In February, we posted that the Children’s Advertising Review Unit (or “CARU”) was in the process of updating its Guidelines for ads directed to children. The Guidelines had last been updated in 2006, and advertisers often struggled to figure out how to apply them in an advertising landscape that had dramatically changed since then.

The new Guidelines, announced last week, should help. Although the core principles underlying the Guidelines are the same, there are some important updates. Here are some of the key changes:

  • The new Guidelines apply to children under 13 years old across all platforms. (Previously, the Guidelines applied primarily to children under 12.)
  • Whereas the previous Guidelines focused television, the new version better reflects today’s digital advertising landscape.
  • The new Guidelines include a section dedicated to in-app and in-game advertising and purchases.
  • The new Guidelines include new factors to help determine when an ad is primarily directed to children under 13. (The factors in the previous version were more TV-centric.)
  • The new Guidelines incorporate updated FTC guidance on influencers, endorsements, and native advertising.
  • The new Guidelines require that ads not portray or encourage negative social stereotyping, prejudice, or discrimination. (Recall that in a February blog post, CARU had encouraged advertisers to focus on diversity and inclusion in their ads.)

These revised Guidelines will go into effect on January 1, 2022. At that time, CARU will begin actively investigating cases of non-compliance. Unless you take advantage of CARU’s pre-screening services, we’ll need to wait until CARU issues some decisions to determine how it will interpret some of the new provisions.

With three nominations in the queue, the CPSC could be on the way to a Democrat majority. The Biden Administration recently completed its list of three nominees to serve as Chairman and Commissioners.  The list includes Alexander Hoehn-Saric as Chairman (currently Chief Counsel for Communications and Consumer Protection at the House Energy and Commerce Committee), Mary Boyle, (currently CPSC’s Executive Director, and Richard Trumka, Jr. (currently General Counsel and Staff Director at the House Oversight and Investigations Committee’s Subcommittee on Economic and Consumer Policy).

The CPSC currently has one vacant seat, but a second seat will open up this October, at the termination of Commissioner Elliot Kaye’s hold-over year. A third slot will then become available at the close of Acting Chairman Adler’s term.

The Senate Committee on Commerce, Science, and Transportation will need to hold one or more hearings to consider the three nominees before they can be confirmed. However, it is unlikely that one of those hearings will be held before the Senate’s August recess, making action on all three nominees likely for the fall.

If the nominations are confirmed, the CPSC will have a full slate of five Commissioners for the first time since 2019.  Currently split with two Democratic and two Republican Commissioners, the CPSC will have a 3-2 split between Democrats and Republicans if the nominees are approved.

Each of the three nominees has some experience on matters involving CPSC. Hoehn-Saric served as the Deputy General Counsel for the Department of Commerce after being senior counsel for the Senate Committee on Commerce, Science and Transportation. Mary Boyle, current CPSC Executive Director, has over a decade of experience at CPSC in various positions, including working on policy, agency administration, product recalls, and civil penalty negotiations. Trumka Jr., son of AFL-CIO President Richard Trumka, has assisted the subcommittee on Economic and Consumer Policy investigate consumer safety issues relating to children’s booster seats, JUUL e-cigarettes, and talc baby powder.

Summer associate Elizabeth Hamner contributed to this post. Ms. Hamner is not a practicing attorney and is practicing under the supervision of principals of the firm who are members of the D.C. Bar.

Over the course of about a week, the CPSC, an agency that rarely litigates, flexed its litigation muscles not once, but twice,  recently filing complaints against Amazon and Thyssenkrupp Access Corp., seeking to force both companies to conduct recalls. Both are administrative complaints.

Fulfilled by Amazon

The CPSC voted 3-1 to file its complaint against Amazon for allegedly not recalling hazardous third-party products sold on its Fulfilled by Amazon platform.  Those hazardous products include flammable children’s pajamas, faulty carbon monoxide detectors, and hair dryers without protections against electrocution.  Though Amazon has stopped selling some of these potentially harmful products, the CPSC still wants Amazon to issue recalls with the Commission and to destroy any of the goods returned to them.

