented out of context and that they provide isolated information. Numerous health agencies around the world have presented conflicting arguments over the safety of these products, so the science has not been settled just yet.

This post was written by Jonathan Rosenfeld of Rosenfeld Injury Lawyers, Copyright © 2017
For more legal analysis go to The National Law Review

Congress Attempts to Counsel Trump Concerning Removal of CFPB Director Cordray, While PHH Petition for Rehearing Remains Undecided

Congress Capitol CFPB Director CordrayToday, Senators Chuck Schumer (D-NY), Sherrod Brown (D-OH), Elizabeth Warren (D-MA) and others voiced their opposition to any attempt by President-elect Donald Trump to oust Richard Cordray, the current Director of the Consumer Financial Protection Bureau (“CFPB”), before Cordray’s term ends in July 2018. They also sent a letter to Cordray outlining and praising his accomplishments as CFPB Director.

The Senators’ opposition to the prospect of Cordray’s removal is just the latest volley between members of Congress and the incoming Administration concerning the CFPB’s directorship.

On January 12, Sean Spicer, a senior spokesperson for President-elect Trump, told reporters that the President-elect had interviewed former Representative Randy Neugebauer (R-TX) for the position of Director of the CFPB. With Richard Cordray’s term as CFPB Director not scheduled to conclude until July 2018, this strongly suggested that the President-elect is considering an attempt to oust Cordray sooner. While in Congress, Rep. Neugebauer introduced legislation aiming to replace the CFPB’s single director with a five-member commission.

Spicer’s statement came on the heels of a January 10 statement from Senator Brown, the ranking member of the Senate Banking, Housing, and Urban Affairs Committee, urging the President-elect not to attempt to remove Cordray or abolish the CFPB. Senator Brown cautioned President-elect Trump that, “Under Richard Cordray’s leadership, the CFPB has returned $12 billion to servicemembers, seniors, and working Americans . . . Firing Cordray and abolishing the consumer bureau so the special interests can get their $12 billion back would shatter President-elect Trump’s promise to hold Wall Street accountable and protect working people.”

Also on January 10, minority members of the House Committee on Financial Services released a letter to President-elect Trump in the same vein, commending Director Cordray and counseling the President-elect against attempting to remove him.

On January 9, Senators Ben Sasse (R-NE) and Mike Lee (R-UT) released a letter to Vice President-elect Mike Pence urging the opposite: “Given the CFPB’s unconstitutional structure, removing Director Cordray would be consistent with President Trump’s oath to ‘preserve, protect, and defend the Constitution of the United States’ and his duty to serve as an independent guardian of the U.S. Constitution. Removing Director Cordray would also uphold the American idea of limited government, because Director Cordray has vigorously supported the unconstitutional independence of the CFPB and pursued a regulatory agenda that is harmful to the American people.”

The prospect of Director Cordray’s removal is top of mind following the D.C. Circuit Court’s decision in PHH Corp., et al. v. Consumer Financial Protection Bureau, which ruled unconstitutional the provision of the Dodd-Frank Act establishing that the CFPB Director could be fired only “for cause,” i.e., for inefficiency, neglect of duty, or malfeasance in office.

As discussed in a prior post, Senators Brown and Warren are among 21 current and former members of Congress who filed an amicus brief in support of the CFPB’s petition for rehearing en banc of the PHH decision. On December 22, PHH filed a response to the petition, arguing that there is no need for the D.C. Circuit to revisit its original decision. The United States also filed a response on December 22, arguing that the D.C. Circuit’s decision “departs from” Supreme Court jurisprudence regarding the separation-of-powers and the removal of executive agency heads. The court granted PHH until January 27 to respond to the United States’ brief. Any decision on the petition for rehearing will thus not be made until after President-elect Trump’s inauguration on January 20, raising the prospect that the United States’ brief could be withdrawn if the Department of Justice’s position changes under the incoming Administration.

