Hunton Retail Law Resource

The CPSC (by a 3-1 vote) recently filed an administrative complaint against Amazon.com, Inc. (“Amazon”) seeking to force the characterization of Amazon as a “distributor” of products under the Consumer Product Safety Act.  If the CPSC prevails on that characterization, Amazon would become responsible under the CPSA for recalling potentially hazard products sold via its “fulfilled by Amazon” program.   Although Amazon has engaged in recalls on what it has characterized as a voluntary basis, it has not conceded CPSC authority over it as a distributor.  The Amazon complaint that tees this issue up for judicial resolution involves carbon monoxide detectors that fail to alert, children’s pajamas that do not meet flammability requirements, and hair dryers without required water immersion protection devices.  Amazon has stopped selling some of these products, notified consumers who purchased the products about the potential hazards, and offered refunds via Amazon gift cards.  The CPSC views these steps as insufficient and aims to force Amazon to issue recalls and destroy the returned products.  Under the CPSA, a “distributor” is “a person to whom a consumer product is delivered or sold for purposes of distribution in commerce.”  15 U.S.C. § 2052(a)(8).  Under the “fulfilled by Amazon” program, merchants keep title to their products but store them at Amazon fulfillment centers, where Amazon packs and ships the products for a fee.  Although the CPSC views Amazon as a “distributor,” Amazon argues it is merely an intermediary for other retailers because it does not hold title to the products and therefore cannot be held liable for them.

On July 29, 2021, the US Department of Labor filed a final rule rescinding the Trump-era “Joint Employer Status Under the Fair Labor Standards Act” rule (29 CFR part 791), which went into effect on March 16, 2020.

The COVID-19 pandemic caused supply chain interruptions across industries, from toilet paper and cleaning supplies, to red meat.  Although most states have resumed close to “normal” capacity and operations, the nation still faces an historic and unprecedented lumber shortage.  The shortage is the result of growing demand for bigger homes, new construction, and a surge of new DIY-ers amid the pandemic, coupled with supply chain disruption caused by the virus as production cuts and government shutdown orders stifled production at both domestic and foreign mills.  As a result of this perfect storm, prices for lumber and other building materials have skyrocketed since the start of the pandemic, and have only just begun to fall, as the increasing supply struggles to catch up with still very high demand.  According to the National Association of Home Builders (NAHB), the average price of a newly constructed single-family home has increased by about $36,000 since April 2020, and the “price per thousand board feet” went from $350 to over $1,400 in May 2021.

These two worlds are colliding. If any of the products you sell contain hidden ‘forever chemicals’ you will be subject to EPA’s new reporting rule.

On July 21, 2021, the Federal Trade Commission announced increased scrutiny on purported restrictions of consumers’ “right to repair.” The statement, approved unanimously by the Commissioners, comes on the heels of the FTC’s "Nixing the Fix" report released to Congress earlier this year. That report asserted that some manufacturers use “anticompetitive practices” to limit the ability of consumers and independent repair shops to fix and maintain products. According to the FTC, those limitations “may increase costs, limit choices, and impact consumers’ rights under the Magnuson-Moss Warranty Act.”

On July 21, 2021, during an open Commission meeting, the Federal Trade Commission (Commission) voted to retain its longstanding Care Labeling Rule. This decision came after the Commission previously sought comment (in July 2020) on a proposal to repeal. The Rule, which has been in effect since 1971, requires manufacturers and importers to affix labels to certain garments and other goods providing care instructions, including dry cleaning or washing, bleaching, drying and ironing.

At the Federal Trade Commission’s (FTC) July 1 meeting, it finalized a new “Made in USA” Rule that was almost two decades in the making. The FTC issued a notice of proposed rulemaking in June 2020 and received 700 comments from stakeholders. During that time, the FTC has aggressively policed Made in USA claims (through an enforcement policy statement), settling a historic, million dollar follow-on Made in USA enforcement action and obtaining a six-figure settlement with an online retailer.

The CPSC has recently focused its enforcement efforts on children’s products.  Fisher-Price recalled two of its infant sleep products—Rock ‘n Glide Soothers and Soothe ‘n Play Gliders—after four infant deaths were reported involving the first product.  All four infants were placed in the products unrestrained on their backs and were later found on their stomachs deceased.  This news comes after the CPSC’s actions last month to approve a new federal standard for infant sleep products and to recall two more products related to infant sleep.

Business re-openings, increased hiring, and a fresh batch of stimulus checks have driven a recovery in retail sales during the first half of 2021.  However, the collective sigh of relief that many retailers (and their landlords and lenders) are breathing is not being shared by all.  The recovery is not benefitting every retailer evenly, and some may never recover their pre-pandemic sales as COVID-19 has accelerated trends towards e-commerce and away from larger brick and mortar locations.  Many commercial tenants who were unable to secure rent forgiveness from their landlords still owe rent from April and May 2020, when nearly half of commercial retail rents went unpaid.  As struggling retailers weigh their options, some recent cases involving The Gap, Inc. offer insight into how courts may treat attempts by commercial tenants to break their leases using COVID-19 as justification.

In a recent post (“Environmental, Social and Corporate Governance: What are the Risks, Really?”), we discussed the various risks, trending issues, and emerging concerns arising from environmental, social, and corporate governance factors (“ESG”). As noted previously, neglecting ESG considerations can result in a number of risks to a company, including risks associated with the reputational, financial, and legal impacts of handling ESG issues poorly. We also observed how managing ESG issues well can enhance corporate value and performance, and create competitive advantages for companies. Given these emerging risks and opportunities, it is perhaps unsurprising that ESG has begun to play a larger role in the M&A context in recent years.