Hunton Retail Law Resource

October was filled with frights as malfunctioning electronics took center stage. With personal panic devices failing to operate and diving computers posing drowning risks, manufacturers should keep in mind that life-threatening hazards dramatically increase their potential liability.

This past week, several consumer actions made headlines:

Hyundai and Kia Set State Attorneys General Investigations for $42.1 Million

Hyundai Motor Co. and Kia Motor Corp. have agreed to pay $42.1 million to settle claims by the Attorneys General of 33 states and the District of Columbia that the companies misrepresented mileage and fuel economy ratings for certain vehicles. Hyundai issued a statement regarding the settlement, noting that it contains no admission of any wrongdoing. The companies previously paid $100 million to settle claims that they had misrepresented emissions to the U.S. Environmental Protection Agency, and $225 million to a consumer class for overstating the fuel efficiency of their vehicles.

Traditional shopping malls across the country are facing a decreasing amount of customers, declining profits, and, in certain cases, overall viability. Though numerous specialty malls continue to be quite profitable, many regional shopping malls are not as fortunate. Online retailers dominate an ever increasing share of the retail market, and the retailers that have traditionally made up mall tenants may no longer see the value in as many, or any, brick and mortar stores. Due in large part to the convenience and success of online retailers, American consumers generally spend less time shopping at brick and mortar stores, opting instead to shop from their computers or other media devices. In response, and out of necessity, major department stores have dramatically consolidated their number of locations over the past few years. Regional malls anchored by troubled department stores such as Sears and Macy’s are perhaps faring the worst. 

This past week, the FTC and DOJ issued an 11-page guidance document (the “Guidance”) aimed at protecting employees against anticompetitive conduct with respect to naked wage-fixing and agreements, in which companies agree on salary or other terms of compensation, and anti-poaching agreements, in which companies agree not to recruit each other’s employees. The Guidance for human resource (“HR”) professionals and hiring managers relates to both hiring and compensation decisions.

The following consumer protection actions made headlines this week:

Epson to Make Advertising Modifications Following NAD Recommendations

Epson America Inc. has agreed to make some modifications to its advertising after a challenge from HP. The NAD recommended Epson discontinue its “loaded and ready” claim as it may confuse consumers into thinking its EcoTank printers are pre-filled with ink and ready to print immediately. The NAD reviewed numerous other Epson claims, including: (1) EcoTank printers offer “an unbeatable combination of convenience and value”; (2) EcoTank printers will “save [consumers] a small fortune on ink”; and (3) implied claims that EcoTank printers provide environmental benefits versus other printers. While the NAD found that the EcoTank printer can save a consumer money in the long run, it recommended that Epson discontinue its “small fortune” claim. The NAD also found that Epson provided support for its implied comparative environmental claims.

As reported in the Hunton Insurance Recovery blog, a federal judge in Alabama ruled Tuesday that a grocer could not rely on its legacy business insurance policies – including an “electronic data” coverage extension – to protect against third-party claims after customer data was compromised by a point-of-sale cyber attack. The decision in Camp’s Grocery, Inc. v. State Farm Fire and Casualty Company is another reminder to retail policyholders to ensure that their cybersecurity programs include both adequate cybersecurity safeguards and appropriate first-party and third-party cyber/crime insurance coverages. Failure to maintain either may jeopardize coverage for resulting cyber losses.

On October 19, 2016, Chemence, Inc., the manufacturer of products such as Hammer Tite, Krylex Glues and Kwik Fix, agreed to resolve an FTC challenge of the company’s “Made in USA” and “Proudly Made in USA” claims. The settlement  requires Chemence to pay $220,000 and substantiate any future “Made in USA” claims.

On October 11, 2016, the SEC announced its enforcement results for the fiscal year which ended on September 30, 2016. A total of 868 enforcement actions were filed, which set a new record for the most actions in a single year. The SEC filed 61 more actions in 2016 than in 2015, representing a year-over-year increase of almost 7.6 percent. The actions resulted in total disgorgements and penalties of over $4 billion, down slightly from last year’s $4.19 billion.

In a continued effort to implement the policy change announced by President Obama on December 17, 2014, to engage and empower the Cuban people, the Office of Foreign Assets Control (“OFAC”) has announced additional amendments to the Cuban Assets Control Regulations. These amendments, which went into effect on October 17, 2016, constitute the sixth time that the various sets of regulations governing Cuba have been amended.

The following consumer protection actions made headlines this week:

Mylan Reaches $465 Million Settlement Over Medicaid Classification

On October 7, 2016, Mylan Inc. announced that it had agreed to pay $465 million to resolve a DOJ investigation into Mylan's classification of EpiPen as a generic drug that resulted in Medicaid and Medicare receiving a significantly smaller rebate on every prescription since 2007. The DOJ, on behalf of the Centers for Medicare & Medicaid Services (“CMS”), investigated whether EpiPen should have been classified as a "branded" drug, which would have given CMS at least a 23.1 percent rebate, as compared to the 13.1 percent rebate CMS received for Mylan's self-classification of EpiPen as a generic drug. Mylan believed that although the injector pen device was patented, the relevant consideration for CMS classification is that the active ingredient in EpiPen is off-patent. The DOJ agreement resolves the government’s classification concerns, but does not address potential private class action litigation.