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FDA Labeling Guidance: Making Structure/Function Claims for Dietary Supplements

Dietary supplement manufacturers seeking to explain and market their products must carefully craft statements on supplement labels to ensure compliance with the Food and Drug Administration’s (“FDA’s”) regulations regarding supplements.

The FDA permits supplements to so-called “structure-function claims,” which are claims that describe the role of a nutrient or dietary supplement “intended to affect the structure or function in humans” or characterize the “documented mechanism” by which the nutrient acts to maintain such structure or function, but do not claim to “diagnose, mitigate, treat, cure, or prevent a specific disease or class of diseases.”  21 U.S.C.A. § 343.  Structure/function claims are permissible without pre-approval by the FDA if the statement satisfies three criteria:

(a) the manufacturer possesses “substantiation” that such statement is truthful and not misleading;

(b) the product label “prominently displays” the following statement: “This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.”; and

(c) the manufacturer notifies the FDA within 30 days after the product is first marketed with the claim.

In contrast, “disease claims” are not permissible without FDA pre-market review and authorization under the rules for health claims or drugs, as appropriate. It is thus important to distinguish permissible structure/function claims from impermissible disease claims. A “disease” means “damage to an organ, part, structure, or system of the body such that it does not function properly (e.g., cardiovascular disease), or a state of health leading to such dysfunctioning (e.g., hypertension)

Retailers Face Class Actions Based on Automatic Renewal of Fee-Based Loyalty Programs

March 2, 2020

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Retailers are being targeted by class action lawsuits alleging that automatic renewal of loyalty programs requiring an annual fee violates California law. In the past year and a half, more than 100 lawsuits have been filed alleging violation of California’s Automatic Renewal Law, or ARL.[1]

The ARL took effect July 1, 2018 and prohibits automatic renewal of subscription or service fees without first presenting consumers with certain terms, and obtaining their affirmative consent.  Prior to charging a consumer a loyalty program fee, retailers should ensure that:

  • They obtain affirmative consent of the consumer to “automatic renewal offer terms” that are presented in a “clear and conspicuous” manner. The law specifies that this means in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks, in a manner that clearly calls attention to the language.
  • Their automatic renewal offer terms include (1) that the subscription will continue until the consumer cancels; (2) the description of the cancellation policy that applies; (3) the recurring charges that will be charged as part of the automatic renewal, and that the amount of the charge may change, if that is the case, and the amount to which the charge will change, if known; (4) the length of the automatic renewal term, unless the length of the term is chosen by the consumer; and (5) the

FDA Extends Enforcement of New Nutrition Facts Label Another 6 Months

Although January 1, 2020 was the deadline for many companies to implement the new Nutrition Facts label, the FDA states on its Industry Resources on the Changes to the Nutrition Facts Label web page that it will not take any enforcement actions for the first six months, or until after July 1, 2020.

The FDA initially set a general compliance date of July 2018. Manufacturers with annual food sales of less than $10 million were given an additional year to comply. In May 2018, the FDA extended those compliance dates “by approximately 1.5 years.”

The FDA has provided the following example illustrating what’s different about the new Nutrition Facts label:

Importantly, the new label requires:

  • Declarations for “added sugars” in grams and as a percentage of Daily Value (% DV);
  • Updated list of declared nutrients. Disclosure of vitamin D and potassium will be required. Calcium and iron will continue to be required. Vitamins A and C will no longer be required but can be included on a voluntary basis.
  • Continuing to retire “Total Fat,” Saturated Fat,” and “Trans Fat,” but no longer require “Calories from Fat,” since research shows the type of fat is more important than the amount.
  • Updated daily values for nutrients like sodium, dietary fiber and vitamin D; and
  • Updated serving sizes and labeling requirements for certain package sizes.

The FDA has also issued a

U.S. Department of Labor Targets Forced Labor in Fashion Industry

The U.S. Department of Labor (“DOL”) has allocated $22 million to target the growing issue of abusive labor practices in the fashion industry, and specifically, to combat the use of child and forced labor in supply chains, especially in South America, Africa, and Southeast Asia.

