Category: Consumer Protection

FCC’s Enforcement Bureau Commends PayPal for Modifying its User Agreement

We previously advised that the FCC’s Enforcement Bureau, in an unusual move, on June 11 published a letter it sent to PayPal warning that PayPal’s proposed changes to its User Agreement that contained robocall contact provisions might violate the TCPA.

FCC_LogoThese proposed revisions conveyed user consent for PayPal to contact its users via “autodialed or prerecorded calls and text messages … at any telephone number provided … or otherwise obtained” to notify consumers about their accounts, to troubleshoot problems, resolve disputes, collect debts, and poll for opinions, among other things. The Bureau’s letter highlighted concerns with the broad consent specified for the receipt of autodialed or prerecorded telemarketing messages and the apparent lack of notice as to a consumer’s right to refuse to provide consent to receive these types of calls.

On June 29, prior to the revisions coming into effect, PayPal posted a notice on its blog stating: “In sending our customers a notice about upcoming changes to our User Agreement we used language that did not clearly communicate how we intend to contact them.” PayPal clarified that it would modify its User Agreement to specify the circumstances under which it would make robocalls to its users, including for important non-marketing reasons relating to misuse of an account, as well as to specify that continued use of PayPal products and services would not require users to consent to receive robocalls.

The FCC’s Enforcement Bureau immediately put out a statement commending PayPal for its decision to modify its proposed contact language, noting that these changes to the User Agreement represented “significant and welcome improvements.” The Bureau’s very public actions on this matter signal to businesses everywhere of the need to review existing “consent to contact” policies. Certainly the FCC’s yet to be released Declaratory Ruling on TCPA matters that was voted on during a contentious FCC Open Meeting on June 18 may also invite that opportunity.

ARTICLE BY Laura H. Phillips of Drinker Biddle & Reath LLP

©2015 Drinker Biddle & Reath LLP. All Rights Reserved

OSHA Stresses Fireworks Safety

We can all agree, the fireworks around the July 4th holiday are great. But, did you ever stop and think about the dangers employees of thepyrotechnics industry face in manufacturing, storing and selling these products? OSHA has a web page dedicated to discussing hazards associated with retail sales of fireworks and fireworks displays. For more information on this topic, see OSHA’s recent news release.

Have a safe and happy holiday weekend.

ARTICLE BY Jordan Helvie of Holland & Hart LLP

Copyright Holland & Hart LLP 1995-2015.

On National Bourbon Day, Maker’s Mark Toasts to Consumer Protection Reform

June 14th is National Bourbon Day, so it’s a nice time to highlight the resolve of the recent class action lawsuit filed against Maker’s Mark, one of America’s favorite whiskeys, by two consumers who said the company falsely advertised its product as “handmade.”

The suit seized on the word “handmade” used in Maker’s Mark advertising, claiming consumers had been misled. U.S. District Judge Robert Hinkle ruled on behalf of Maker’s Mark, stating that “no reasonable person would understand ‘handmade’ in this context to mean literally made by hand.”

This case is representative of an increasingly common national trend. Similar suits have recently been filed against Tito’s Handmade Vodka and Jim Beam Bourbon.

Consumer advocates say that these class action lawsuits are the most effective way to hold companies accountable for what they allege to be misleading marketing. But real-life consumers, those the litigation is supposed to protect, are often harmed as defendants’ legal costs and sometimes multimillion-dollar verdicts or settlements are passed on in the form of higher prices and fewer choices.

So all across the country, state policymakers are rethinking and reforming their respective consumer protection acts (CPAs) to their original mission of preventing and punishing truly deceptive business practices.

Most state CPAs were modeled on the Federal Trade Commission Act when they were first enacted in the 1960s and 1970s. But since then, many of these laws have come to include expansive amendments and judicial interpretations that now allow lawsuits like the one aimed at Maker’s Mark.

Emory University law professor Joanna Shepherd’s white paper, Consumer Protection Acts or Consumer Litigation Acts?, was published last year and demonstrates this devolution. It begins with the origins of the federal law a century ago when “Congress first sought to define and deter” a “new class of consumer harms” that arose as “the merchant-consumer relationship” evolved rapidly, along with new products and services, retail models, and credit-based payment systems. “Unfair and deceptive acts or practices in or affecting commerce” were prohibited by the broadly worded new law.

