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With the holiday shopping season in full swing, companies will soon begin the annual fight for every consumer dollar. But before companies can make the sale, they will face an even more daunting task: grabbing customer attention in the crowded world of online shopping.

As social media companies integrate shopping features into their base platforms, an industry shift often called “social commerce,” influencer marketing becomes an increasingly important method for driving sales.

As innocuous as those 30-second influencer marketing social media clips may seem to be, companies and influencers should be aware that the Federal Trade Commission (FTC) is keeping a watchful eye. This month, the agency issued dozens of warning letters to influencers for the lack of adequate disclosures in their social media posts as required by the recently updated FTC Endorsement Guides.Continue Reading Influencers on Notice: FTC Issues Warning Letters for Inadequate Disclosures

Supply chain disruptions and accompanying inflation for raw materials have challenged many businesses. A recent case involving paint retailer Sherwin-Williams shows how not to deal with these challenges. In a putative class action, plaintiffs accused Sherwin-Williams of surreptitiously adding a hidden “Supply Chain Charge” to every sales transaction. On October 24, the U.S. District Court for the Northern District of New York said the claims may proceed.

The plaintiffs allege they suffered economic injury as a result of a “deceptive bait-and-switch scheme” perpetrated by Sherwin-Williams. They asserted claims of deceptive acts or practices under New York General Business Law § 349, breach of contract, and unjust enrichment. On Sherwin-Williams’ motion to dismiss, the Northern District of New York tossed the unjust enrichment claim, but held that the Section 349 claim and breach of contract claim were plausibly alleged.Continue Reading Supply Chain Surcharges? Plaintiffs Say You Better Not Conceal Them

As the bustling holiday season quickly approaches, and in light of COVID-19’s impact on global supply chains, retailers face many challenges in their business operations, but also in maintaining regulatory compliance relating to shipping—and shipping representations. This is especially true for retailers selling goods online, by phone, or by mail, who must be mindful of both federal and state regulations.

Major state regulators are already cracking down. Four California county district attorneys recently filed suit against Kanye West’s Yeezy Apparel brand, alleging violations of California Business & Professions Code, Section 17538, which requires in pertinent part that businesses selling goods online (or by mail or telephone) to California customers must ship the goods within 30 days of a completed order or provide a full refund, send written notice of the delay and offer a refund, or provide substitute goods and offer a refund. The law allows the state to seek civil penalties of $2,500 for each violation.Continue Reading ‘Tis the Season—to Update Your Shipping Representations

Dollar General, Dollar Tree and Family Dollar will pay $1.2 million in fines and restitution to the New York Attorney General to resolve allegations that they routinely sold expired medicines and failed to comply with New York’s bottle deposit law. The bulk of the penalty – $1.1 million – will be paid by Dollar General, which is accused of selling two types of motor oil that have been obsolete for almost 30 and 90 years, respectively.

Investigators began secretly shopping at the discount chains in March 2016, inspecting shelves for expired products. At stores throughout the state of New York, they found over-the-counter medicines for sale months past their expiration dates. At Dollar General stores, they also found at least two types of store-brand motor oil that is not suitable for most modern car engines. One type of motor oil has been obsolete since 1988, and the other since 1930. These motor oils were placed on store shelves next to, and used packaging with the same or similar descriptors as, brand-name motor oils that are suitable for modern engines. There were no signs or other indicators to warn customers that they should be used only on antique vehicles.Continue Reading A Day Late and $1.2M Short: NY AG Fines Dollar Store Chains for Selling Expired Medicines and Obsolete Motor Oil, Violating Bottle Deposit Law

Venable clients that engage in selling goods and/or services over the internet should evaluate whether the recent Supreme Court decision in South Dakota v. Wayfair will now require them to begin collecting sales and use taxes in states where they have not previously done so. In the Wayfair Case the Court held that a state can require a remote vendor to collect its sales/use tax based merely on “economic nexus” with the state. The prior law standard requiring a remote vendor to have physical presence in a state has been overturned. Under the South Dakota law at issue in Wayfair, an internet retailer is required to collect South Dakota sales tax if it has more than $100,000 of sales into the state or more than 200 sales transactions in the state over the course of a year.

