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
Pending Legislation Would Require Country of Origin Disclosures for Online Product Offerings
The Senate recently passed the Country of Origin Labeling Online Act (COOL Online Act) with overwhelming bipartisan support. Currently, U.S. law requires that external packaging for many products state the product’s country of origin. The uptick in online shopping and the sale of imported products, however, has increased interest in requiring country of origin disclosures
Fashion Sustainability Claims Can’t Shake Scrutiny
With Earth Day in April, it’s not a surprise that sustainability claims in the clothing industry have been in the limelight this spring. Actions in both the U.S. and overseas are a reminder to fashion retailers of the importance of substantiating sustainability claims.
Recently lobbying group PoliticallyInFashion partnered with 40 organizations and individuals to submit
FTC and Right to Repair
Companies watching the “right to repair” legislation proposed in some states should not lose sight of the federal landscape. Last week the FTC released a bipartisan report concluding that there is “scant evidence to support manufacturers’ justifications for repair restrictions.” This will likely add momentum to groups pushing for legislation requiring companies, particularly electronics manufacturers,
Earth Day = Green Guides
It’s Earth Day! A perfect day to think about the FTC’s Green Guides, designed to help marketers develop claims about the environmental benefits of their products. The Green Guides address the following types of claims: (a) general environmental benefit claims; (b) carbon offset claims; (c) certifications and seals of approval; (d) “compostable” claims; (e)
Amazon Pays $2 Million to Settle Reference Price Allegations
Shortly after the state of California filed a lawsuit against Amazon alleging deceptive prices, Amazon agreed to pay $2 million in penalties and restitution.
Under the stipulated judgment, Amazon is restrained from using an advertised reference price based on a formula, algorithm, or other method that produces misleading or false results until April 1,
No More Deference for Amazon’s Reference Prices
As many retailers and manufacturers that sell directly to their customers know well, sale and similar promotional pricing practices have been the targets for regulators and class action plaintiffs for several years, and Amazon is back in that spotlight, this time in a lawsuit filed by the state of California. There has been a wide
FTC Moving Away From “Lax Enforcement” with Made in USA Claims
The FTC recently announced that glue maker, Chemence, paid a landmark $1.2 million settlement to resolve allegations that the company failed to comply with a 2016 Order regarding “Made in USA” claims. The 2016 Order required Chemence to pay $220,000 and to stop making misleading claims that its products were made in the United States.
FTC’s Mail Order Rule Crackdown Continues
Last week the FTC filed suits against a few online merchandisers regarding their alleged failures to promptly deliver personal protective equipment (PPE) to consumers. The lawsuits allege that three online sellers violated the FTC’s Mail Order Rule, which mandates that companies notify consumers of shipping delays in a timely manner and give them the
Data Protection and National Security Concerns Meet in TikTok, WeChat Executive Orders
This summer continues to be a busy season at the intersection of data protection and national security. As we reported in July, the Schrems II decision invalidated Privacy Shield on the ground that its national security derogations were too expansive.
Last week, the President seized on concerns about surveillance by the Chinese government as a core rationale for Executive Orders directing the Department of Commerce to prohibit transactions involving TikTok (and its parent company, ByteDance) and WeChat (and its parent company, Tencent Holdings). For instance, the TikTok Order asserts that the company’s data practices “potentially allow[] China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage;” and the WeChat Order states that WeChat’s data collection “threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information.”
The scope of these Orders remains unclear. Members of Kelley Drye’s Export Control and Sanctions team provide further analysis on Kelley Drye’s Trade and Manufacturing Monitor (see below), and we will continue to monitor how implementation of the Orders could affect companies’ communications and transactions on these popular platforms.
President Issues Executive Orders Targeting TikTok and WeChat
Last Thursday, the President issued two executive orders (“E.O.s”) targeting social media applications TikTok (and its parent company, ByteDance) and WeChat (and its parent company, Tencent Holdings). The E.O.s direct the Department of Commerce (“DOC”) to prohibit transactions involving the applications. Companies that deal directly with TikTok or WeChat in the United States and abroad or use their services need to evaluate the scope of those activities and determine if they will be affected by the E.O.s.
The E.O.s were issued pursuant to the national emergency declared in E.O. 13873 regarding information and communication services in the United States that are controlled by persons within the jurisdiction of a “foreign adversary.” In issuing the E.O.s, the President cited concerns that the Chinese government could gain access to Americans’ personal information collected by the applications, among other policy considerations. The President has the power to issue the directives under the International Emergency Economic Powers Act (“IEEPA,” 50 U.S.C. 1701 et seq.), which provides the President with the authority to declare national emergencies and implement sweeping trade controls based on national security concerns.
The intended scope of the E.O.s is not clear due to ambiguous language used in Section 1, which contain the E.O.s’ primary prohibitions. Here is an excerpt of that section from the TikTok order:
Section 1. (a) The following actions shall be prohibited beginning 45 days after the date of this order, to the extent permitted under applicable law: any transaction by any person, or with respect to any property, subject to the jurisdiction of the United States, with ByteDance Ltd. (a.k.a. Zìjié Tiàodòng), Beijing, China, or its subsidiaries, in which any such company has any interest, as identified by the Secretary of Commerce (Secretary) under section 1(c) of this order.
[…]
(c) 45 days after the date of this order, the Secretary shall identify the transactions subject to subsection (a) of this section.
There are two plausible readings of that section. The first is that all transactions involving ByteDance and its subsidiaries will be prohibited within 45 days. The second, and we believe more appropriate reading, is that all types of transactions specified by DOC will be prohibited. The inclusion of the last sentence of Section 1(a) and of Section 1(c) suggests that DOC has discretion to impose targeted prohibitions that only apply to certain types of transactions involving the subject companies, rather than all transactions involving ByteDance. While the ultimate scope of the prohibitions may not be clear until DOC takes action, the term “transactions” is often interpreted broadly, and could include many types of business dealings, not just financial transactions involving the companies. The White House is reportedly pushing for a broad interpretation of both E.O.s, noting that prohibited transactions could include making the apps available on app stores, purchasing advertising on TikTok, or accepting terms of service to download the applications.
It is also important to note that the TikTok and WeChat E.O.s differ in scope. The TikTok E.O. authorizes prohibitions on any transaction involving ByteDance and its subsidiaries. In contrast, the WeChat E.O. is more narrowly constructed to authorize prohibitions on transactions with Tencent Holdings or its subsidiaries that are “related to WeChat.” The more narrow construction with respect to Tencent may be intended to exclude Tencent’s many U.S. investments unrelated to WeChat from coverage under the E.O.
Much remains unclear about the intended scope and ultimate application of the E.O.s. Given this regulatory uncertainty, companies with business dealings directly or indirectly involving ByteDance or Tencent should review their engagements closely for potential exposure under the new rules. In particular, companies that use WeChat services for commercial purposes, including its IT and payment services, will need to evaluate whether they can continue that activity in the United States and abroad.
Please contact our Export Control and Sanctions team with any questions related to these developments.