But to prevent litigious mischief, Congress purposely limited enforcement of the law to its newly created FTC, prohibiting private lawsuits out of fear that “a certain class of lawyers” would otherwise “arise to ply the vocation of hunting up and working of such suits,” the number of which “no man can estimate,” warned Sen. William J. Stone (D-MO) prior to the act’s 1914 passage.

Fifty years later, the states were no longer willing to leave consumer protection entirely to the federal government. Eventually all 50 states and the District of Columbia adopted their own consumer protection statutes and authorized state attorneys general to enforce them.

By the 1980s, however, many state CPAs were being expanded well beyond their original scope. No longer were these laws enforced primarily by state attorneys general seeking injunctive relief in the public interest. Now they permitted and even promoted private lawsuits seeking significant awards for sometimes theoretical damages and inflated attorney’s fees. Incredibly, some plaintiffs no longer have to prove injuries, demonstrate that they relied on allegedly deceptive representations, or even behaved reasonably in order to prevail in lawsuits.

But here’s to judges like Judge Hinkle who require plaintiffs to explain precisely how they were misled by innocuous advertising terms like “handmade.”  And here’s to those state lawmakers working to refocus their consumer protection laws in the interest of consumers who were truly misled into making a purchase and suffered an actual injury as a result.

Happy National Bourbon Day, everyone.

ARTICLE BY Sherman Joyce of American Tort Reform Association
Copyright © 2015 American Tort Reform Association

Scrutiny of Nail Salon Chemicals Raises Mass Tort Risk

Recent reports purport to link certain chemicals used in nail salon products to serious health problems such as cancer, asthma, respiratory disease, and miscarriages.  Though past efforts to impose stricter regulations on these chemicals have been largely unsuccessful, a recent slew of New York Times articles have drawn significant attention to the issue. 126504560 In response, New York Governor Andrew Cuomo issued a number of emergency regulations to protect salon workers, and New York City mayor Bill de Blasio has announced his own efforts to address the issue.  These responses could indicate a willingness on the part of lawmakers to revisit the laws regulating the cosmetics industry.

The Food, Drug, and Cosmetics Act of 1938, bans harmful chemicals from cosmetics.  The law is over 75 years old and, many believe, outdated.  It does not require FDA preapproval before chemicals are marketed, and does not mandate that chemical companies test the effects of the chemicals.  Nor does the law require cosmetic chemical manufacturers to share safety information with the FDA.  Senators Diane Feinstein (D-CA) and Susan Collins (R-ME) recently introduced a bipartisan bill that would expand FDA oversight of cosmetics.  But critics say that the bill does not go far enough because it allows the cosmetic industry to essentially continue regulating itself.  The bill may also preempt states’ ability to implement stricter regulations.

OSHA has identified at least twelve chemicals it says causes serious health problems for salon workers.  Three of these, dibutyl phthalate, formaldehyde, and toluene, which some have dubbed the “toxic trio,” have been purportedly linked to the most serious problems, such as cancer, lung and kidney failure, birth defects, and miscarriages.  These chemicals have been banned in several countries and, in others, require labels indicating the potential consequences of exposure.  No such rules currently exist in the United States.

[S]alon workers can be exposed to levels of chemicals that are legal according to OSHA but are still dangerous . . . .

In response to recent New York Times articles highlighting the working conditions of nail salon employees, Governor Cuomo issued emergency regulations to address the potential health hazards these workers face.  Thenew rules, which require manicurists to wear gloves and masks and mandate ventilation at salons, are expected to become permanent in the coming months.  NYC Mayor Bill de Blasio has also announced steps to address this issue.  In addition, NYC’s Department of Consumer Affairs has been visiting salons to collect and test products.  The Department indicated it would issue subpoenas to the manufacturers of products labeled free of a certain toxin if the product is found to contain that toxin.  The Department has also started a petition directed at the Personal Care Products Council, the cosmetic chemical industry’s main trade group, to urge its members to stop using ingredients linked to certain ailments.  The agency has sent similar letters to the FDA and OSHA.  David Michaels, the labor secretary who heads OSHA, believes OSHA’s standards are outdated and has said that salon workers can be exposed to levels of chemicals that are legal according to OSHA but are still dangerous to the workers.

