As publicly traded retailers begin to prepare their annual reports and 2020 proxy statements, they should keep in mind a number of new and amended SEC disclosure items. As detailed in our recent client alert, hot topics for proxy statements include hedging policy disclosure, board diversity disclosure and overboarding of directors.  In annual reports on Form 10-K, public retailers must consider new cover page requirements; new disclosure rules for material property, management’s discussion and analysis (MD&A) and exhibit filings; and most retailers will now disclose critical audit matters, or CAMS, as identified by their independent auditors. The SEC staff has also provided recent guidance on disclosure obligations concerning companies’ intellectual property and technology risks originating from international operations. The guidance builds on the SEC staff’s recent efforts to assist companies with the assessment and disclosure of new and evolving risk areas such as cybersecurity and LIBOR discontinuation. The SEC staff additionally has released new interpretations regarding public companies’ ability to incorporate by reference a discussion of the earliest of three years of its recent MD&A.

 

The Florida legislature has introduced identical bills in the Florida House of Representatives (HB 963) and the Senate (SB 1670) (collectively the Act) that, if adopted, will require companies operating websites and other online services in the state to inform Florida consumers whether it is collecting personal information, and to provide an opportunity for the consumer to opt out of the sale of the personal information.

Continue Reading Florida Following in Other Jurisdiction’s Footsteps with Proposed Data Privacy Legislation

A new bill introduced in Congress earlier this month could increase litigation risk for the retail industry by leaving companies unable to prevent the Consumer Product Safety Commission (CPSC) from disclosing inaccurate or premature information about potential product hazards. The Safety Hazard and Recall Efficiency (SHARE) Information Act, introduced on January 9, 2020, by U.S. Representative Bobby L. Rush (D-IL), would also increase the maximum civil penalty for violations of the Consumer Product Safety Act (CPSA) from $15 million to $50 million. Largely seen as a response to public criticism over the perceived delays in the CPSC’s disclosure of hazards associated with infant inclined sleepers over the last year, the SHARE Information Act would allow the CPSC to tell the public that a product may pose a safety issue before the hazard has been confirmed.

Continue Reading SHARE Information Act Could Increase Companies’ Product Liability Litigation Risk

Innovation and developments in technology bring both opportunities and challenges for the retail industry, and Hunton Andrews Kurth has a sophisticated understanding of these issues and how they affect retailers. On January 23, 2020, our cross-disciplinary retail team, composed of over 200 lawyers, released our annual Retail Industry Year in Review. The 2019 edition, Spotlight on Technology, provides an overview and analysis of recent developments impacting retailers, as well as what to expect in 2020 and beyond. Topics discussed include: braille gift cards as the next wave of evolving accessibility litigation; enterprise software licensing audits; the intense FTC oversight of online user-generated reviews and influencer marketing; challenges around skilled immigration for staffing roles in a variety of technologically-driven professions in retail; the increase in retail bankruptcies and the “retail apocalypse”; M&A as an ongoing strategy for navigating growth; upcoming modifications of the FTC’s Made in the USA program; cyber insurance coverage for phishing schemes and coverage for privacy breaches; the intricacies in AI product liability cases; and key retail payment trends such as frictionless payments, mobile payments and the rise of voice commerce.

Read the 2019 Retail Industry Year in Review

Responding to a challenge brought by HelloFresh (Grocery Delivery E-Services, USA), the National Advertising Division (NAD) affirmed that Home Chef (Relish Labs, LLC) offered reasonable grounds on which to base its claims that its meal kit delivery service offers consumers more flexibility than HelloFresh’s similar service. In particular, NAD noted that Home Chef’s “Customize It” feature provides ample variety, permitting consumers to upgrade or increase the amount of protein in their weekly meal selections, or even change recipes entirely by switching out the protein. Still, the NAD took issue with various other iterations of Home Chef’s “more choices” claims, finding that certain of those claims exaggerated the amount of customization offered. For example, while NAD concluded that a reasonable consumer would interpret Home Chef’s numeric comparison of “choices” offered relative to HelloFresh to be a meals-to-meals or recipe-to-recipe comparison, Home Chef counted the customization options of “doubling” or “upgrading” of the protein as wholly different choices. NAD suggested narrowing such comparative numbers of choices to the competitors’ “base” meals or recipes, including those Customize It options where customers can switch out the protein. Home Chef has agreed to comply with NAD’s recommendations.