ARTICLE BY Jamie A. Heine of Covington & Burling LLP

© 2017 Covington & Burling LLP

Samsung Recalls Expanding to China After Consumer and Media Complaints

smartphone Samsung recallSamsung’s much-publicized recall of the new Samsung Galaxy Note7 phones due to alleged fire hazards of lithium-ion batteries started in North America. Within weeks, after a media and social media outcry in China, the company expanded the recall to cover consumers in China. Samsung’s decision to expand the recall to cover consumers in China echoes the recent experience of other major international brands involved in high-profile consumer product recalls, and illustrates a longstanding challenge and two emerging trends. First, it has long been difficult to identify what, if any, defect a consumer product poses when presented with experience data suggesting a hazard may exist. Second, in the “no good deed goes unpunished” category, is the increasing risk that swift direct communications to U.S. consumers about a potential risk – which is not prohibited in any way by the U.S. Consumer Product Safety Act (CPSA) – will result in a public backlash by regulators complaining about a “go it alone” strategy when a company acts unilaterally. Third is the growing power of the consumer movement in China. All of these factors illustrate the need to consider a holistic global notification and recall strategy. Accordingly, today’s product recall landscape has become far more complex.

The path to the Samsung recall of the Galaxy Note7 began shortly after the devices were made available for sale on August 19, 2016. Reports quickly began coming in concerning overheating of the phone’s battery, including reports of injuries and fires. By September 2, Samsung had received enough reports in North American and other markets to publicly announce a unilateral partial recall of Galaxy Note7s sold in those markets. This initial announcement was not issued in the usual form of a joint press release in cooperation with the U.S. Consumer Product Safety Commission (CPSC) or other safety agencies. Although recalling a product without CPSC agreement is entirely legal, the CPSC strongly prefers to negotiate with companies over the terms of their voluntary recalls, and can force mandatory recalls if it deems companies’ actions insufficient. The sale of products covered by a recall – including products recalled voluntarily – is also a violation of the law, and CPSC immediately criticized Samsung for the unilateral action.

A traditional formal recall announcement of covering some Galaxy Note7 units was subsequently issued by Samsung, CPSC, Health Canada, and Profeco (Mexico’s Procuraduría Federal del Consumidor) on September 15. Reports of overheating and fires associated with additional units not included in the recall continued to come in, however, as well as reports associated with replacement units. This led the company to expand its recall to cover all Galaxy Note7s on October 13.

Meanwhile, in China, Samsung announced only a limited recall of 1,858 units on September 14. The company justified the narrow recall by pointing to the different batteries used in Chinese units, asserting that the only affected units were pre-sale samples offered to a limited universe of consumers. Reports spread in the Chinese news and social media about the breadth of recalls in North America, and Chinese users posted photos and videos in social media showing the phones failing (“exploding,” as the consumers described them) in China. Samsung disputed some of those reports. The official state-run broadcaster, China Central Television (CCTV), however, castigated the company, asking “[i]f Samsung continues to violate the legitimate rights and interests of Chinese consumers and continues to refuse to make public the samples used in its testing process as well as the process itself, who would be able to help Chinese consumers find the truth?” Critiques also came in from other government-associated media sources. After the Chinese consumer product agency, General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ) received about 20 reports of overheating, Samsung recalled its Chinese units on October 11, just before recalling all units worldwide and cancelling the Galaxy Note7.

When user reports of batteries overheating began coming in after the Galaxy Note7 was launched, Samsung reportedly began an immediate investigation. Conducting a sound product-safety root-cause analysis is hard. Samsung appears to have opted to make a public announcement about the potential battery issue based on its initial assessment of the cause of the issue. Its actions in publicly notifying consumers were clearly motivated by an interest in advancing consumer safety by a swift public notice. But further reports involving replacement batteries and criticism by CPSC for the firm’s unilateral action in notifying the public illustrate the conundrum that consumer product firms face every day: It is hard to balance the need to precisely identify potential safety issues (and notify regulators about them) with a desire to quickly advise the public about potential safety concerns.

Global interconnectedness, including through the internet and social media, complicate the situation further. National recalls can easily become international recalls. Although there is little evidence, to date, that pushing recalls on social media meaningfully improves recall response, there is no question that Chinese consumers are turning to social media to pressure global businesses to recall products in China when those products are recalled elsewhere. Ironically, after years of Chinese exports being called into question by recalls in the U.S., Europe, and elsewhere, Chinese consumers are insisting that the products sold in the Chinese market must be held to safety standards applicable elsewhere, and that Chinese consumers be offered equivalent remedies.