Clothing production is booming. In fact, according to a report by sustainability consultant McKinsey & Company, clothing production doubled from 2000 to 2014.  The global market now produces more than 100 billion garments a year, according to a report by the Ellen MacArthur Foundation.  At the same time, driven by “fast fashion,” the amount of wear we get from clothes has dropped by 36 percent, with almost 65 percent of all garments ending up in a landfill or being incinerated.

With more clothing being produced, production supply chains have already become a concern, raising concerns for the potential of forced labor, human trafficking, and/or indentured child labor. The DOL estimates that there are currently 25 million people in forced labor, and of those, over 4 million are children.

There are efforts to counteract this problem. For example, the DOL maintains a list of products (and corresponding locations) that are believed to be at higher risk of being produced by forced or indentured child labor.  Importantly, there probably many more international occurrences that are not identified on this list.

Where Are the Funds Going?

According to the DOL, the funding will be used to:

  • Support the International Labor Organization’s work with

FCC Urged to Take Action on Litigation-Fueling Autodialer Issue Under TCPA

February 14, 2020

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Retailer groups, including the National Retail Foundation, the U.S. Chamber of Commerce, and the Restaurant Law Center, are part of a coalition urging the Federal Communications Commission to clarify what constitutes an automatic telephone dialing system under the Telephone Consumer Protection Act (TCPA) following a recent decision by the Eleventh Circuit that deepened the legal divide over the issue.

The TCPA prohibits “using any automatic telephone dialing system” to call a cellular telephone number, except for emergency purposes or with the prior express consent of the called party, or to collect a debt owed to the U.S. government.[1]

The statute defines an “automatic telephone dialing system” (or autodialer) as “equipment which has the capacity—(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.”[2]

Last month, the Eleventh Circuit narrowly interpreted the TCPA as stating that an autodialer requires random or sequential number generation, and does not include equipment that dials from a preexisting list of numbers. This directly conflicts with a prior Ninth Circuit decision, which broadly interpreted an autodialer to include all devices with the capacity to automatically dial numbers even if not randomly generated.

A previous FCC order defining what constitutes an autodialer was invalidated by the D.C. Circuit in 2018, because it could have subjected “ordinary calls from any conventional smartphone to the Act’s coverage.”

Since that time, despite two rounds of public comment, the FCC has remained largely inactive

Survey of Privacy Practices: One Quarter of U.S. Retailers Block European Visitors

January 31, 2020

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Our Survey of the Retail Industry’s Privacy Practices discloses that 25 percent of U.S. retailers have decided to block European visitors from reaching their websites.

There are two situations in which the GDPR purports to apply extraterritorially to companies that have no contact to the European Union. The first situation, described in Article 3(2)(a) of the GDPR, occurs when a company that has no contacts with the European Union “offer[s] goods or services” to a person that is located in the European Union.  The second situation, described in Article 3(2)(b) of the GDPR, occurs when a company that has no contacts with the European Union “monitor[s]” the “behaviour” of someone “as far as their behaviour takes place within the Union.”[1]

While the GDPR implies that merely having an internet website that is accessible to European Union residents is not enough for the GDPR to attach, there is uncertainty about whether a European supervisory authority might attempt to apply the GDPR to a website that is accessible to European Union residents.  Some companies have attempted to mitigate that risk by geofencing their websites – i.e., blocking any individual from visiting their website from a European IP address.

In order to help companies understand and benchmark industry practices, BCLP randomly selected a sample of 33 percent of the Fortune 500 companies identified as being predominantly within the “retailing” sector and then visited their homepages from a server with an IP address in the United States and from a server

Do Your New Year’s Resolutions Include Steps to Prevent Slavery and Human Trafficking?

January is National Slavery and Human Trafficking Prevention Month in the US (culminating in the annual observation of National Freedom Day on February 1, 2020) and this year is the 20th anniversary of the Trafficking Victims Protection Act (US) that established trafficking and related offenses as federal crimes.

