Hunton Retail Law Resource

This past week, the following regulatory and consumer protection actions made headlines:

Outlet Retailers Sued over Allegedly Deceptive Pricing Practices

Class action lawsuits against several retailers, including Burberry and Dooney & Bourke, allege that outlet discount prices tags that compare the outlet price with purported retail prices deceive consumers into believing they are getting a bargain when, in fact, they are not. Reference pricing rules (e.g., the FTC’s Guides on Deceptive Pricing) prohibit sellers from offering fictitious bargains. In these cases, the plaintiffs allege that the retailers’ practice of offering for sale made-for-outlet goods that never were sold at the referenced price is deceptive.

As we previously reported in Looking Back: Retail Antitrust Enforcement in 2015, last year was a booming year for consumer products mergers (and the antitrust review of those mergers). With a robust market and incentives strongly in favor of further acquisitions, we expect the trend to continue in 2016.

2015 was a record year for mergers and acquisitions activity, with over $4.7 trillion in transactions announced. This record volume has kept U.S. antitrust authorities fully engaged.

Federal antitrust agencies reviewing more M&A transactions. Increased M&A activity in 2015 kept U.S. antitrust agencies busy. The number of transactions reported under the Hart-Scott-Rodino Act increased by 25 percent from FY2013 to FY2014, and the upward trend appeared to continue, although official statistics are not yet available.

The antitrust cops are on the beat. Implementing their “litigation readiness” focus, the U.S. antitrust agencies brought many merger challenges in 2015. Combined, the Department of Justice (“DOJ”) and Federal Trade Commission (“FTC”) sued to block over 25 mergers, including Staples/Office Depot, Sysco/US Foods, Electrolux/General Electric appliances business, Dollar Tree/Family Dollar and more.

In 2015, there was a record number of activist shareholder campaigns in the United States. Although activist hedge funds targeted companies across numerous industries, several retail companies found themselves in activists’ crosshairs. These included companies such as fast-food restaurant chains, convenience store operators, auto parts retailers and department store retailers.

The Securities and Exchange Commission (“SEC”) recently announced it settled charges against the Monsanto Company (“Monsanto”) regarding its accounting practices surrounding the sale of its popular Roundup herbicide. Monsanto “agreed to pay an $80 million penalty and retain an independent compliance consultant to settle charges that it violated accounting rules and misstated company earnings.” Two Monsanto accounting executives and one sales executive also agreed to pay penalties to settle charges that were brought against them. The case underscores for both manufacturers and retailers that financial reporting and disclosures cases continue to be a high priority for the SEC.

This past week, the following regulatory and consumer actions made headlines:

National Advertising Division Weighs in on “Scary Bleach” Claims

After a challenge by The Clorox Company, the National Advertising Division (“NAD”) recommended that Church & Dwight, the maker of OxiClean White Revive non-chlorine bleach, modify its television ad campaign suggesting that chlorine bleach could be “scary.” The commercials in question highlighted garment care labels directing consumers to “use only non-chlorine bleach, when needed,” thus implying that Chlorox’s product was damaging to the kinds of white garments depicted in the ads. The NAD found that Church & Dwight was required to provide a reasonable basis for its use of care labels in its ads, particularly advertising claims that denigrated Chlorox’s product. This decision followed on a 2014 NAD recommendation that Church & Dwight avoid conveying the unsupported message that chlorine bleach is damaging to white garments.

As reported on the Hunton Employment and Labor Law Blog, the United States Supreme Court has denied a restaurant manager’s petition seeking review of whether parties may stipulate to the dismissal with prejudice of a lawsuit alleging violations of the Fair Labor Standards Act (“FLSA”), or whether judicial or Department of Labor (“DOL”) approval is a prerequisite to such a dismissal, as the Second Circuit held in his case, Cheeks v. Freeport Pancake House, Inc. Having declined the petition for writ of certiorari, FLSA lawsuits will remain more difficult to resolve for employers in New York, Connecticut and Vermont.

M&A in 2015: Shattering prior records. With the economy in a modest recovery and with cheap financing readily available, M&A activity was at an all-time high in 2015. Surpassing the prior record of $4.3 trillion in deals in 2007, 2015 saw M&A activity of $4.7 trillion worth of transactions, of which approximately half involved U.S. companies. In fact, U.S. deals alone exceeded $2 trillion for the first time ever.

Each week, we will present a summary of key consumer protection developments affecting the retail industry. This past week, the following regulatory and consumer actions made headlines:

FTC Continues Focus on False Weight Loss Claims, Settles with Sale Slash for $43 million

After a nearly year-long litigation, California company Sale Slash LLC has agreed to pay $43 million to settle Federal Trade Commission charges that the company deceptively sold “bogus” weight loss pills, including through unauthorized celebrity endorsements. As part of the settlement, Sale Slash may not represent that its products are endorsed by any specific individual, or claim that its products aid in weight loss or are safe for consumers unless the claims are supported by “competent and reliable scientific evidence.”

Prospective buyers of property for retail development face a plethora of issues when negotiating a purchase from a potential seller. Aside from the obvious issues of purchase price, contingencies and financing, prospective Southern California buyers are also confronting issues related to the availability of parking. As developers try to maximize their leasable footprint, there is a growing trend to look to subterranean parking, according to James W. Abbott, Jr., a broker at Realty Advisory Group in Los Angeles, California, who specializes in retail and institutional sales in the hot Venice Beach area.