Retail Law Archives - The National Law Forum

Buy American and Buy European

The Buy American Act was originally passed by Congress in 1933 and has undergone numerous changes across several presidential administrations. While the core of the Act has essentially remained the same, requiring the U.S. government to purchase goods produced in the U.S. in certain circumstances, the domestic preference requirements have changed over the years. While the Buy American Act applies to direct government purchases, the separate (but similarly named) Buy America Act passed in 1982 imposes similar U.S. content requirements for certain federally funded infrastructure projects. Generally, the Buy American Act’s “produced in the U.S.” requirement ensures that federal government purchases of goods valued at more than $10,000 are 100% manufactured in the U.S. with a set percentage of the cost of components coming from the U.S. As of 2024, that set percentage has been increased to 65%. Therefore, the cost of domestic components must be at least 65% of the total cost of components to comply with the rule. Under the existing rules, the threshold will increase to 75% in 2029. These planned changes are consistent with the trend of increasing preferences for domestic goods over time (a trend that has continued across administrations from both sides of the political spectrum).

Unsurprisingly, protectionist policies favoring American production can produce similar protectionist measures enacted by foreign countries. The European Union’s (EU) European Green Deal Industrial Plan (sometimes referred to as the Buy European Act), which includes the Critical Raw Materials Act (CRMA) and the Net-Zero Industry Act (NZIA), were both formally adopted within the last few months. The NZIA, which was agreed upon in February, is aimed at the manufacture of clean technologies in Europe and sets two benchmarks for such manufacturing in the EU: (1) that 40% of the production needed to cover the EU will be domestic by 2030; and (2) that the EU’s production will account for at least 15% of the world’s production by 2040. The NZIA contains a list of net-zero technologies, including wind and heat pumps, battery and energy storage, hydropower, and solar technologies. The CRMA, adopted on March 18, sets forth objectives for the EU’s consumption of raw materials by 2030: that 10% come from local extractions; 40% to be processed in the EU; and 25% come from recycled materials. The CRMA also provides that “not more than 65% of the Union’s annual consumption of each strategic raw material at any relevant stage of processing from a single third country.”[1] While Europe’s new acts are perhaps more geared towards raw materials and clean technology, the U.S. and Europe’s concerted efforts to focus on domestic production will be something to watch for years to come. In particular, it is worth watching whether the recent EU measures generate a response from U.S. lawmakers. If so, it could accelerate the already increasing stringency of Buy American and Buy America requirements.

[1] https://www.consilium.europa.eu/en/policies/eu-industrial-policy/

by: Kevin P. Daly, Jeffrey J. White , Sabrina M. Galli of Robinson & Cole LLP

For more news on the Buy American Act and the European Green Deal Industrial Plan, visit the NLR Antitrust & Trade Regulation section.

FTC Starts Long-Awaited Green Guides Review

On December 14, 2022, at an open meeting of the Federal Trade Commission (“FTC” or “Commission”), FTC commissioners voted unanimously to publish a Notice in the Federal Register announcing a Request for Public Comments on potential amendments to the Commission’s Guides for the Use of Environmental Marketing Claims (“Green Guides” or “Guides”).
The FTC solicits comments on the ongoing need for the Guides and on specific claims addressed in the Guides, including “recyclable,” “recycled content,” “degradable,” “compostable,” and more. It also asks if it should initiate a rulemaking process and address claims it declined to consider during the last review, such as “organic” and “sustainable.”
Importantly, given the growth in some state laws that purport to restrict claims, the FTC asks for input on whether the Guides conflict with federal or state laws. This proceeding is expected to garner significant input.
Once the Notice is published in the Federal Register (which the FTC anticipates will be in mid-January 2023), interested stakeholders will have 60 days from the date of the Notice to submit comments to the FTC, unless an extension is granted.
For more information about the FTC Notice, please read our report here.

For more Energy and Environmental Law news, click here to visit the National Law Review.