Human trafficking and modern slavery are often hidden and pervasive crimes that know no boundaries and include forced and compulsory labour, debt bondage / bonded labour, human trafficking, child slavery, descent based slavery or forced / early marriage. As many as 40.3 million people – adults and children — are trapped in a form of modern slavery around the world, including in the United States.  However, in an inter-connected and transparent global business environment not only are these crimes increasingly visible but also the focus of targeted US domestic, US inter-agency and international governmental cooperation and business action.  It is clear that human trafficking and modern slavery are an intolerable blight on any society dedicated to freedom, individual rights, and the rule of law, but these crimes fundamentally leverage economic exploitation and are often also financial crimes (or linked to other criminal economic activity).  Human trafficking and modern slavery are an intolerable blight on any society dedicated to freedom, individual rights, and the rule of law, but these crimes fundamentally leverage economic exploitation and are often also financial crimes (or linked to other criminal economic activity).

The US Department of Labor’s integrated program to combat these criminal practices domestically and internationally addresses

Survey of Retail Industry’s Privacy Practices

December 30, 2019

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Survey of Retail Industry’s Privacy Practices

December 30, 2019

Authored by: BCLP and David Zetoony

There is no one strategy for disclosing privacy practices to consumers, or for complying with the federal and state laws (including the California Consumer Privacy Act, or CCPA) that govern data privacy.  The following summarizes current trends within the retail industry:

  • Privacy notices are, on average, 7.5 months old.
  • Retail industry privacy notices are significantly newer than the privacy notices of companies in other industries.
  • The majority of retailers have not updated their privacy notices for the CCPA.
  • Retailer privacy notices that reference enumerated categories tend to use lists instead of tables.
  • Retailers that discuss the sale of information are evenly split between selling and not selling data. The majority of retailer privacy notices, however, are silent or ambiguous about sale.
  • The majority of retailer privacy notices do not include a “Do Not Sell” option. Retailers are slightly more likely, however, than other companies to include a Do Not Sell option.
  • Some retailers disclose that they sell information, but are choosing not to provide a Do Not Sell option.
  • A small, but significant, number of retailers that don’t sell personal information are still providing a “Do Not Sell” option. That trend departs from companies outside the retail industry.
  • Most retailers are not including a “Do Not Sell” link on their homepage.
  • Some companies provide a Do Not Sell option but are not highlighting the option on their homepages.
  • The percentage of retailers that offer access and deletion rights is significantly less than the percentage of overall companies that offer

Countdown to the CCPA: What is Legally Considered to be a Data Breach?

When the California Consumer Privacy Act (“CCPA”) takes effect in January 2020, California will become the first state to permit residents whose personal information is exposed in a data breach to seek statutory damages of between $100-$750 per incident, even in the absence of any actual harm.  The class actions that follow are not likely to be limited to California residents, but will also include non-California residents pursuing claims under common law theories.  A successful defense will depend on the ability of the breached business to establish that it implemented and maintained reasonable security procedures and practices appropriate to the nature of the personal information held.  The more prepared a business is to respond to a breach, the better prepared it will be to defend a breach lawsuit. To help our clients get ready for the CCPA, Bryan Cave Leighton Paisner is issuing a series of data security articles to empower organizations to focus on breach readiness.

Understanding the Nature and Scope of Data Security Events, Incidents, and Breaches

It has been several years since data breaches first emerged as the lead news story.  In 2016, then attorney general Kamala Harris published the California Data Breach Report to provide a comprehensive analysis of reported data breaches from 2012 to 2015.  During that four-year time period, nearly 50 million records of Californians had been breached, the majority resulting from security failures.  Despite increasing security and technology advancements, companies are still grappling with how to stay ahead of hackers and when

FTC Issues Guidance on Proper Disclosures for Social Media Influencers

November 6, 2019

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Many retailers and online businesses leverage social media to boost brand awareness and promote product sales. The FTC recently has issued guidance on what social media influencers need to do when endorsing products. The rules are common sense, but influencers may not adopt them completely, creating risk for themselves and potentially for businesses whose products they promote. Marketing teams responsible for sponsorships, partnerships and endorsements should review the FTC’s new guidance and ensure that their influencers are being clear and direct about sponsored product placements. While the FTC indicates that influencers have the obligation to ensure their promotions are truthful, plaintiffs, in the context of potential consumer class actions, may attempt to attribute risk back to your business.