The CPSC’s complaint reflects its ongoing challenge with how to handle massive third-party platforms while still effectively protecting consumers.  Under the Fulfilled by Amazon program, merchants can keep their products at an Amazon fulfillment center, and Amazon will pack and ship the products for them for a fee. Those merchants maintain legal titles to their products while Amazon provides its packing and shipping services. CPSC, however, emphasizes that when a consumer returns a Fulfilled by Amazon product, it goes back to Amazon, not the merchant. Amazon then examines the product to see if it can be resold. If an item cannot be resold, then the merchant can have the product mailed back to its own facility.

In its complaint, the CPSC considers Amazon as a “distributor” that may be liable for the safety of the products it packs and ships.

Amazon, like many similar platform providers, does not consider itself a “distributor” of these products. Indeed, the Texas Supreme Court’s Amazon.com, Inc. v. McMillan ruling this June supports Amazon’s stance. The Texas Court found that the company is not considered a “seller” of Fulfilled by Amazon products under the state’s product liability law, because the platform does not actually hold title to the products.

Amazon has notified consumers who purchased the products identified in CPSC’s complaint about the potential hazards and offered to refund customers with Amazon gift cards, but the CPSC said those efforts are not enough. The CPSC wants Amazon to recall the defective carbon monoxide detectors, hair dryers and youth garments and facilitate their returns so the retailer may destroy them. And the CPSC has requested documentation proving the items’ destruction as well as monthly progress reports on the process. They further ask that Amazon notify those who purchased defective items and issue them full refunds.

The outcome of this case could jeopardize the existence of third party marketplaces or at least require them to completely revamp their current business models. In addition, it could have broader implications for entities that help third parties sell their products.

Thyssenkrupp Access Corp.

The CPSC also voted 3-1 to file the complaint against Thyssenkrupp Access Corp. (“Thyssenkrupp”), a major elevator company. The complaint alleges Thyssenkrupp’s residential elevators contain defects in the elevators’ design and installation materials, presenting a substantial product hazard.

The CPSC alleges that the elevators are dangerous due to a narrow gap between the hoistway door and elevator car door. Small children can slip between the doors into that space and become trapped or fall under a moving elevator car.

The lawsuit seeks to require Thyssenkrupp to inspect the elevators installed in customers’ homes and offer free installations of space guards in the elevators.

In another example of CPSC’s growing willingness to take unilateral action to notify the public of a potential safety issue, Acting CPSC Chairman Adler followed the lawsuit with a notice to vacation rental platforms, including Airbnb and Vrbo, urging them to disable elevators immediately until they have been inspected.

We will continue to watch this case and the ramifications it could have for companies that manufacture or distribute products for a third party’s installation.

Summer associate Elizabeth Hamner contributed to this post. Ms. Hamner is not a practicing attorney and is practicing under the supervision of principals of the firm who are members of the D.C. Bar.

Following the momentum of President Biden’s sweeping competition executive order, the FTC now wants in on the action. In a unanimous vote, the Commission approved to adopt a policy statement calling for more aggressive enforcement against manufacturer restrictions that prevent consumers and businesses from repairing their own products. The policy statement also pushes for more enforcement of the Magnuson-Moss Warranty Act, which restricts a company from tying a warranty to the use of a specific service provider.

This policy statement flows from a two year process. As we have previously reported, in 2019, the FTC called for public comment and empirical research on repair restrictions, and in May 2021, the FTC released its “Nixing the Fix” report to Congress. Based on those results, the FTC issued this statement that it will now “prioritize investigations into unlawful repair restrictions under relevant statutes such as the Magnuson-Moss Warranty Act and Section 5 of the FTC Act.”

In her prepared remarks before the vote, Chair Lina Khan stated that repair restrictions “can significantly raise costs for consumers, stifle innovation, close off business opportunity for independent repair shops, create unnecessary electronic waste, delay timely repairs, and undermine resiliency.” She expressed that the FTC “has a range of tools it can use to root out unlawful repair restrictions” and called on the public to submit complaints about potential violations.

Commissioner Chopra echoed Khan’s sentiment and recommended that the Commission take steps in addition to reinvigorating enforcement: (1) engage the independent repair community, and conduct a close review on the user experience on reportfraud.ftc.gov; (2) work with other agencies to reform existing procurement policies that allow contractors to block government buyers from self-repair or seeking third-party repair services; and, (3) assist policymakers, including at the state level, to draft Right-to-Repair laws.

All companies offering a product warranty should review its terms, particularly any terms limiting repairs under the warranty. As we are bound to see more activity on the state and federal levels with right to repair legislation and enforcement, we will continue to monitor these developments.