The theme for this Recall Roundup is effectiveness of recalls. In October, the US Senate Committee on Commerce, Science, and Transportation released an investigative report criticizing the CPSC’s data-handling breaches from the spring. This month, the Office of Oversight and Investigations Minority Staff from the same US Senate committee released a report criticizing the CPSC’s handling of three “high-profile failures to effectively recall dangerous products” last year. The report summarizes the CPSC’s actions related to jogging strollers, infant reclined sleeping products and home elevators. The report concludes that the CPSC’s “failures” are “the result of a pattern of inappropriate deference to industry that has characterized CPSC leadership in recent years.” The report recommends that the CPSC “at a minimum” increase the use of imminent health and safety warnings, fine companies that fail to timely report substantial products hazards and use refunds or consumer-friendly repairs as default remedies.

Continue Reading Recall Roundup: December

On January 7, 2020, the Federal Trade Commission announced a settlement with Mortgage Solutions FCS, Inc., d/b/a Mount Diablo Lending, and its sole principal, Ramon Walker, to resolve allegations that the lender violated the FTC Act, the Fair Credit Reporting Act (FCRA) and the Gramm-Leach-Bliley (GLB) Act, by improperly disseminating consumers’ personal information on Yelp in response to consumers’ negative reviews posted to that site. In its complaint, the FTC alleges that Walker posted on Yelp responses that included customers’ nonpublic and personal financial information—their credit histories, debt-to-income ratios, taxes, health, sources of income, family relationships and other personal information, and in some instances, their names—in violation of the mortgage broker’s notice and disclosure obligations under Regulation P of the GLB Act, and which further constitute an impermissible use of a consumer report under the FCRA. Under the terms of the settlement, Walker and Mount Diablo will pay a $120,000 civil penalty, and must not misrepresent their privacy and data security practices, misuse credit reports or improperly disclose personal information to third parties. They also are required to implement a comprehensive data security program and obtain biannual third-party assessments of this program. The defendants must designate a senior corporate manager responsible for overseeing compliance with the FTC’s order.

The Ninth Circuit Court of Appeals dismissed a consumer-fraud class action lawsuit against Diet Dr Pepper maker Dr Pepper/Seven Up, Inc., holding that use of the word “diet” in the product’s name was not false or deceptive advertising in the proper context of the soft drink market. The court found that, despite allegations that the product was long promoted with advertising featuring thin models, the common consumer would not read the “diet” in a soda’s brand name to promise the weight loss or other health benefits commonly associated with the word. Rather, given the relative ubiquity of diet soft drink products in the marketplace, the reasonable consumer interprets the use of the term as merely a claim that the “diet” version of a soft drink has fewer calories than its “regular” counterpart.

As reported on December 30, 2019 on the Hunton Employment & Labor Perspectives blog, Judge Kimberly J. Mueller of the United States District Court for the Eastern District of California granted a temporary restraining order that temporarily prohibits the state of California from enforcing AB 51, a law that would prohibit companies in California from requiring arbitration agreements as a condition of employment.

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As reported on December 10, 2019 in Hunton’s environmental law blog, “The Nickel Report”, additive manufacturing, more commonly known as 3D printing, has already found commercial application in various industries and its use is on the rise. 3D printing converts 3D digital models created on a computer or with a scanner into physical objects, usually by successively adding material layer by layer. The process allows manufacturers to make complex designs, rapid prototypes and final products while offering the potential to limit process waste and reduce production costs.

3D printing is no longer a novelty, as manufacturers in the automotive, aviation, medical, consumer goods, entertainment and numerous other industries are integrating 3D printing into their production processes…

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