FTC’s Disclosures 101 for Social Media Influencers is an easy read (published  November  5, 2019), and according to the FTC’s press release of the same date, it updates the FTC Endorsements Guides and a related Frequently Asked Questions document.   A key overarching theme is that the “endorsement message should make it obvious when [the influencer has] a relationship (‘material connection’) with the brand.”  According to the FTC, good disclosure is “important because it keeps [the influencers] recommendations honest and truthful, and it allows people to weigh the value to [the] endorsement.”

When to Disclose. In this section, the FTC highlights a number of important issues including:

(a) Disclosure is required if the influencer has any “financial, employment, personal, or family relationship with a brand.”

(b) Anything of value,

What Rules Will Govern Claims Relating to CBD in Food, Beverages and Supplements?

Within the last two months, three class action lawsuits have been filed in federal courts against companies that sell ingestible products containing cannabidiol (CBD), a chemical compound found in the cannabis plant, alleging that the products contain significantly less CBD than advertised.  Sellers of other food and supplement products facing this type of claim regarding their non-CBD products’ content have successfully argued that such claims are preempted by the federal Food, Drug and Cosmetic Act (FDCA) and its implementing regulations.  But the Food and Drug Administration (FDA) has not yet approved CBD as an ingestible ingredient, food or dietary supplement.  And while some states have followed the FDA’s lead, other states have legalized sales of ingestible, hemp-derived CBD products.  This can leave food, beverage, and supplement companies confused about what rules apply to CBD as an ingredient in ingestible products.

The first of the three class actions was filed on August 16, 2019, in the United States District Court for the Southern District of Florida.  Plaintiff alleges that defendants operate “JustCBD,” which advertises and labels ingestible products as containing certain amounts of hemp-derived CBD, when they really contain much less.  Plaintiff allegedly tested defendants’ products and found that (1) the “JustCBD honey Liquid Tincture” has only 48.92mg of CBD even though it purports to have 100mg, and (2) the “JustCBD Apple Rings Gummies” contain a non-detectable quantity of CBD even though they purport to contain 250mg of CBD.  Plaintiff claims he relied on representations and warranties regarding the quantity of

Are Your Gift Cards Accessible? Lawsuits Assert Gift Cards Should Be Offered in Braille

In addition to concerns surrounding the accessibility of a business’ website, retailers now have a new concern – the accessibility of their gift cards. Plaintiffs have recently filed a number of lawsuits alleging that the failure to sell gift cards containing writing in Braille is a denial of full and equal access to blind and visually impaired individuals, and thus is a violation of Title III of the Americans with Disabilities Act (“ADA”).

On October 24, 2019, twelve lawsuits were filed in the United States District Court for the Southern District of New York against well-known retailers, restaurants, and other businesses. The complaints allege, in part, that because store gifts cards are generally the same size and texture as credit cards, they are indistinguishable by a blind person from credit cards and other gift cards.

To support this new theory of ADA liability, the complaints provide some background into the gift card market. They cite industry surveys stating that sales of store gift cards amount to $400 billion in 2019 and that such sales grow annually at 10 percent.  They also allege that store gift cards increase revenue for merchants because they foster communication and brand loyalty, increase sales, and because consumers often spend more money than the amount of the gift card.

The complaints allege claims for violation of the ADA, violation of the New York State Human Rights Law, and violation of the New York City Human Rights Law. For relief, the plaintiffs seek both declaratory and injunctive

Avoid a Catastrophic Loss From a Customer’s Bankruptcy — Five Tips

One day, you get a notice in the mail that an important customer has filed chapter 11. Your customer recently paid $250,000 on invoices that were delinquent for several months and still owes you $500,000. The customer, a brick-and-mortar store, sent form letters to its vendors expressing optimism that the chapter 11 process will allow the store to continue to operate while it locates a buyer which will continue to operate the store.

A few weeks later, no buyer has been located and the customer seems headed into a liquidation. Your inventory will probably be dumped on the market at bargain prices — potentially depressing the price of your product.  You may not see any of the proceeds of the liquidation, which will most likely go to pay the customer’s bank lenders. Lastly, you are losing a significant customer.

Not only are you looking at potentially writing off $500,000 in uncollectable accounts receivable, but, after speaking to bankruptcy counsel, you discovered that you may have to repay the $250,000 you recently were paid.