The increased regulatory and media focus on the health threats facing salon workers suggests the potential for lawsuits arising from cosmetic chemical exposure.   As in other mass or “toxic tort” claims, salon worker lawsuits may involve a large number of defendants, since workers often use a variety of products made by different manufacturers.  In states that impose strict product liability on anyone in a product’s chain of distribution, nail salon lawsuits may implicate not only manufacturers, but also wholesale and retail distributors of chemical products.  As in other “toxic tort” cases, nail salon lawsuits would likely involve competing expert testimony from toxicologists, industrial hygienists, and epidemiologists regarding a numerous issues not that least of which being general and specific causation.

ARTICLE BY Jamie Lynn Lanphear & Yakov P. Wiegmann of Schiff Hardin LLP
© 2015 Schiff Hardin LLP

Court Dismisses Text-Message TCPA Suit Against AOL, Finding Instant Messaging Service Does Not Constitute an ATDS

On June 1, the Northern District of California dismissed a putative TCPA class action against AOL, finding that the plaintiff had failed to allege that AOL utilized an automated telephone dialing system (ATDS), as required to state a cause of action under the TCPA.  In dismissing the plaintiff’s complaint in Derby v. AOL, the court rejected the plaintiff’s arguments that AOL Instant Messenger (AIM), which allows individuals to send instant messages as text messages to cell phones, constitutes an ATDS.  Instead, the court agreed with AOL’s argument that AIM relied on “human intervention” to send the messages at issue, which foreclosed the possibility of potential TCPA liability.  (Covington represented AOL in this case.)  The decision should be beneficial to a variety of services that enable their users to send text messages to cell phones.

The TCPA’s prohibitions include a ban on using an ATDS to call cellular telephones for informational purposes without the prior express consent of the recipient.  The FCC and courts have extended the reach of the statute to include text messages.  However, the FCC has stated that only equipment that has the capacity to operate “without human intervention” may qualify as an ATDS.  The plaintiff in Derby alleged that he received three text messages from an AIM user that were intended for another individual, which the court recognized were “presumably . . . the result of the sender inputting an incorrect phone number.”  After the receiving the third message, the plaintiff alleged that he sent a text message to AIM to block future texts from the AIM user, and that he received back a text confirmation of his request.

In analyzing TCPA liability for the first three text messages, the court noted that the plaintiff’s complaint “affirmatively alleges that AIM relies on human intervention to transmit text messages to recipients’ cell phones.”  The court followed precedent from other Ninth Circuit district courts rejecting ATDS arguments where the equipment at issue relied on humans to press buttons on phones or manually enter telephone numbers into the system.  Since the complaint demonstrated that “extensive human intervention is required to send text messages through defendant’s AIM service,” the court held that the complaint failed to state a claim under the TCPA with respect to the three text messages sent by an AIM user.

The court also analyzed potential TCPA liability for the separate confirmation text message that Derby alleged he had received from AIM.  Again citing relevant authority, the court held that “a single message sent in response to plaintiff’s text . . . is not the kind of intrusive, nuisance call that the TCPA prohibits.”  The court concluded that Derby, having sent the “block” request from his cell phone, had “knowingly released” his number to AIM and consented to receive a confirmation text from AIM at that number.  The court’s opinion advocated for a “common sense” approach to TCPA liability, finding that the statute should not be utilized to “punish the consumer-friendly practice of confirming requests to block future unwanted texts.”  Accordingly, the court also dismissed the TCPA claim based on the confirmation text message for failure to state a claim.

ARTICLE BY Caleb Skeath of Covington & Burling LLP
© 2015 Covington & Burling LLP

Catch of the Day: Tuna Fish Brand StarKist Swims into a Sea of Trouble After Agreeing to Settle Claims Against It

StarKist Co. recently agreed in principle to a $12 million settlement with a putative class of plaintiffs concerning alleged under-filling of tuna fish cans. But agreeing on the dollar figure seems to have been the easy part; the parties in this bitterly-fought case have become embroiled in motion practice about the allocation of that $12 million payout.