In today’s fast-paced social medial environment, consumer product companies must carefully consider not only the facts on the ground and the legal framework, but also the potential social media scrutiny and resulting implications of regionally limited recalls for globally distributed products. There may well be excellent safety arguments that justify not recalling products everywhere, but in today’s environment, decisions to limit recalls to specific jurisdictions require a strong basis of support and considerable on-the-ground effort to work with regulators and understand the market dynamics.

ARTICLE BY David J. Ettinger, Sheila A. Millar & Jean-Cyril Walker of Keller and Heckman LLP

© 2016 Keller and Heckman LLP

Coming Soon to a Lawbook Near You – New Cosmetic Requirements

Cosmetics, Personal Care Products

Back in April 2015, Senators Dianne Feinstein (D-CA) and Susan Collins (R-ME) introduced the Personal Care Products Safety Act (S.1014).  More recently, on September 22, 2016, the Senate Health, Education, Labor, and Pensions Committee received testimony from Senators Feinstein and Collins in support of this bipartisan legislation.  The HELP Committee also heard from experts in the cosmetics industry about product developments and health standards.

Witnesses in favor of the Personal Care Products Safety Act stated that the FDA has not done enough to ban endocrine-disrupting chemicals in cosmetic products and that industry-financed review programs should not substitute government regulatory programs in collecting chemical toxicity data.  They contrasted FDA’s inability to ban products unless they are “adulterated” with the more expansive authorities of similar regulatory agencies in Canada, Japan, and the European Union.

Witnesses against the proposed legislation described chemical toxicity testing procedures already place, such as the Human Repeat Insult Patch Test (HRIPT).  They also noted the proposed legislation would have a disproportionate impact on smaller companies, as stricter national standards for the entire industry are expected to increase the costs of producing and distributing all kinds of personal care and cosmetic products.

As we described last year when the bill was first introduced, the Personal Care Products Safety Act would introduce significant changes to the current U.S. regulatory system for cosmetics.  Among other provisions, the bill would require cosmetic manufacturers to register with FDA annually and submit ingredient information to the agency, and for larger firms registration would be accompanied by a user fee.  Such a registration and user fee system would be similar to what is currently mandated for drug and device manufacturers.  Registered cosmetic firms would also be required to comply with Good Manufacturing Practices for their products, analogous to what drug and device companies must comply with today; such “cosmetic GMPs” would need to be developed by FDA through notice-and-comment rulemaking so that industry and other stakeholders have an opportunity to provide feedback before the rules are finalized.  In addition, S. 1014 would give FDA mandatory recall authority over cosmetics (an authority that the agency only recently obtained for food products under the Food Safety Modernization Act of 2011), and cosmetic firms would be required to report serious adverse events to FDA within 15 business days of becoming aware of the event.

Despite some opposition, congressional aides say the proposed legislation is likely to see movement next year.  FDA, too, welcomes the opportunity to increase its regulatory power over the cosmetics and personal care products.  Citing recent adverse event reports about WEN hair products, the Agency has stressed the need to do away with voluntary reporting for adverse events so that companies are required to report serious adverse events as they become aware of them.  FDA also has raised concerns about studies done by the industry self-regulatory process called Cosmetic Ingredient Review (CIR), claiming they are summaries of voluntary data rather than analyses of raw data from clinical trials.  Overall, therefore, FDA is supportive of the Senate’s effort to expand the agency’s cosmetic oversight power.  Many industry members also support the bipartisan compromise legislation, as do consumer protection groups who view some strengthening of the U.S. regulatory system as “better than nothing.”

Fatema Ghasletwala contributed to this article.

©1994-2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Upcoming European Chemical Restrictions in Apparel Raise Concerns

European Chemical RestrictionsThe European Commission intends to ban the use in apparel of hundreds of Cat. 1A and 1B carcinogenic, mutagenic and toxic for reproduction substances (“CMRs”) within the next year. To do so, the Commission expects to use the so-called “fast-track” procedure to ban CMRs under Regulation 1907/2006 (“REACH Regulation”), instead of the standard procedure for prohibiting substances. Historically, the fast-track procedure has been reserved for mixtures that contain CMRs and are intended for the general public.  The Commission has indicated that its proposal to ban the use of CMRs in apparel is a “test-case” of its intention to also ban Cat. 1A and 1B CMRs in articles (i.e., objects) intended for consumers on a regular basis in the near future.  This fast-track procedure allows less scientific input from the European Chemicals Agency (“ECHA”) and industry, and the related restrictions would create significant barriers to international trade.