Our chart below lists the states that currently have authorized an economic nexus standard similar to that approved in Wayfair and lists the threshold requirements for each state. This list can be expected to grow as states without economic nexus laws for sales tax purposes rush to alter their existing standards to take advantage of Wayfair’s liberalization of the sales tax nexus rules.Continue Reading Internet Vendors Need to Pay Attention to these States After U.S. Supreme Court Alters Sales Tax Collection Standard

States can now require internet retailers to collect sales taxes even if the retailer has no physical presence in the state.

In South Dakota v. Wayfair, the Supreme Court overturned its 1992 decision in Quill Corporation v. North Dakota, which limited a state’s ability to impose its sales tax on an out-of-state retailer. In Quill the Court ruled that only a retailer that had a physical presence in a state by means of employees, stores, warehouses, or the like was required to collect such state’s sales tax. The Quill decision is one of the main reasons why many e-commerce retailers did not have to collect sales tax for sales to out-of-state residents.Continue Reading States Win and E-Retailers Lose as U.S. Supreme Court Alters Sales Tax Collection Standard

comicbook scareScrolling online through the California Business and Professions Code the other day, I was struck by a frightening sight. My pulse raced. My jaw dropped. I called out to an associate for help. I wanted to make sure that what I was seeing was real, i.e., that I wasn’t out of my mind. Many lawyers have read California Business and Professions Code Section 16600 by which California outlaws covenants not to compete. But click a few code sections over and you’ll be shocked!

Section 16603 has to be one of the strangest (and most seasonally appropriate) laws ever. It targets the two-for-one sale of comic books, stating: “Every person who, as a condition to a sale or consignment of any magazine, book, or other publication requires that the purchaser or consignee purchase or receive for sale any horror comic book, is guilty of a misdemeanor” punishable by jail time up to six months or a fine up to $1000. The section goes on to define a horror comic book with specificity:Continue Reading Creepy Code Section Alert: Cal. Bus. and Prof. §16603

e-commerceAs states continue their quest to compel online vendors to collect sales and use tax on sales to customers located in the state and to subject such vendors to state income tax, a current trend has been targeting vendors selling via online marketplaces. Some states assert that the presence of inventory held for a vendor or the presence of the marketplace provider/facilitator in a state acting on behalf of a vendor is sufficient nexus or connection of the vendor with the state to subject the vendor to the state’s taxing jurisdiction. 

The Multistate Tax Commission (MTC), an intergovernmental state tax agency that works on behalf of the states and taxpayers to facilitate the administration of state tax laws, is coordinating a Voluntary Disclosure Settlement program (VDA program) to enable retailers that sell their products online using a third-party marketplace provider/facilitator (such as Rakuten) to register with a state for current and prospective tax compliance and at the same time settle tax obligations for prior years.Continue Reading Marketplace Vendors Offered Voluntary Closing Agreement Program for State Tax Exposure

For Medical Use OnlyThe New York State Department of Health recently proposed a new set of regulations that would loosen marketing and advertising laws affecting New York’s medical cannabis program. The proposed regulations were published in the New York Register on August 23, 2017, and are open for a 30-day public comment period before the new regulations are to take effect.

The proposed regulations ease restrictions for registered organizations and dispensing facilities’ exterior signage by eliminating the previous requirement that all registered cannabis dispensaries display no more than one exterior black-and-white sign. The new regulations also removes the previous restriction that banned dispensaries from illuminating, “at any time, a sign advertising a marihuana product located on any physical structure.”Continue Reading Proposed Regulations Update Advertising for Cannabis Organizations

Risk-free trialIt’s no secret that automatic renewal (or continuity or negative option programs) are on many regulators hit lists. Regulators argue that consumers are often unaware that they have signed up for services or products for which they will be billed on a monthly basis unless and until they cancel, particularly when it involves a free trial period. In some cases cancellation may not always be easy and the billing descriptor that appears on the consumer’s credit card statement may differ significantly from the branded product or service name. Finally, otherwise busy consumers may simply forget about the upcoming renewal, particularly if the subscription term is lengthy.

Regulators have responded by bringing numerous law enforcement actions, many of which seek to heighten disclosure requirements. At the federal level many of these enforcement actions are based in part upon ROSCA, the Restore Online Shoppers Confidence Act. (See our previous posts on ROSCA here.) The Unsubscribe Act, introduced in the House of Representatives earlier this year, seeks to tighten legal requirements for such programs even further.Continue Reading Congress Takes Further Aim at Negative Option Programs