Small Businesses Don’t Recognize Risk of Cyberattack Despite Repeated Warnings

CNBC surveys over 2,000 small businesses each quarter to get their thoughts on the overall business environment and their small business’ health. According to the latest CNBC/SurveyMonkey Small Business Survey, despite repeated warnings by the Cybersecurity and Infrastructure Security Agency and the FBI that U.S.- based businesses are at an increased risk of a cyber-attack following Russia’s invasion of Ukraine, small business owners do not believe that it is an actual risk that will affect them, and they are not prepared for an attack. The latest survey shows that only five percent of small business owners reported cybersecurity to be the biggest risk to their company.

What is unfortunate, but not surprising, is the fact that this is the same percentage of small business owners who recognized a cyber attack as the biggest risk a year ago. There has been no change in the perception among business owners, even though there are repeated, dire warnings from the government. Also unfortunate is the statistic that only 33 percent of business owners with one to four employees are concerned about a cyber attack this year. In contrast, 61 percent of business owners with more than 50 employees have the same concern.

According to CNBC, “this general lack of concern among small business owners diverges from the sentiment among the general public….In SurveyMonkey’s polling, 55% of people in the U.S. say they would be less likely to continue to do business with brands who are victims of a cyber attack.” CNBC’s conclusion is that there is a disconnect between business owners’ appreciation of how much customers care about data security and that “[s]mall businesses that fail to take the cyber threat seriously risk losing customers, or much more, if a real threat emerges.” Statistics show that threat actors are targeting small to medium-sized businesses to stay under the law enforcement radar. With such a large target on their backs, business owners may wish to make cybersecurity a priority. It’s important to keep customers.

Article By Linn F. Freedman of Robinson & Cole LLP

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

The Metaverse: A Legal Primer for the Hospitality Industry

The metaverse, regarded by many as the next frontier in digital commerce, does not, on its surface, appear to offer many benefits to an industry with a core mission of providing a physical space for guests to use and occupy. However, there are many opportunities that the metaverse may offer to owners, operators, licensors, managers, and other participants in the hospitality industry that should not be ignored.

What is the Metaverse?

The metaverse is a term used to describe a digital space that allows social interactions, frequently through use of a digital avatar by the user. Built largely using decentralized, blockchain technology instead of centralized servers, the metaverse consists of immersive, three-dimensional experiences, persistent and traceable digital assets, and a strong social component. The metaverse is still in its infancy, so many of the uses for the metaverse remain aspirational; however, metaverse platforms have already seen a great deal of activity and commerce. Meanwhile, technology companies are working to produce the next-generation consumer electronics that they hope will make the metaverse a more common location for commerce.

The Business Case for the Hospitality Industry

The hospitality industry may find the metaverse useful in enhancing marketing and guest experiences.

Immersive virtual tours of hotel properties and the surrounding area may allow potential customers to explore all aspects of the property and its surroundings before booking. Operators may also add additional booking options or promotions within the virtual tour to increase exposure to customers.

Creating hybrid, in-person and remote events, such as conferences, weddings, or other celebrations, is also possible through the metaverse. This would allow guests on-site to interact with those who are not physically present at the property for an integrated experience and possible additional revenue streams.

Significantly, numerous outlets have identified the metaverse as one of the top emerging trends in technology. As its popularity grows, the metaverse will become an important location for the hospitality industry to interact with and market to its customer base.