“Standard” vs. “Fast-Track” Procedure

Title VIII of the REACH Regulation empowers the European Commission to restrict the use in mixtures (e.g., inks, paints) and articles (e.g., apparel) of substances that pose an unacceptable risk to human health or the environment.  Restricted substances are listed in Annex XVII of the Regulation, which is regularly updated.

There are two different procedures for adding new restrictions: the “regular” and the “fast-track” procedure. In both cases, the Commission proposes the restrictions, and its final proposal is then adopted through “comitology” (i.e., a process involving the input of Member States).  The road towards the final Commission proposal, however, is very different for each procedure:

  • Standard procedure: The standard procedure is generally highly regarded for the sound scientific input it gathers. Articles 69 – 73 of the REACH Regulation include important steps, such as ECHA’s or a Member State’s preparation of an Annex XV dossier analyzing the restrictions, assessments by the Agency’s Risk Assessment Committee (“RAC”) and Socio-Economic Assessment Committee (“SEAC”), and consultation of the Forum for Exchange of Information on Enforcement (“Forum”).
  • Fast-Track Procedure: Article 68(2) of the REACH Regulation, however, empowers the Commission to ban the use of substances that are classified as Cat. 1A or 1B CMRs in mixtures and articles that could be used by consumers without the preparation of a dossier, the opinions of the RAC and SEAC or the consultation of the Forum. As the Commission recognized in its Article 68(2) Paper of 2014, the legislation provides little to no guidance on the use of this procedure.

Indeed, the fast-track procedure was originally intended, and until now has been used solely, to restrict the use of mixtures intended for consumers that contain Cat. 1A or 1B CMRs in concentrations above specific thresholds. Entries 28 to 30 of Annex XVII contain the general ban for mixtures containing Cat. 1A and 1B CMRs, and the Commission has regularly updated them by amending their Appendixes.

The procedure was historically intended for mixtures due to the potential high exposure of consumers using them. In contrast, there is scientific uncertainty on the risk of exposure of consumers to CMRs contained in articles.  As the Commission recognizes in its Article 68(2) Paper, the “main difference between articles and substances and mixtures is that there might be cases where there is no or very limited possibility of exposure of consumers to a CMR substance contained in an article.”

The Proposed CMR Restrictions

The Commission’s long term strategy is to use the REACH fast-track procedure to restrict the use of Cat. 1A and 1B CMRs in a broad range of consumer products. The upcoming ban in apparel is intended as a “test-case”.

Following concerns raised by the industry, the Commission recently announced that it intends to restrict the use of Cat. 1A and 1B CMRs in textiles in two phases. First, it will restrict CMRs in textiles that are in direct contact with the skin.  This concerns primarily apparel, but also products such as footwear and bed linen.  We understand that these restrictions could be adopted by spring or summer of 2017.

Second, the Commission will restrict Cat. 1A and 1B CMRs in textiles that are not in direct contact with the skin, such as accessories (e.g., buttons), floor coverings, and carpets.  The Commission will not start this second phase until it presents its final proposal for textiles that are in direct contact with the skin.

It is still unclear which Cat. 1A and 1B CMRs the Commission will target. Initially, it had proposed to restrict 286 CMRs.  The Commission should only restrict those substances for which there are validated detection and measurement methods.

Analysis of the Planned Restrictions

The Commission’s initial proposal to restrict no less than 286 CMRs in a wide category of textile products raises significant concerns. These include:

Duplication: Of the CMRs that the Commission intends to restrict under the fast-track procedure, several are already subject to other restrictions in the REACH Regulation. The resulting double bans or restrictions might create confusion and duplication. The Commission indicated last June that it is aware of this issue and that it “is committed to avoid double regulation for the same substance and use.”

  • Trade implications: Extensive restrictions could create unnecessary barriers to trade and violate the EU’s commitments under the Agreements of the World Trade Organization. The apparel industry is a global industry; a rapidly-imposed ban on CMRs in apparel may lead operators in this sector to temporarily or permanently stop marketing certain products in the EU.
  • Socio-economic impact: It is questionable whether the Commission has sufficiently considered the cost of compliance with the upcoming restrictions. Widespread and simultaneous restrictions may represent a significant burden for industry, including numerous small and medium-sized enterprises (“SMEs”), and increase the price of apparel for consumers.