On July 20, the U.S. House of Representatives passed H.R. 2668, the Consumer Protection and Recovery Act, to clarify the Federal Trade Commission’s enforcement authority under Section 13(b) of the FTC Act. H.R. 2668, authored by Representative Tony Cárdenas (D-CA), would explicitly authorize the FTC to seek permanent injunctions and other equitable relief, including restitution and disgorgement, to redress perceived consumer injury. The bill was passed by a vote of 221-205, with two Republicans joining all Democrats in support.

In a joint statement issued after the vote, House Energy and Commerce Committee Chair Frank Pallone (D-NJ) and Consumer Protection and Commerce Subcommittee Chair Jan Schakowsky (D-IL) said: “The Consumer Protection and Recovery Act will restore the FTC’s ability to force scammers that have broken the law to repay those who have been harmed or defrauded.” Chairs Pallone and Schakowsky moved quickly to usher the bill through their committee and the House just three months after the Supreme Court ruled in AMG Capital Management, LLC v. FTC that the Federal Trade Commission did not have the authority to pursue monetary penalties under Section 13(b).

Facing increasing legal uncertainty in the months leading up to the AMG decision, bipartisan FTC Commissioners had urged Congress to clarify the agency’s enforcement authority – and bipartisan Members of Congress expressed support, citing a shared desire to protect consumers and hold fraudsters accountable. Those bipartisan sentiments, however, did not translate to bipartisan legislative text. As we’ve written previously, House Energy and Commerce Committee Republicans have voiced process concerns, accusing Democrats of rushing the legislation through the House. Republicans have also stressed the need for statutory “guardrails” to ensure due process and protect legitimate businesses. Throughout the legislative process, for instance, Republicans have sought to amend the legislation to reduce the 10-year statute of limitations and to more narrowly tailor the language to target outright fraudulent acts. Republicans have also expressed concerns about retroactivity, questioning the legality of allowing the FTC to go after prior conduct with the expanded authorities included in H.R. 2668.

Ahead of the vote, Consumer Protection and Commerce Subcommittee Ranking Member Gus Bilirakis (R-FL) said, “…this bill before us will provide the FTC with new authorities that far outpace the need supported by a consensus of the FTC Commissioners.” He went on to say that the expanded authority granted to the agency in the legislation “signals a return to the broad overreach we saw with the FTC in previous decades –  a situation so bad that a Democratic Congress crippled the FTC’s funding and stripped it of its authority at that time.”

Additionally, House Republicans argue that any 13(b) fix should be part of a broader package of FTC reforms and should move in concert with legislation establishing a national privacy framework – an issue itself full of partisan landmines.

H.R. 2668 now heads to the Senate, where bipartisan Members of the Commerce Committee have expressed interest in a legislative fix – and where Democrats don’t have the luxury of disregarding Republican opposition. Perhaps in a nod to that reality, ahead of the bill’s passage, Representative Cárdenas said on the floor, “It’s unfortunate that we weren’t able to negotiate more into this bill and make it bipartisan, but there will be other opportunities as we are a two-chamber legislature, and I’m sure the Senate has some ideas about how to make this bill better. And we’re all open to that opportunity.”

For his part, President Biden appears ready to sign the bill, should it make it to his desk. Ahead of the House vote, the White House issued a strong statement of support: “The Administration applauds this step to expressly authorize the FTC to seek permanent injunctions and pursue equitable relief for all violations of law enforced by the Commission and ensure that the cost of illegal practices falls on bad actors, not consumers targeted by illegal scams.”

 

 

The California Office of the Attorney General has published a list of recent CCPA enforcement examples on its website.  Each example summarizes the AG’s allegation of noncompliance and the steps that the companies took to cure the alleged noncompliance.

Under CCPA, companies have 30 days to cure noncompliance after which the California AG may initiate a civil action for civil penalties not to exceed $2,500 for each violation or $7,500 for each intentional violation.  In each example made public by the California AG, the AG stated that the target of the enforcement action cured the violation and the California AG did not assess penalties.  In January 2023, however, the right to cure will sunset when the CPRA takes effect.