Legal Issues to Consider

Select the right platform for you. There are multiple metaverse platforms, and they all have tradeoffs. Some, including Roblox and Fortnite, offer access to more consumers but generally give businesses less control over content within the programs. Others, such as Decentraland and the Sandbox, provide businesses with greater control but smaller audiences and higher barriers to entry. Each business should consider who its target audience is, what platform will be best to reach that audience, and its long term metaverse strategy before committing to a particular platform.
Register your IP. Businesses should consider filing trademark applications covering core metaverse goods or services and securing any available blockchain domains, which can be used to facilitate metaverse payments and to direct users to blockchain content, such as websites and decentralized applications. Given the accelerating adoption of blockchain domains along with limited dispute resolution recourse available, we strongly encourage businesses to consider securing intellectual property rights now.
Establish a dedicated legal entity. Businesses may want to consider setting up a new subsidiary or affiliate to hold digital assets, shield other parts of their business from metaverse-related liability, and isolate the potential tax consequences.
Take custody of digital assets. Because of their digital character, digital assets such as cryptocurrency, which may be the primary method of payment in the metaverse, are uniquely vulnerable to loss and theft. Before acquiring cryptocurrency, businesses will need to set up a secure blockchain wallet and adopt appropriate access and security controls.
Protect and enforce your IP. The decentralized nature of the metaverse poses a significant challenge to businesses and intellectual property owners. Avenues for enforcing intellectual property rights in the metaverse are constantly evolving and may require multiple tools to stop third-party infringements.
Reserve metaverse rights. Each Business that licenses its IP, particularly those that do so on a geographic or territorial basis, should review existing license agreements to determine what rights, if any, its licensees have for metaverse-related uses. Moving forward, each brand owner is encouraged to expressly reserve rights for metaverse-related uses and exercise caution before authorizing any third party to deploy IP to the metaverse on a business’ behalf.
Tax matters. Attention needs to be paid to how the tax law applies to metaverse transactions, despite the current tax law not fully addressing the metaverse. This is particularly the case for state and local sales and use, communications, and hotel taxes.

Ready to Enter?

As we move into the future, the metaverse appears poised to provide a tremendous opportunity for the hospitality industry to connect directly with consumers in an interactive way that was until recently considered science fiction. But like every new frontier, technological or otherwise, there are legal and regulatory hurdles to consider and overcome.

Article By Charles B. Ferguson, Jr. and Kimberly A. Wachen of ArentFox Schiff LLP

For more technology legal news, click here to visit the National Law Review.

L’Oreal PFAS Lawsuit Again Shows ESG Risks of Marketing

In less than six months, L’Oreal has now found itself to be the target of PFAS lawsuits related to its mascara products. The latest L’Oreal PFAS lawsuit was filed in the New Jersey federal court on April 8, 2022. Cosmetics and PFAS is a topic that saw increased scrutiny from the scientific community, legislature, and the media in 2021. As we predicted in early 2021, the increased attention on the industry presented significant risks to the cosmetics industry, and our prediction was that the developments made the cosmetics industry the number two target for future PFAS lawsuits. In less than three months, four industry giants – Shiseido, CoverGirl, L’Oreal and Burt’s Bees – were hit with lawsuits related to their cosmetics and PFAS content in some of the companies’ products. The industry, insurers, and investment companies interested in the consumer goods vertical with niche interest in cosmetics companies must pay careful attention to the cosmetics lawsuits and the increasing trend of lawsuits targeting the industry.

PFAS and Cosmetics: the 2021 Foundation

On June 15, 2021, a scientific study in the Journal of Environmental Science and Technology Letters published conclusions regarding testing of a variety of cosmetics products from the United States and Canada for PFAS content, and found PFAS present in over half of the products. On the same day that the study was published, the No PFAS In Cosmetics Act 2021 was introduced in the Senate by U.S. Senators Susan Collins (R-ME), Richard Blumenthal (D-CT), Dianne Feinstein (D-CA), Maggie Hassan (D-NH), Jeanne Shaheen (D-NH), Kirsten Gillibrand (D-NY), and Angus King (I-ME). The bill sought to ban PFAS in cosmetics.

These two developments led us to conclude “with these developments, our prediction that cosmetics is the number two target for PFAS litigation issues behind water rings true.”

Why PFAS In Cosmetics Is A Concern

PFAS content in cosmetics raises concerns for human health in scientific communities due to the fact that PFAS are capable of entering the bloodstream in ways other than direct oral ingestion, and one of these ways includes dermal absorption. Concerns have also been raised regarding absorption of PFAS into the bloodstream by way of tear ducts. The absorption issue is one that is being studied fairly extensively through various pending scientific studies. At the end of 2021, the federal Agency for Toxic Substances and Disease Registry (ATSDR) went so far as to recommend that citizens in Southern New Hampshire reduce their risk of further PFAS exposure by avoiding the use of certain consumer goods, including cosmetics.