Next Steps

What lies ahead? The Commission has agreed to gather additional expert input over the next few months.  This will include input from the Forum, ECHA, and a group of experts, including industry representatives.  Subsequently, the Commission will open its proposal for a public consultation, likely by the end of 2016 or early 2017.  Once this public consultation is closed, the Commission will adopt its final proposal.

Although much remains to be decided, it is clear that a ban of hundreds of CMRs in all skin contact textiles will significantly affect apparel and footwear companies that market their goods in the EU and EEA. In the mid-long term, the Commission’s plans will likely also have a significant impact on the wider global textile and consumer goods industry.

ARTICLE BY Charlotte Ryckman of Covington & Burling LLP
Roberto Yunquera Sehwani, a Stagiaire at Covington & Burling LLP and attends the Universidad Autónoma de Madrid, also contributed to this post.

© 2016 Covington & Burling LLP

Massive Consumer Product Safety Commission IKEA Recall Leaked to Press by “CPSC Source” Prior to Official Agency Announcement

IKEA recallToday the U.S. Consumer Product Safety Commission (“CPSC”) and Health Canada announced a massive joint recall with IKEA involving over 35 million pieces of furniture that can pose a tip over hazard to small children. While we would normally write about the recall itself, a troubling development has caught our attention.  A CPSC employee prematurely leaked the recall to staff reporter Tricia Nadolny at the Philadelphia Enquirer.

The CPSC and IKEA officially announced the recall this morning, but the Philadelphia Enquirer prematurely broke the story yesterday afternoon. The reporter confirmed in the story that her source works for the CPSC and did not have clearance to discuss the recall publicly. Additionally, the story included quotes from consumer advocates and other interested parties reacting to the recall—indicating that the reporter had the information for a decent amount of time prior to publishing the story.

After the Enquirer article was published, multiple other media outlets began reporting the recall. This likely put IKEA (and the CPSC) in an incredibly difficult situation of having to quickly make decisions about the release of information about the recall. For companies and legal counsel negotiating a recall—especially one of this magnitude—this is a nightmare scenario.

Even if a company has a contingency plan in the event a recall is leaked early (something we usually recommend for higher profile recalls), the carefully negotiated messaging and CPSC agreed rollout of the recall will have been thrown out the window and replaced by the leaked information. The company will be forced to scramble to respond to media questions while also not spoiling the originally planned announcement.

Additionally, and even more problematic, consumers who may have recalled units will start calling and emailing the company before they know the company’s official 800 number to call and before the company has sufficient staff to start fielding those calls. With over 29 million units involved in this specific recall, that could add up to quite a lot of phone calls and emails.

There are many compelling reasons why the CPSC and companies agree to not only the content of a recall, but also its timing. For a recall of this magnitude to be leaked to the media is a very troublesome precedent and cause for concern to companies negotiating higher profile recalls with the CPSC. Companies have not historically had much to fear in terms of recall information leaking from the agency, but this development potentially calls that into question.

Not only is it a violation of CPSC’s own statutes and regulations for recall information to be prematurely leaked to the press (and potentially could lead to employee sanctions), but it is also potentially disruptive to the effectiveness of the recall itself. The CPSC should take steps to ensure such leaks do not occur in the future.

ARTICLE BY Matthew R. Howsare & Charles A. Samuels of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

©1994-2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Breaking: CPSC Obtains Record $15.45 Million Civil Penalty in Settlement Agreement with Gree

Consumer Product Safety Commission SealThis morning, the U.S. Consumer Product Safety Commission (CPSC) announced that it has obtained a record-breaking $15.45 million civil penalty in a settlement agreement with Gree Electric Appliances of China, Hong Kong Gree Electric Appliances Sales Co. of Hong Kong, and Gree USA Sales of California (Gree) over dehumidifiers sold under 13 different brand names.  This civil penalty amount shatters the largest previous amount levied by the CPSC against a company, $4.3 million.

The amount of this civil penalty—the maximum permitted under the Consumer Product Safety Act (CPSA)—is consistent with a series of recent remarks made by CPSC Chairman Elliot Kaye.  In 2015, Kaye remarked at the annual ICPHSO product safety conference that he was directing staff to seek significantly higher civil penalties against companies for violations of the CPSA.  Last month, at the 2016 ICPHSO conference in Washington, D.C., Kaye doubled down (literally) by stating that he wanted to see “double digit” civil penalties based on certain fact patterns as that is what Congress intended when it increased the civil penalty ceiling in the Consumer Product Safety Improvement Act of 2008 (CPSIA).