The case under discussion is Hendricks v. StarKist Co., No. 3:13-cv-0729-HSG in the Northern District of California. Plaintiff alleged that StarKist had been under-filling its cans of tuna fish, resulting in a product weight that fell below the federally mandated minimum averages of 2.84 to 3.23 ounces of tuna per 5 ounce can. This practice, plaintiff alleged, violated California’s Consumer Legal Remedies Act, California’s False Advertising Law, California’s Unfair Competition Law, and plaintiff also brought various common law claims.

StarKist moved to transfer or dismiss the case, and the Court denied the motion to transfer and mostly denied StarKist’s motion to dismiss. The Court also denied StarKist’s motion for reargument. Plaintiff subsequently moved to certify a nationwide class for his common law claims, moved for sanctions relating to alleged discovery misconduct, and several interested parties sought to intervene and certify statewide sub-classes under other states’ laws. On the morning that all those motions were to be argued, the parties signed a binding settlement term sheet under which StarKist would make available $8 million in cash and $4 million in vouchers to the settlement class.

There was a catch, however, over how to allocate payments from the settlement fund. Plaintiff proposed a flat-rate payout of $25 in cash or $50 in vouchers to class members. Plaintiff’s proposal would potentially exhaust the settlement fund quickly, and Starkist objected to it. Specifically, StarKist argued that it is “arbitrary and bear[s] no relationship to the number of StarKist products each class member purchased or the extent of purported injury” (emphasis in original). By contrast, StarKist’s allocation proposal would award each class member $1.00 for up to ten products purchased, and an additional $1.00 for every ten cans of StarKist tuna fish purchased with an upper limit set at 250 cans or $25.00. StarKist also proposed that vouchers be available in lieu of cash at a value of $1.50 per ten cans of StarKist tuna fish purchased with a maximum value of $37.50.

It remains to be seen whether StarKist’s arguments will persuade the Court to can plaintiff’s flat-rate payout. We will, of course, monitor developments in this case, but in the interim it bears repeating that sometimes the dollar figure is the easy part of settling a putative class action.

ARTICLE BY

Lawrence I Weinstein & Benjamin M Rattner of Proskauer Rose LLP
© 2015 Proskauer Rose LLP.

Home Depot Moves to Dismiss Consumer Data Breach Claims for Lack of Standing

Home Depot has staked its defense of consumer claims arising from the 2014 theft of payment card data from the home improvement retailer on the asserted absence of injuries sufficient to confer standing to sue.  Because consumers rarely sustain out-of-pocket losses when their payment card numbers are stolen, lack of standing is typically the primary ground for seeking dismissal of consumer data breach claims. While many courts have been receptive to arguments seeking dismissal of consumer data breach claims for lack of standing, decisions in recent cases – including, most significantly, the Target data breach case – have found that non-pecuniary harms constitute sufficient injury to confer standing.  The survival of the consumer claims will depend on which line of precedent the Home Depot court follows.

Arguments as to standing are grounded in Article III, Section 2 of the United States Constitution, which limits the jurisdiction of federal courts to “cases” or “controversies.”   To constitute a case or controversy, a claim cannot arise from a speculative or potential harm, but rather must concern an actual or imminent injury.  Thus, in Clapper v. Amnesty International USA, 133 S. Ct. 1138 (2013), the Supreme Court ruled that mere interception of private data – in that case, by the National Security Agency, through its wiretaps of telephone and email communications – did not confer standing to sue.  Clapper held that speculation that intercepted data might be misused did not confer Article III standing; actual use or misuse of the intercepted information was required.  Defendants in privacy cases, citing Clapper, have succeeded in dismissing data breach claims for lack of standing where data breach plaintiffs have not alleged actual misuse of their data.  See, e.g., Polanco v. Omnicell, Inc., 988 F. Supp. 2d 451 (D.N.J. 2013); In re Barnes & Noble Pin Pad Litig., No. 12-8617, 2013 WL 4759588 (N.D. Ill. Sep. 3, 2013); Yunker v. Pandora Media, Inc., No. 11-3113, 2013 WL 1282980 (N.D. Cal. Mar. 26, 2013).