Given the size of your business, this outcome is serious, if not catastrophic.

If you are facing or have ever faced this scenario, you are not alone. This is an increasingly common situation, particularly in the current, challenging retail environment.

How can this situation be avoided or mitigated? Here are 5 tips.

1. Recognize the warning signs

  • When a customer files bankruptcy, vendors who are owed money will often say there were warning signs for months

California Chamber of Commerce Challenges Prop. 65 Warning for Acrylamide in Food and Beverage Products

October 18, 2019

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The California Chamber of Commerce has filed a lawsuit seeking to prevent the state from “enforcing a requirement to provide a false, misleading, and highly controversial cancer warning for food and beverage [] products that contain the chemical acrylamide.” Cal. Chamber of Commerce v. Becerra, No. 19-0962 (E.D. Cal., October 7, 2019).

The complaint argues that although “certain governmental and scientific entities” have identified acrylamide as a carcinogen in laboratory animals, “[s]cientific studies in humans, however, have found no reliable evidence that exposure to acrylamide in food products is associated with an increased risk of developing any type of cancer. In fact, epidemiologic evidence suggests that dietary acrylamide—i.e., acrylamide that forms naturally in normal cooking of many food products—does not cause cancer in humans or pose an increased risk of cancer in humans. Indeed, some food products that contain acrylamide (e.g., whole grains and coffee) have been shown to reduce the risk of certain diseases, including cancer.”

The Chamber argues that California’s Office of Environmental Health Hazard Assessment (OEHHA) requires businesses to warn consumers about potential exposure to acrylamide under the state’s Safe Drinking Water and Toxic Enforcement Act (Prop. 65) despite the fact that “neither OEHHA nor any other governmental entity has determined that acrylamide is a known human carcinogen, and in fact OEHHA has acknowledged that the agency does not know that acrylamide increases the risk of cancer in humans.” Therefore, the Chamber argues, the acrylamide warning requirement violates the First Amendment “by compelling Plaintiff’s members and other entities that produce, distribute,

The ABCs of AB-5: How California’s New Employee Classification Law May Impact Retailers

Following passage and signature into law of California Assembly Bill 5 (“AB-5”), retailers should be aware of how the new law affects whether they can classify workers as independent contractors.

AB-5 codifies a decision last year by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court of Los Angeles establishing the “ABC test” for determining whether workers can be classified as independent contractors for purposes of wage order claims, and extends the test beyond wage order claims to the California Labor Code, generally.  The new law takes effect January 1, 2020.

Although AB-5 is making headlines for its potential impact on the gig economy, the law may impact any business that uses independent contractors.  For retailers, this may include workers ranging from freelance artists to models.

Under AB-5 and the “ABC test,” a worker is considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

  • The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  • The person performs work that is outside the usual course of the hiring entity’s business.
  • The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
  • Under AB-5, the “ABC test” now applies to a variety of claims, including claims for overtime,

    CCPA Loyalty Club FAQ: Is a Retailer Required to Delete Information Concerning a Loyalty Member?

    October 11, 2019

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    Typically no.

    Loyalty programs can be, and are, structured in a variety of different ways.  Some programs track dollars spent by a consumer, others track products purchased.  Some programs are free to participate in, others require consumers to purchase membership.  Some programs offer consumers additional products, other programs offer prizes, money, or third party products.  All loyalty programs share one thing in common however – they provide some form of reward to a consumer in recognition of (or in exchange for) their repeat purchasing patterns.

    One of the rights conferred by the CCPA is the ability of a consumer to request that a business delete personal information “which the business has collected from the consumer.”  While numerous retailers have expressed confusion regarding whether that right requires the deletion of loyalty program related data, it is important to remember the right to deletion is not an absolute right and may rarely apply in the context of a loyalty program.

    As an initial matter, because the right to deletion is limited to information that the business has collected “from” the consumer, if a business receives a deletion request under the CCPA, there is a strong argument that the business is permitted to keep information about the consumer that it developed itself (e.g., its transactions or experiences with the consumer), or information that it received from third parties (e.g., third party businesses that may participate in the loyalty program).  As this information was not collected “from” the consumer, it arguably does not fall

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