Continue Reading CCPA Update: California AG Releases List of Enforcement Actions 

The dietary supplement and personal care product space continued to see enforcement on false CBD, COVID, and fertility claims as well as related litigation involving “germ-killing” claims on hand sanitizers and wipes.  Messy stuff…Let’s take a look…

 

LITIGATION

Personal Care Products

In a blow to the trending “pink tax” theory of liability in consumer class actions, in May, the Eighth Circuit ruled that various personal care product manufacturers and retailers did not violate Missouri’s anti-discrimination laws by charging more for products marketed towards women as compared to allegedly identical products that were either marketed towards men or utilized gender-neutral marketing.  The Court found that the plaintiff “mistakes gender-based marketing for gender discrimination” and, in the process, ignores numerous differences between the products that account for the higher price tag.  There has been a handful of similar “pink tax” cases filed over the last year or two, but this is the first appellate court to rule on the issue. Continue Reading Dietary Supplement and Personal Care Products Regulatory and Litigation Highlights – May and June 2021

For our June review, the action stays largely in the litigation arena with vanilla getting thrown out and sustainability as well as settlements getting called into question.  Meanwhile, environmental and health stakeholders are pushing FDA to ban PFAS from food contact uses as many in industry move away from PFAS-containing packaging.  How to digest all of it?  Consider some yogurt.  FDA updated the standard of identity, making it more delicious than ever.  Let’s take a look….

LITIGATION

Two More Vanilla Cases Get Thrown Out of the Food Court

In Robie v. Trader Joe’s Co., the Northern District of California dismissed claims that Trader Joe’s Almond Clusters cereal should have been labeled as “artificially flavored.”  The court held that, because the vanilla flavor can from both the vanilla plant and vanillin derived from tree bark, it was properly labeled as “Vanilla Flavored With Other Natural Flavors” under applicable FDA regulations and the plaintiff’s claims suggesting otherwise were preempted.  The court also found that the plaintiff had failed to allege facts suggesting that reasonable consumers would interpret “vanilla” on the product label to mean that the product’s flavor is derived exclusively from the vanilla plant, especially given that the challenged label did not contain any other words or pictures suggesting that the flavor was derived exclusively from the vanilla bean. Continue Reading Food Industry Regulatory and Litigation Highlights – June 2021

Earlier this year, Prose – a company that makes customized haircare products – brought an NAD challenge against Function – a competitor in the same business – over Function’s claims that it had over 110,000 5-star product reviews. We posted about that decision in March. This week, NAD announced a decision in a challenge that Function brought against Prose over Prose’s claims that it had over 192,000 5-star product reviews.

When a consumer buys a product from Prose, the company solicits star-ratings on various aspects of the customer’s experience after each purchase. Prose may then revise its formulation after receiving feedback. For example, if a customer indicates that she would prefer a stronger fragrance, Prose may make that adjustment on subsequent purchases. The iterative process of reviewing and refining happens every time the customer orders.

NAD was concerned that reasonable consumers would not expect that the number of reviews is the result of a back-and-forth process of altering and re-reviewing products to increase customer satisfaction. “In fact, 5-star reviews are achieved as customers refine and customize the product.” Thus, “any claim based on aggregated product reviews should indicate the way in which this level of customer satisfaction is achieved to avoid conveying a misleading message.”

Function also argued that Prose shouldn’t be able to cherry-pick only positive reviews to share with consumers. NAD noted “that Prose clearly labels the reviews as ‘Featured Reviews’ and, as a result, the context of the reviews presented does not reasonably convey the message that Prose only has positive reviews, but features the reviews as testimonials.” NAD cautioned, though, that advertisers must have independent evidence to support any claims in testimonials.

As we noted in our March post, companies are employing new strategies to solicit reviews and make claims based on those reviews. At the same time, many of those companies are also carefully watching what their competitors are doing and bringing challenges when they think those competitors go too far. We expect to see these challenges continue.

The Colorado Legislature recently passed the Colorado Privacy Act (“ColoPA”), joining Virginia and California as states with comprehensive privacy legislation. Colorado Governor Jared Polis signed the bill (SB 21-190) into law on July 7, and ColoPA will go into effect on July 1, 2023.

How does the measure stack up against the VCDPA and the CCPA (as amended by CPRA)? The good news is that, in broad terms, ColoPA generally does not impose significant new requirements that aren’t addressed under the CCPA or VCDPA, but there are a few distinctions to note.. Continue Reading Privacy Law Update: Colorado Privacy Bill Becomes Law: How Does it Stack Up Against California and Virginia?