Home Depot’s brief in support of its motion to dismiss relies heavily on Clapper to support its argument that none of the named plaintiffs have suffered actionable injuries.  Home Depot contends that consumers could not have been injured when card issuers hold consumers harmless for fraudulent charges and Home Depot offered free credit monitoring to affected customers.  The Home Depot brief dismisses plaintiffs’ attempts to plead non-monetary harms, alleging that none of the alleged harms constitute injuries that are cognizable under Article III.  For example, some plaintiffs alleged that they suffered inconvenience and embarrassment as a result of temporarily frozen bank accounts.  According to Home Depot, in the absence of any out-of-pocket losses such alleged harms are not actionable injuries.  Some plaintiffs incurred out-of-pocket credit monitoring costs, but Home Depot takes the position that doing so was gratuitous in light of the free services offered by Home Depot.  Some plaintiffs also alleged out-of-pocket costs associated with fraudulent charges on their payment cards, but Home Depot contends that such injuries are not fairly traceable to Home Depot because such charges should have been covered by the card issuers.

There are also plaintiffs who alleged that they suffered identity theft.  Home Depot argues that such allegations should be rejected as implausible because, based on plaintiffs’ own allegations, the data theft did not result in the theft of social security numbers or date of birth information, both of which would be required to successfully steal an identity was not compromised in the HD data breach.

Although Home Depot makes strong arguments why plaintiffs lack standing, it is constrained to admit in its brief that the court hearing the Target data breach cases rejected an identical standing argument that and been advanced by Target.  In the opinion denying Target’s motion to dismiss, the court gave Target’s standing arguments cursory treatment, finding that “Plaintiffs have alleged injury” in the form of “unlawful charges, restricted or blocked access to bank accounts, inability to pay other bills, and late payment charges or new card fees.”  Although Target, like Home Depot, contended that such alleged injuries are insufficient to confer standing because “Plaintiffs do not allege that their expenses were unreimbursed or say whether they or their bank closed their accounts . . . ,” the court rejected this argument, stating that Target had “set a too-high standard for Plaintiffs to meet at the motion-to-dismiss stage.”

Home Depot characterizes the Target decision as an outlier that offers no support for its rejection of Target’s standing arguments.  Further, the Target decision did not rule out the possibility injuries alleged would not be fairly traceable to Target’s conduct, stating that, “[s]hould discovery fail to bear out Plaintiffs’ allegations, Target may move for summary judgment on the issue.”  Although the settlement of Target’s consumer claims means that the proposition will not be tested in that case, the Target court’s recognition that injury matters for standing purposes provides some support for Home Depot’s position that the Target decision should be disregarded if it is apparent at the pleading stage that no injury has occurred.

ARTICLE BY Kevin M. McGinty of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2015 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

FCC Chairman Proposes New TCPA Rules

The FCC is ready to rule on long-standing petitions seeking clarifications of the Telephone Consumer Protection Act and related FCC regulations. On May 27, 2015, FCC Chairman Tom Wheeler circulated a proposed regulatory ruling to fellow commissioners, which would address issues raised in more than 20 pending petitions. The fact sheet summarizing the chairman’s proposal foreshadows bad news for legitimate businesses using automatic telephone dialing technology.

FCC_Logo

The fact sheet lumps scammer calls like those from perky “Rachel” of the mysterious and ambiguous “Cardholder Services” with those from legitimate businesses. The fact sheet cites the 214,000 consumer complaints about robocalls. No breakdown is given as to how many of these complaints involved con artists and how many related to businesses calling, for example, to collect debt. The tone of the fact sheet provides no comfort. Its preamble states the plan is to “close loopholes and strengthen consumer protections.”

The FCC will vote on the new proposal during its Open Commission Meeting scheduled for June 18, 2015. In the meantime, companies using automatic telephone dialing technology should plan to take action to comply with whatever comes from the FCC. There will be no notice and comment period and whatever passes at the Open Commission Meeting will become effective immediately upon release.