L’Oreal PFAS Lawsuit

On April 8, 2022, plaintiff Rebecca Vega filed a lawsuit in the New Jersey federal court seeking a proposed class action lawsuit against LOreal. The L’Oreal PFAS lawsuit alleges that the company does not disclose to consumers that its mascara and other products contain PFAS. Instead, the lawsuit states, the products were fraudulently and misleadingly marketed as safe for consumers and environmentally friendly, in violation of federal and state consumer laws. The Complaint details several examples of L’Oreal marketing indicating the safe nature of the products.

The plaintiff seeks certification of the class action lawsuit, injunctive relief, damages, fees, costs and a jury trial. The proposed class is any consumer in the United States, or in the subclass of New Jersey, who purchased the relevant L’Oreal products.

Just the Beginning For Cosmetics Industry

With studies underway, legislation pending that targets cosmetics, and increasing media reporting on cosmetics concerns to human health, the cosmetics industry has a target on its back with respect to PFAS that will have impacts on the industry’s involvement in litigation. Twelve months ago, we made this prediction: “Personal injury / products liability cases, false advertising, and failure to disclose theories of liability are some of the more prominent allegations that cosmetics companies are likely to face. Further, the cosmetics industry is concerned about federal and state level regulatory enforcement action for environmental pollution remediation costs stemming from placing PFAS waste into the environment as a by-product of the manufacturing process.”

The first part of our prediction is becoming reality, as four significant cosmetics industry players now find themselves embroiled in litigation focused on false advertising, consumer protection violations, and deceptive statements made in marketing and ESG reports. The lawsuits may well serve as a test case for plaintiffs’ bar to determine whether similar lawsuits will be successful in any (or all) of the fifty states in this country. Each cosmetics company faces the stark possibility of needing to defend lawsuits involving plaintiffs in all fifty states for products that contain PFAS.

It should be noted that these lawsuits would only touch on the marketing, advertising, ESG reporting, and consumer protection type of issues. Separate products lawsuits could follow that take direct aim at obtaining damages for personal injury for plaintiffs from cosmetics products. In addition, environmental pollution lawsuits could seek damage for diminution of property value, cleanup costs, and PFAS filtration systems if drinking water cleanup is required.

Conclusion

It is of the utmost importance that businesses along the whole supply chain in the cosmetics industry evaluate their PFAS risk. Public health and environmental groups urge legislators to regulate PFAS at an ever-increasing pace. Similarly, state level EPA enforcement action is increasing at a several-fold rate every year. Now, the first wave of lawsuits take direct aim at the cosmetics industry. Companies that did not manufacture PFAS, but merely utilized PFAS in their manufacturing processes, are therefore becoming targets of costly enforcement actions at rates that continue to multiply year over year. Lawsuits are also filed monthly by citizens or municipalities against companies that are increasingly not PFAS chemical manufacturers.

Article By John Gardella with CMBG3 Law.

For more articles on ESG lawsuits, visit the NLR Environmental, Energy & Resources section.

Sugar Association Files Supplemental Petition Urging Regulatory Changes for Artificially Sweetened Foods

This week the Sugar Association submitted a Supplemental petition (“Supplement”) to FDA to further support the Association’s June 2020 petition Misleading Labeling Sweeteners and Request for Enforcement Action (“Petition”). As noted in a previous post, the Association’s petition asks FDA to promulgate regulations requiring additional labeling disclosures for artificially sweetened products, which it believes are necessary to avoid consumer deception. Other than acknowledging accepting the petition for filing on Nov. 30, 2020, (see Regulations.gov), the agency has not responded.
The Supplement provides new data and information that the Association believes supports its original Petition, alleging that misleading labeling is “getting more prolific in the absence of FDA action.” According to the Association, the number of new food product launches containing non-sugar sweeteners has increased by 832% since 2000, with 300% growth in just the last five years. To further support its position, the Association references consumer research that it commissioned, suggesting that consumers think it is important to know if their foods contain sugar alternatives.
The Association is urging FDA to mandate significant additional disclosures on labels of artificially sweetened food products, including the following requirements to —
- Clearly identify the presence of alternative sweeteners in the ingredient list;
- Indicate the type and quantity of alternative sweeteners, in milligrams per serving, on the front of package of food and beverage products consumed by children;
- Disclose the sweetener used on the front of package for products making a sugar content claim, such as “Sweetened with [name of Sweetener(s)]” beneath the claim;
- Disclose gastrointestinal effects of various sweeteners at minimum thresholds of effect;
- Require that no/low/reduced sugars claims be accompanied by the disclosure “not lower in calories” unless such products have 25% fewer calories than the comparison food.

