Hunton Retail Law Resource

The Children’s Advertising Review Unit (CARU) of BBB National Programs announced an investigation into the popular kids YouTube channel “Vlad and Niki,” owned by Content Media Group FZC, LLC (CMG), which produces videos under various licensing and merchandising agreements. Because these agreements obligate CMG to produce the videos and allow CMG to share in generated revenue, CARU considers CMG an endorser of the products in Vlad and Niki videos and subject to CARU’s Self-Regulatory Guidelines for Children’s Advertising.

COVID-19 has had an unprecedented effect on the retail industry across the United States, as many retailers grapple with government mandates that either require closure or impose stringent restrictions on being open, employment and supply chain disruptions, and an overall decline in consumer demand as market conditions remain volatile and unemployment rates continue to rise. The devastating consequences of the coronavirus began to come into focus at the same time many companies were preparing to issue quarterly or annual results and convene investor calls.

The COVID-19 pandemic poses unique and novel challenges to publicly-traded retailers, particularly with respect to design and testing of both internal controls over financial reporting and disclosure controls and procedures. We recommend that retailers assess what has changed in the current financial reporting environment, consider whether existing controls are sufficient to prepare financial statements and disclosure documents at the reasonable assurance level, and determine what new controls (if any) are necessary to reduce the risk of errors and fraud.

In light of the various restrictions on retail businesses being issued nationwide in an effort to slow the spread of COVID-19—such as the “safer at home” orders issued in Los Angeles County and throughout California last week—one Southern California city is taking action to support local businesses, while continuing to push compliance with the new legal restrictions.

Coastal areas in Texas have already begun evacuating as Hurricane Harvey heads for the Gulf Coast. Weather experts anticipate that the windstorm will reach Category 3 or Category 4 status by the time it makes landfall on the Texas coast late Friday night or early Saturday morning, making it the first Category 3+ storm to make landfall in the United States since Hurricane Wilma hit South Florida in October 2005.

On August 15, 2017, the FTC announced that it had reached a settlement with Uber, Inc., over allegations that the ride-sharing company had made deceptive data privacy and security representations to its consumers. Under the terms of the settlement, Uber has agreed to implement a comprehensive privacy program and undergo regular, independent privacy audits for the next 20 years.

Development International, an NGO with affiliates around the world, recently published its third annual report (the “Report”) summarizing U.S. public company Conflict Minerals Reports ("CMRs") filed on Form SD for reporting year 2016. Although the Report advances a very narrow reading of the recent D.C. Circuit case striking down part of the SEC conflict minerals rule, it otherwise provides a wealth of statistical information about the most recent round of Form SD filings. This information can be useful to retailers benchmarking their own Form SD reporting as well as the Form SD reporting of key suppliers.

Liability insurance policies generally have an exclusion barring coverage for claims brought by the insured’s own employees. These exclusions usually do not bar coverage, however, when claims are brought by an employee of one insured against another insured. This scenario occurs frequently, especially for companies in the retail industry, who are usually one of multiple insureds under a single policy and are susceptible to being sued by another insured’s employees.

It is no secret that California has had appliance efficiency standards in place for some time now. And it is no secret that the California Energy Commission (“CEC”) has been responsible for crafting those standards. According to the CEC and the California State Legislature, however, compliance with those standards has been hit-or-miss. In 2011, the Legislature found that “significant quantities of appliances are sold and offered for sale in California that do not meet the state’s energy efficiency standards,” and the CEC itself has stated that nearly half of all regulated appliances are non-compliant, and that certain product categories are entirely non-compliant. The broad range of products covered by the CEC’s efficiency standards may be partly to blame for the lack of compliance, as manufacturers may not even realize their product must comply. For example, the efficiency standards encompass nearly every device with a rechargeable battery and that rechargeable battery system, meaning everything from cell phones to laptops to tablets to golf carts must be tested, certified and listed in the CEC’s database before being offered for sale in California. 

On August 2, 2017, the U.S. Senate confirmed one of President Trump’s two management-side appointees, Marvin Kaplan, to the National Labor Relations Board (“NLRB”) in a contentious vote along party lines. Kaplan was sworn in on August 10, 2017, for a term ending on August 27, 2020. 