New Provisions

If Chairman Wheeler’s proposals are adopted without changes, the new rules will provide:

  • Wireless and wired telephone consumers will have the right to revoke their consent to receive calls and text messages sent from autodialers in any reasonable way at any time. Many courts have concluded that consumers have a right to revoke consent. Some have said that revocation must be in writing. Some have said consent, once given, cannot be taken back. If this proposal passes, all courts likely will hold that consent may be revoked in any reasonable way at any time. This rule will have consequences beyond TCPA exposure. For example, it is likely to increase the cost of credit because creditors and debt collectors will have to employ more people to manually dial debtors who have failed to meet their obligations and utter the words, “Stop calling me!”

  • To prevent “inheriting” consent for unwanted calls from a previous subscriber, callers will be required to stop calling reassigned wireless and wired telephone numbers after a single request. It is not clear from the fact sheet what the individual on the other end of the line must say to notify the caller that they are not the person they seek to reach.

  • The TCPA currently prohibits the use of automatic telephone dialing systems to call wireless phones and to leave prerecorded telemarketing messages on landlines without consent. The current definition of an “automatic telephone dialing system” under the TCPA is “equipment which has the capacity to (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” A 2003 FCC ruling focused on the use of the word “capacity” in the definition and broadly extended the definition to cover autodialers used to dial specific numbers. This ruling has resulted in inconsistent court decisions over whether a dialer must have a present capacity to so dial or whether a future capacity is sufficient for to trigger TCPA coverage. The new proposal appears to attempt to resolve the ambiguity by amending the definition of an “automatic telephone dialing system” to mean “any technology with the capacity to dial random or sequential numbers.” That is not much help. The industry needs an answer on the present versus future capacity issue. As it stands now, a court could conclude that a smartphone is an automatic telephone dialing system. The tone of the fact sheet suggests that this problem is not going to be solved in a way that is favorable to industry.

Existing Provisions Under TCPA

Chairman Wheeler’s proposal also provides for some very limited and specific exceptions for “urgent circumstances,” which may include free calls or text messages to wireless devices that alert consumers of potential fraud or that remind them of urgent medication refills. Consumers will still have an opportunity to opt-out of these types of calls and texts.

  • The new proposal will also leave many of the existing provisions of the TCPA intact:

  • The FTC will continue to administer the National Do-Not-Call Registry to prevent unwanted telemarketing calls

  • Wireless and home phone subscribers can continue to prevent telemarketing robocalls made without prior written consent

  • Autodialed and prerecorded telemarketing and information calls and text messages to mobile phones will still require prior consent

  • Political calls will still be subject to restrictions on prerecorded, artificial voice, and autodialed calls to wireless phones, but will continue to not be subject to the National Do-Not-Call Registry because they do not contain telephone solicitations as defined by FCC regulations

  • Consumers will still have a private right of action for violations of the TCPA along with statutory penalties

Implications

If adopted, the new regulations may significantly restrict the use of autodialing technologies by business. However, the devil will be in the details. Organizations should review the owners’ manual that came with their dialer. What can it actually do? In other words, what is its present and future capacity? Have those answers ready so you can act when the FCC rules. Companies should also have proper processes and systems in place to meet the consumer opt-out requirements of any new regulations. Policies should address steps to take when a called party claims that the number called no longer belongs to your intended recipient.

One thing is certain about these new rules, they will not stop scammers who use spoofed caller IDs and originate calls from outside of the United States and, therefore, outside of the jurisdiction of the FCC and/or FTC. They will just make to harder and more expensive for legitimate businesses to reach their customers.

ARTICLE BY Chanley T. Howell, Michael C. Lueder & Steven Millendorf of Foley & Lardner LLP

© 2015 Foley & Lardner LLP

FDA Issues Draft Guidance on Mandatory Food Recalls Under the Food Safety Modernization Act

The Food and Drug Administration (FDA) recently issued a draft guidance titled, “Questions and Answers Regarding Mandatory Food Recalls.” FDA was given general mandatory food recall authority by the Food Safety Modernization Act (FSMA). The guidance is notable for its brevity, coming in at a total of seven pages including the cover. Although much of the content will be familiar to those with experience in food recalls, the guidance does discuss the procedure for FDA to order a mandatory food recall and the assessment of user fees for those subject to such a recall.