According to the settlement agreement, the CPSC alleged that Gree did the following: (1) knowingly failed to report a defect and unreasonable risk of serious injury to the CPSC immediately with dehumidifiers sold under thirteen brand names; (2) knowingly made misrepresentations to the CPSC; (3) sold dehumidifiers bearing the UL safety certification mark knowing that the dehumidifiers did not meet UL flammability standards.  The CPSC alleged further that Gree’s subject dehumidifiers had a defect that caused them to overheat, and, on occasion, catch fire, causing a purported $4.5 million in property damage.

Gree denied the CPSC’s allegations and also set forth in the settlement agreement that it voluntarily notified the Commission in connection with the dehumidifiers, carried out a voluntary recall in cooperation with the Commission and acted to reduce the potential risk of injury.

In addition to paying the $15.4 million civil penalty to settle the CPSC’s charges, Gree has agreed to implement a stringent compliance program to ensure future compliance with the CPSA.  Such compliance programs have become common elements in civil penalty settlement agreements.

The vote to approve the settlement agreement was 4-1 in favor, with Commissioner Ann Marie Buerkle voting against.   Although voting in favor of the agreement, Commissioner Joe Mohorovic issued a statement expressing reservation that the public facing documents do not reveal enough detail (in Mohorovic’s words the “compelling facts”) for the regulated community to draw lessons.   Mohorovic has expressed these same concerns previously.

Article By Matthew Cohen & Matthew R. Howsare of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

True Green for True Blue: Blue Buffalo Promises $32 Million Settlement

Pet-food maker Blue Buffalo will pay $32 million to settle 13 consumer class action suits, the company announced last month.

The 13 class actions—which pet owners originally filed in California, Connecticut, Florida, Illinois, Louisiana, Massachusetts, Missouri, New York, Ohio, and South Carolina federal courts—were consolidated in the Eastern District of Missouri in October 2014.  The consolidated action centers on Blue Buffalo’s “True Blue Promise” labels, which allegedly appeared on all Blue Buffalo products.  Blue Buffalo’s True Blue Promise was that its brand of pet food contains “Only the Finest Natural Ingredients,” with

  • real meat first ingredients,

  • “NO Chicken or Poultry By-Product Meals,”

  • “NO Corn, Wheat or Soy,” and

  • “NO Artificial Preservatives, Colors or Flavors.”

These True Blue Promise claims were allegedly restated on the front and back labels of every Blue Buffalo product and in other Blue Buffalo promotional materials. The class action plaintiffs also asserted that they paid a higher price for Blue Buffalo’s products because of the True Blue Promise.

But according to the class action plaintiffs, independent tests showed that some Blue Buffalo products did, in fact, contain chicken and poultry by-products.  In addition, the tests indicated the presence of rice and corn in some products, including products from Blue Buffalo’s “Wilderness” and “Freedom” product lines, which were advertised as being grain-free.

Blue Buffalo denied any wrongdoing in entering into the settlement, stating that it agreed to the settlement to eliminate the uncertainties, burden and expense of further litigation. Under the terms of the deal, Blue Buffalo will pay the $32 million into a settlement fund.  From this fund, Blue Buffalo will pay its class member customers an amount of money based on the number of Blue Buffalo products they purchased during the class period, and subject to certain conditions.  Attorneys’ fees and costs will also be paid from the settlement fund.  The court has given the settlement agreement preliminary approval, and will hold a fairness hearing on May 19, 2016.  At that time, the court will decide whether to give the settlement final approval.

This case serves as a cautionary reminder of the potential liabilities of false advertising class actions. Nestle Purina, a competing pet food maker, commented that this $32 million settlement is the largest pet food class action settlement ever.  In May 2014, Nestle Purina filed a false advertising lawsuit against Blue Buffalo on the basis of similar claims.  That separate false advertising case against Blue Buffalo is ongoing before the same judge who presided over the consolidated consumer class actions, Judge Rodney W. Sippel.

Article By Lawrence I Weinstein & Tiffany Woo of Proskauer Rose LLP

© 2016 Proskauer Rose LLP.