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.

This past week, several consumer actions made headlines that affect the retail industry.

FTC Extends Comment Period for Paint Claims

On August 7, 2017, the FTC extended the public comment period related to four proposed settlements with paint companies. According to the original complaints from June 2017, Benjamin Moore, Imperial Paints, ICP Construction and YOLO Colorhouse deceptively claimed that their paint products were either emission-free or contained zero volatile organic compounds, including during and immediately after application. 

On August 7, 2017, the FTC announced that it obtained a court order temporarily halting an online marketing scheme that deceptively lured shoppers into expensive negative option plans. The FTC alleged in its complaint that defendants used initial low-cost “trial” offers to hook consumers into expensive monthly shipments for tooth-whitening products without properly disclosing the terms and conditions of the deal or properly obtaining their consent.

As an update to our Recall Roundup’s focus on the fidget spinning craze from June and July, the Consumer Product Safety Commission (“CPSC”) has released spinner safety tips. Although the CPSC still reports no fidget spinner recalls, Acting Chairman Ann Marie Buerkle used the CPSC’s bully pulpit to warn of the choking dangers that result when fidget spinners break and release small pieces. In addition, she references “reports of fires involving battery-operated fidget spinners.” 

The Ninth Circuit will decide whether Great Lakes Reinsurance must defend clothing company, In and Out, against a trademark infringement suit by Forever 21. The dispute focuses on exclusionary language in the general liability policy issued by Great Lakes to In and Out, which broadly bars coverage for claims stemming from violations of intellectual property rights, but which also excepts from the exclusion claims for copyright, trade dress and slogan infringement occurring in the company's advertisements. The appeal concerns last year’s ruling by a California federal judge that Great Lakes owed a defense because the underlying complaint raised a potential that In and Out’s advertising infringed Forever 21’s trade dress.

Retail developers continue to experiment with new concept designs for creating a shopping environment that will bring consumers back to brick and mortar. Along this pursuit to deliver a more attractive retail experience, developers of open-air shopping centers have started lobbying for relaxed open-container ordinances that would enable patrons to explore their retail districts with an alcoholic drink in tow. 

June commenced with another massive civil penalty. A manufacturer agreed to pay a $5.2 million civil penalty and maintain a compliance program for allegedly failing to immediately report defective floorboards in recreational off-highway vehicles. In a three-year period, the manufacturer received over 400 reports of floorboards cracking or breaking in one vehicle model and over 150 similar reports in two other models. Once the manufacturer filed its report, it allegedly underreported the number of floorboard incidents associated with one model and failed to identify altogether the floorboard incidents associated with the two other models. These omissions, according to CPSC staff, constituted a material misrepresentation. The CPSC accepted the settlement by a 4-to-1 vote.

When say-on-pay (i.e., shareholders with the right to vote on the remuneration of executives) was introduced under the Dodd-Frank Wall Street Reform and Consumer Protection Act, there was a requirement that companies conduct say-on-pay frequency votes every six years for shareholders to decide whether say-on-pay votes should be held every one, two or three years. Companies first held say-on-pay frequency votes in 2011, so for many companies the 2017 proxy season is the first time that shareholders have revisited the matter since then.

The Department of Justice’s (“DOJ’s”) often criticized rulemaking delays have resulted in no new website accessibility rules for places of public accommodation to receive notice of and implement. Notwithstanding the obvious due process concerns raised by these delays, more and more website accessibility cases are being threatened and filed every day. Most, not unexpectedly, settle. Winn-Dixie did not, and what happened next is worth a closer look.

This past week, several regulatory and self-regulatory actions made headlines that affect the retail industry.

As reported on Hunton's Employment and Labor Law Perspectives blog, over the past eight years, the NLRB has been unusually aggressive with its policymaking. Hunton & Williams' Labor and Employment partners Ryan A. Glasgow and Kurt G. Larkin discuss the current state of labor law, the NLRB and how it might change under the current administration.

Watch the 5-minute video.