Article By The Food and Drug Law Practice Group at Keller and Heckman LLP

For more biotech, food, and drug legal news, click here to visit the National Law Review.

Fashion Sustainability and Social Accountability Act Proposed in New York

Happy New Year (are we still saying that?) from the Global Supply Chain Law Blog! In our ever-evolving society, the fashion industry has taken new heights. And with those heights, the industry is on pace to account for more than a quarter of the world’s carbon budget, according to the New Standard Institute. Indeed, the group indicates that apparel and footwear are responsible for roughly 4-8.6% of global greenhouse gas emissions. You may be wondering, “but how?” Well after that sweater you bought last year (or even last month!) goes out of style, you may donate it. According to CBS, some of those donations go overseas to Ghana, for example, to be sold. The unsold clothes, however, end up as landfills creating an environmental nightmare.

As a result and in an effort to create more regulation, New York is taking action with respect to the environmental nightmare. Earlier this year, the New York legislator proposed a bill—the Fashion sustainability and social accountability act, which would amend the general business law, requiring fashion retail sellers and manufacturers to disclose environmental and social due diligence and policies.

Specifically, every fashion retail seller and fashion manufacturer doing business in the State of New York and having annual global gross revenues that exceed $100 million dollars must disclose its:

environmental and social due diligence^[1] policies,
processes and outcomes, including significant real or potential negative environmental and social impacts, and
targets for impact reductions, implementation, improvement and compliance on an annual basis.

The required disclosures would include supply chain mapping of at least 50% of suppliers (which the retail seller or manufacturer could choose) by volume across all tiers of production, a sustainability report, independently verified greenhouse gas reporting, volume of production displaced with recycled materials, and median wages of workers of suppliers compared with local minimum wage, to name a few.

All disclosures must be posted on the retail or manufacturer’s website within a year of enactment. Enforcement of the bill would fall to the state’s attorney general, who would publish a report listing the fashion retail sellers and manufactures who are out of compliance with the act. Public shaming would not be the only punishment, however. Retailers and manufacturers who fail to comply may be fined up to 2% of annual revenues of $450 million or more. The money from the fines will be deposited into a community benefit fund, which will be used for environmental benefit projects that directly and verifiably benefit environmental justice communities.

In short, if the Fashion sustainability and social accountability act is enacted into law, fashion retailers and manufactures will be held accountable for environmental and social impacts stemming from their supply chain and production of apparel and shoes. According to Vogue, “proponents say the bill will make history” as it could “shift how the fashion industry operates globally.” Thus, stay tuned as we will be tracking the legislation closely and will provide real time updates!

^[1]“Due diligence” shall mean the process companies should carry out to identify, prevent, mitigate and account or how they address actual and potential adverse impacts in their own operations, their supply chain and other Business relationships, as recommended in the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises, the Organisation for Economic Co-Operation and Development Due Diligence Guidance for Responsible Business Conduct and United Nations Guiding Principles for Business and Human Rights.

Article By Alexis B. Chandler with Squire Patton Boggs (US) LLP.

For more articles on sustainability, visit the NLR Environmental, Energy & Resources type of law page.

Multi-Level Marketing Gets Multi-Level Attention

Multi-level marketing has touched us all – whether it be purchasing beauty products, essential oils, or health supplements from a friend through social media, or receiving an invitation to join a team of seemingly successful people working their “side hustle.” But multi-level marketing is now getting some additional multi-level attention, both in the media and in the court room.

With interest in documentaries on the rise throughout the pandemic, Amazon recently delivered with its four-part docu-series “LuLaRich.” It follows the multi-level marketing company, LuLaRoe, which is known for its colorfully patterned clothing, messages of empowering women, and nearly $2 billion in purported sales in a single year. But the docu-series also offers a glimpse at the dividing line between a multi-level marketing platform and a pyramid scheme, with the latter running afoul of the law.