With respect to the procedure, the guidance states after FDA finds that the criteria for a mandatory recall have been met, it must first provide the responsible party with an opportunity to perform a voluntary recall of the food. FDA will provide this opportunity in writing using an expeditious method. If the responsible party does not voluntarily cease distribution and recall the food within the time and manner prescribed by FDA, FDA may order the responsible party to cease distributing the article of food, order the responsible party to give notice to certain other persons to cease distributing the article of food, and give the responsible party an opportunity for an informal hearing. After these steps are completed, FDA may order a recall if it determines that the removal of the food from commerce is necessary. Only the FDA Commissioner has the authority to order a recall.

As to user fees, the guidance observes that the FDA has the authority to collect fees from a responsible party for a domestic facility and an importer who does not comply with a food recall order. The fees would cover time spent by FDA conducting food recall activities, including technical assistance, follow-up effectiveness checks, and public notifications. FDA defines noncompliance to include (1) not initiating a recall as ordered by FDA, (2) not conducting the recall in the manner specified by FDA in the recall order, or (3) not providing FDA with requested information regarding the recall, as ordered by FDA. FDA publishes a Federal Register notice of fees for non-compliance with a Recall Order no later than 60 days before the start of each fiscal year.

Given that most parties will voluntarily recall food when the statutory conditions are satisfied to avoid a public relations disaster and harsh FDA action, it seems unlikely that FDA will have to resort often to the exercise of its mandatory recall authority or assessment of fees. The fact that FDA has this authority, however, helps ensure FDA will not have to exercise it.

A copy of the draft guidance document can be found here.

ARTICLE BY Hae Park-Suk & Lynn C. Tyler, M.S. of Barnes & Thornburg LLP
© 2015 BARNES & THORNBURG LLP

Are Cosmetics Gaining Higher Congressional and FDA Scrutiny?

Currently, FDA regulates cosmetics to ensure they are not adulterated or misbranded, but does not have the authority to order cosmetic recalls or require adverse event reporting.  Senators Dianne Feinstein (D-CA) and Susan Collins (R-ME) seek to change that.

On April 20, 2015, they introduced the Personal Care Products Safety Act (S.1014). The Act, if passed, would modify Chapter VI of the Federal Food, Drug, and Cosmetic Act (FDCA) to strengthen FDA’s oversight of, and regulatory authority over, cosmetic products.

Title I of the Act (“Cosmetic Safety”) gives FDA authority to order cosmetic recalls, as well as require manufacturers to:

  1. Report adverse events,

  2. Label ingredients not appropriate for children,

  3. Post complete label information (including ingredients and product warnings) online, and

  4. Register their facilities with FDA.

In addition to this significant new authority over manufacturers, the Act also requires FDA to work with industry and consumer groups to annually select and review at least 5 ingredients or non-functional constituents.

The first 5 ingredients, if the law is passed, will be:

  1. Diazolidinyl urea

  2. Lead acetate

  3. Methylene glycol/methanediol/formaldehyde

  4. Propyl paraben

  5. Quaternium-15

Title II of the Act (“Fees Related to Cosmetic Safety”) outlines the costs associated with enforcement of the new standards. With an annual implementation cost estimated at $20.6 million, it is to be funded by annual fees from all registered owners or operators of cosmetic facilities engaged in manufacturing or processing in the United States.

The Act has wide industry support, including the Personal Care Products Council (a 600+ member company trade association), large cosmetics manufacturers, and consumer groups.  Since it was introduced, it has gained two co-sponsors, Senators Barbara Boxer (D-CA) and Amy Klobuchar (D-MN).

The Act is consistent with FDA’s current priorities related to cosmetics.  Two of these priorities have been reporting of adverse events (with the majority of issues seen in hair care products), and maintaining a distinct line between over-the-counter drugs and cosmetics, because cosmetics need not currently undergo the additional scrutiny that OTC drugs must.

More information on the Personal Care Products Safety Act can be found in Senator Feinstein’s statement upon its introduction.

ARTICLE BY Michelle Gillette & Katherine Fox of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2015 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.