In a 5-4 decision with major implications for e-commerce retailers, the Supreme Court has closed the “online sales tax loophole” by holding that a state may collect sales tax from out-of-state sellers that do not maintain a physical presence in the state. The decision, South Dakota v. Wayfair, Inc. et al., No. 17-494, 585 U.S. __ (2018), overturns two prior Supreme Court cases holding that an out-of-state seller’s duty to collect and remit tax to a consumer’s home state depended on whether the seller had a physical presence in that state. The Court found that this “Physical Presence Rule” was inconsistent with “the present realities of the interstate marketplace” and was costing states an estimated $8 to $33 billion in revenue each year. The Court also was persuaded by the notoriously low rate of consumer compliance with use taxes, and by the fact that the state law in question afforded small merchants a “reasonable degree of protection” by applying only to sellers that annually delivered more than $100,000 of goods or services or engaged in 2,000 or more separate transactions for the delivery of goods or services into the state. The dissenting opinion by Chief Justice Roberts insists that Congress, not the courts, should have undertaken the task to overturn the Physical Presence Rule and that the burden of this new tax regime will fall disproportionately on start-ups and small businesses.
October ushered in a case that might, on one hand, provoke a sigh of relief for manufacturers, distributors and retailers concerned about the upward trend in multimillion dollar civil penalties from the CPSC or, on the other hand, raise some eyebrows of concern about the extent of a court’s authority to prospectively impose auditing, compliance and training measures. See United States v. Spectrum Brands, Inc., No. 15-CV-371-WMC, 2017 WL 4339677 (W.D. Wis. Sept. 29, 2017). Continue Reading Recall Roundup: October
Last month, the solar eclipse captivated the United States and many consumers flocked to purchase solar eclipse glasses to safely observe the astronomical phenomenon. We previously reported how NASA issued a safety alert advising consumers on the proper eye protection they should seek. Now, some consumers have filed a class action lawsuit against a major online retailer for allegedly selling “unfit, extremely dangerous, and/or defective” solar eclipse glasses. As a result, the consumers allege “varying degrees of eye injury ranging from temporary discomfort to permanent blindness.”
As consumers celebrated lower avocado prices at Whole Foods during the last week in August, views were mixed regarding the FTC’s decision not to challenge the Amazon/Whole Foods merger.
On August 23, 2017, the FTC’s Bureau of Competition issued a short statement that read, in its entirety: “The FTC conducted an investigation of this proposed acquisition to determine whether it substantially lessened competition under Section 7 of the Clayton Act, or constituted an unfair method of competition under Section 5 of the FTC Act. Based on our investigation we have decided not to pursue this matter further. Of course, the FTC always has the ability to investigate anticompetitive conduct should such action be warranted.”
It’s probably painfully obvious to companies in the retail industry and beyond that the old paradigm of the retail shopping center is being permanently altered by e-commerce, as well as changing consumer preferences. As the old-guard stalwarts of retail begin to shutter stores or fold completely, it is up to both landlords and existing anchor tenants to adapt to the changing landscape, or risk prolonged periods of high vacancy.
One of the areas which can hamper efforts to re-tenant spaces are the restrictive covenants contained in both declarations governing shopping centers and in anchor leases, put in place with the justification that such concepts are not retail-oriented or are parking intensive. As consumers move towards a more experience-based retail experience (i.e., restaurants, entertainment and fitness concepts), landlords may find their hands tied by such restrictive covenants when it comes to leasing vacant spaces. In light of this, landlord’s should be reviewing their restrictive covenants both in declarations and leases any time a lease is being amended, modified or renewed which may contain leasing restrictions.
Careful attention should be paid to those restrictions that can affect leasing to post-e-commerce era concepts, such as restaurants and small format fitness centers, both of which are becoming an increasing share of retail centers. Unless these issues are tackled head on, landlords may find themselves with vacant spaces for extended periods of time, which harms traffic to the shopping centers and, consequently, traffic to existing tenants. Landlords may find that tenants may be more willing to play ball on dropping these restrictions if they come to the realization that extended vacancies harm tenants more than the parking issues that these restrictions are intended to protect against.
The Santa Barbara City Council, in an effort to combat the retail malaise on State Street in Downtown Santa Barbara, has approved a pilot program that would streamline the permit and review process for potential commercial tenants. Continue Reading Santa Barbara City Council Strikes Back Against Retail Malaise
With the National Retail Foundation estimating 8 to 12 percent growth in U.S. e-commerce in 2017, retailers across the country are vying to compete for a piece of the $400B+ pie. Crucial to their efforts is that retailers offer a seamless online and in-home customer experience, which includes maximizing shipping and returns efficiencies. But equally as important is that retailers remain compliant with FTC regulations and state unfair competition and business practices laws, in order to minimize their exposure to an ever-expanding putative class of the 80 percent of Americans who place online orders each year.
In that vein, we have previously reported and advised on the rise in ADA and TCCWNA claims in 2015 and 2016. Now, over the past few months, a new trend has emerged that has ramifications for virtually every participant in the online retail space: a rise in the number of class action claims challenging allegedly excessive shipping & handling (“S&H”) fees. Regardless whether an online retailer offers flat or incremental S&H fees, standard and expedited S&H options or free shipping with returns-only S&H fees, few are immune from claims that the fees charged do not align perfectly with retailers’ underlying shipping costs.
In the early 1990s, before everyone could instantly buy almost anything from their smartphone, the proposed combination of QVC network and Home Shopping Network (“HSN”) reportedly was shuttered due to antitrust concerns.
Continue Reading What Once Was Old Is New Again: QVC and HSN Announce Merger Plans 25 Years After Last Attempt
Recently, the Fourth Circuit affirmed a $31 million dollar jury award in favor of retailer Lord & Taylor for lost profits in connection with a breach of its reciprocal easement agreement (“REA”) with D.C.-area mall owner White Flint, LP. The court found White Flint’s efforts to redevelop the regional mall into a mixed-use project violated the terms of the REA under which the mall landlord agreed to maintain the site as a “first-class high fashion regional Shopping Center.” Continue Reading Why Retail Developers and Tenants Should Reconsider the Use of Detailed REAs
Many online retailers are exploring how to use drones to quickly deliver online orders to customers. In June 2016, the Federal Aviation Administration (“FAA”) issued a final rule permitting flights by commercial drones under certain conditions, including the drone and its cargo weigh less than 55 pounds and the drone stays within sight of the pilot. While the rule was a welcome step forward for the commercial drone industry, the operational restrictions prohibited drones to fly over any populated areas due to safety concerns, essentially forbidding commercial drones in most urban areas. Continue Reading Retailers Await New Drone Regulations Amid Trump Administration Regulation Freeze