Throughout its short existence, LuLaRoe has been no stranger to litigation. Several class actions have been filed against it, including one with allegations that LuLaRoe’s leggings ripped as easily as wet toilet paper. But most notable is a recent class action that was certified just last month by a Federal Court in Alaska. See, e.g., Katie Van et al. v. LLR Inc. dba LuLaRoe et al., No. 3:18-cv-00197, in the United States District Court for the District of Alaska. The claims in Van allege that LuLaRoe charged sales tax on purchases to customers located in tax-free jurisdictions. This was, allegedly, the result of a customized point-of-sale system that did not allow sales tax to be assessed based on the location to where the “retailer” (sales person) shipped the merchandise. LuLaRoe addressed this by creating a “toggle switch” that allowed retailers to “turn off” the automatic tax charges and charge a different amount, including 0%. However, some retailers used the toggle switch to override the collection of sales taxes on taxable transactions while others did not use the toggle switch to override sales taxes on transactions that were not taxable. When LuLaRoe became aware of this, it allegedly disabled the toggle switch and asked retailers to leave the system’s sales tax box “checked,” while LuLaRoe developed a system that would compute and collect sales tax based on the address where the product was purchased and received. The outcome: consumers in jurisdictions without sales tax (or no sales tax on clothing) were improperly billed for sales tax on their purchases, based on the taxes imposed by the retailer’s location, rather than the consumer’s location. The certified class claim alleges LuLaRoe engaged in an unfair trade practice with the imposition of this non-existent sales tax. And, while attempts at similar class actions against LuLaRoe have been made in the past, this class, with more than 10,000 potential class members, has now been certified.

With so many sales happening through social media controlled by individual retailers, multi-level marketing entities must address unique challenges, including the calculation and imposition of sales tax, especially when customers are located in different states (or even different countries) than their sales person, as was the case in Van. Having the requisite resources – whether that be through staffing or usable technology and software – can be challenging when trying to keep up with the quick growth that often comes with multi-level marketing. Additionally, a multi-level marketing entity’s approach to organizational structure, recruiting, compensation, and manufacturing warrants detailed attention and familiarity with state and federal law.

LuLaRoe’s story, while colorful and seemingly worthy of a hit docu-series, highlights the need to carefully navigate legal issues when operating or becoming involved with a multi-level marketing entity. The potential for legal snags may be hidden in the seams. And it’s never worth becoming too big for your (brightly patterned) britches when it comes to the law.

Article By M. Kaylan Dunn and Ashley Lewis with Hunton Andrews Kurth.

For more class actions, visit the NLR Litigation section.

CPSC Sues Amazon to Force Recall of Hazardous Products Sold on Amazon.com

The U.S. Consumer Product Safety Commission (CPSC) announced on July 14, 2021, that it filed an administrative complaint against Amazon.com, “the world’s largest retailer, to force Amazon to accept responsibility for recalling potentially hazardous products sold on Amazon.com.” CPSC claims that the specified products sold through Amazon’s “fulfilled by Amazon” (FBA) program are defective and pose a risk of serious injury or death to consumers and that Amazon is legally responsible to recall them. According to the complaint, the products include “24,000 faulty carbon monoxide detectors that fail to alarm, numerous children’s sleepwear garments that are in violation of the flammable fabric safety standard risking burn injuries to children, and nearly 400,000 hair dryers sold without the required immersion protection devices that protect consumers against shock and electrocution.”

CPSC filed the complaint under the Consumer Product Safety Act (CPSA). According to the complaint, Amazon acts as a “distributor,” as defined by CPSA, of its FBA products by: (a) receiving delivery of FBA consumer products from a merchant with the intent to distribute the product further; (b) holding, storing, sorting, and preparing for shipment FBA products in its warehouses and fulfillment centers; and (c) distributing FBA consumer products into commerce by delivering FBA products directly to consumers or to common carriers for delivery to consumers.

The complaint states that after CPSC notified Amazon about the hazards presented by the specified products, Amazon took “several unilateral actions,” including:

Removing the Amazon Standard Identification Numbers (ASIN) for certain of the specified products; and
Notifying consumers who purchased certain of the specified products that they could present a hazard. Amazon also offered a refund to these consumers in the form of an Amazon gift card credited to their account.

According to the complaint, these actions “are insufficient to remediate the hazards posed by the Subject Products and do not constitute a fully effectuated Section 15 mandatory corrective action ordered by” CPSC. The complaint states that “[a] Section 15 order requiring Amazon to take additional actions in conjunction with the CPSC as a distributor is necessary for public safety.” The complaint asks CPSC to:

Determine that Amazon is a distributor of consumer products in commerce, as those terms are defined in the CPSA;
Determine that the specified products are substantial product hazards under CPSA Sections 15(a)(1), 15(a)(2), and 15(j);
Determine that public notification in consultation with CPSC is required to protect the public adequately from substantial products hazards created by the specified products, and order Amazon to take actions set out in CPSA Section 15(c)(1), including but not limited to:
1. Cease distribution of the specified products, including removal of the ASINs and any other listings of the specified products and functionally identical products, from Amazon’s online marketplace and identifying such ASINs to CPSC;
2. Issue a CPSC-approved direct notice to all consumers who purchased the specified products that includes a particularized description of the hazard presented by each specified product and encourage the return of the specified product;
3. Issue a CPSC-approved press release, as well as any other public notice documents or postings required by CPSC staff, that inform consumers of the hazard posed by the specified products and encourage the return or destruction of the specified products;
Order that Amazon facilitate the return and destruction of the specified products, at no cost to consumers, to protect the public adequately from the substantial product hazard posed by the specified products, and order Amazon to take actions set out in CPSA Section 15(d)(1), including but not limited to:
1. Refund the full the purchase price to all consumers who purchased the specified products and, to the extent not already completed, conditioning such refunds on consumers returning the specified products or providing proof of destruction;
2. Destroy the specified products that are returned to Amazon by consumers or that remain in Amazon’s inventory, with proof of such destruction via a certificate of destruction or other acceptable documentation provided to CPSC staff;
3. Provide monthly progress reports to reflect, among other things, the number of specified products located in Amazon’s inventory, returned by consumers, and destroyed;
4. Provide monthly progress reports identifying all functionally equivalent products removed by Amazon from amazon.com pursuant to the CPSC Order, including the ASIN, the number distributed prior to removal, and the platform through which the products were sold;
Provide monthly reports summarizing the incident data submitted to CPSC through the Retailer Reporting Program;
Order that Amazon is prohibited from distributing in commerce the specified products, including any functionally identical products; and
Order that Amazon take other and further actions as CPSC deems necessary to protect the public health and safety and to comply with CPSA and the Flammable Fabrics Act (FFA).

CPSC “urges consumers to visit SaferProducts.gov to check for recalls prior to purchasing products and to report any incidents or injuries to the CPSC.” CPSC published the complaint in the July 21, 2021, Federal Register. 86 Fed. Reg. 38450.

Commentary

In CPSC’s July 14, 2021, press release, Acting Chair Robert Adler states that the decision to file an administrative complaint is “a huge step across a vast desert — we must grapple with how to deal with these massive third-party platforms more efficiently, and how best to protect the American consumers who rely on them.” According to The Washington Post, CPSC issued the administrative complaint “after months of behind-the-scenes negotiations between regulators and Amazon as the agency tried to persuade the company to follow the CPSC’s rules for getting dangerous products off the market, according to a senior agency official who spoke on the condition of anonymity to comment on internal discussions.” This same official stated that “Amazon officials refused to acknowledge that the CPSC has the authority to compel the company to remove unsafe products.”

As reported in our February 16, 2018, blog item, “EPA Settles with Amazon on Distribution of Unregistered Pesticides,” the U.S. Environmental Protection Agency (EPA) and Amazon entered into a Consent Agreement and Final Order (CAFO) whereby Amazon agreed to pay $1,215,700 in civil penalties for approximately 4,000 alleged violations under Section 3 of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) for the distribution of unregistered pesticide products. EPA later issued stop sale, use, or removal orders (SSURO) to Amazon and eBay for selling certain pesticide products that EPA claims are unregistered, misbranded, or restricted-use pesticides, and pesticide devices that EPA asserts make false or misleading claims. More information on the SSURO is available in our June 17, 2020, blog item, “EPA Issues Stop Sale, Use, or Removal Orders to Amazon and eBay for Unregistered and Misbranded Pesticides and Devices, Including Products with Claims Related to COVID-19.”

As reported in our October 9, 2020, blog item, Representatives Frank Pallone, Jr. (D-NJ), Chair of the House Committee on Energy and Commerce, and Jan Schakowsky (D-IL), Chair of the House Energy and Commerce Subcommittee on Consumer Protection and Commerce, requested that Amazon Chief Executive Officer (CEO) and Chair Jeff Bezos launch an investigation into the safety of Amazon’s product line, AmazonBasics, and answer a series of questions pertaining to the company’s product safety and recall practices. The Committee’s October 7, 2020, press release notes that the request comes after a CNN investigation found that many of AmazonBasics’ electronic products “have exploded, caught fire, sparked, melted, or otherwise created hazardous situations at rates well above comparable products.” According to the press release, many of these products were never recalled and continue to be sold.

CPSC’s administrative complaint is just the latest indication of the pressure on Amazon to ensure the safety of the products the platform hosts. These federal agency and Congressional efforts will almost certainly cause more pressure on product manufacturers to ensure the products they offer for sale on Amazon are compliant with the relevant regulations.

Article By Lynn L. Bergeson, Lisa M. Campbell and Carla N. Hutton at Bergeson & Campbell, P.C. For more CPSC news, see the Consumer Protection section of the National Law Review.

It is Not Just Auto, Supply Chains are Stressed

Have you tried to buy a bicycle in the last 12 months? How did that go? What sort of selection or choice did you have? Or how about needing just a replacement part, could you find one? Odds are that you could not find a new bike or the mechanical components you want. My local shop has 2,500 bikes on back order and is getting in about five new orders a week. Absent improvements, that means 10 years to fulfill those orders. I was lucky when I went in: my bent derailer could be fixed. What if I needed a replacement derailer, when would it be available? The best estimate the shop could give was “we have no idea.” This is not new: Wired had ideas on “A Plan to Fix the US Bike Shortage” seven months ago. And yet, just last month, Quartz is writing about “Why it’s so hard to to get a new bike right now.”

We will not reiterate the known problems with microchips in the auto industry because if you read this blog, you surely are aware of them. But there are shortages in other components as well. The basics are hard to find. For example, steel shortages impact not just auto, but many other industries. The same is true with plastics, which are in short supply for autos and other companies. While not auto, even lumber prices are rising due to a lack of supply. The list could go on and on.

Will anything change? Maybe. Some of this is due to the focus on reducing cost through reducing inventory of parts to as close to zero as possible. Some of this is due to the same focus that results in sole-sourced, just-in-time supply chain management. It is possible that these shocks to the supply chain will cause companies and supply chain managers to want to pull their supply closer to their manufacturing facilities and to use more than one supplier, with some inventory in reserve as a protection against disruption.

But the current shocks are so deep, so wide, and so persistent that this is just as likely to be seen as a one-time event. A perfect storm from which there is little or no escape. When an auto company is unable to get steel, plastics, microchips and other key components all at the same time, the fact is that production is going to slow industry wide.

As lawyers, we routinely assist companies with one-off shocks to their supply chain through preparation, negotiation and as a last resort, litigation. But those tend to be between one buyer and one supplier over one discrete issue. Those disputes offer lessons in contracting, inventory, diversification and supply chain management. Once in a lifetime pandemics along with hundred year storms and the various shocks to the economic and supply chain system that have been well documented since March 2020 offer less opportunity to identify discrete, or even systemic, issues for a company to address and change.

ARTICLE BY Jeffrey A. Soble of Foley & Lardner LLP

For more articles on supply shortages, visit the NLR Corporate & Business Organizations section.

Category: Retail Law

Buy American and Buy European

Like this:

FTC Starts Long-Awaited Green Guides Review

Like this: