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EU’s General Data Protection Regulation Takes Effect in May — Are You Compliant?

February 22, 2018

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The European Union’s General Data Protection Regulation (“GDPR”), arguably the most comprehensive – and complex – data privacy regulation in the world, goes into force on May 25, 2018. As retailers and other companies prepare, there continues to be a great deal of confusion regarding the requirements of the GDPR.

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Beware of Phantom Price Markdowns: Ruling Against Hobby Lobby Highlights Risk

February 16, 2018

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Over the past several years, there has been a rise in class action lawsuits against retailers for allegedly deceptive price comparison advertising. Many of these lawsuits have alleged that retailers advertised “phantom” discounts from their own “former” or “original” prices, or “retail” or “list” prices at which the products were never actually offered for sale.

As we recently reported, fashion retailer Ann Taylor recently settled for $6.1 million a false discounting class action in New York federal court alleging that prices at its outlet stores were listed as “marked down” from prices that never applied to the items.

In another recent example, last week a California federal court denied Hobby Lobby’s motion to dismiss a proposed class action lawsuit alleging the retailer used a fake marked price to create the false perception that products were being sold at a discounted rate. In Chase v. Hobby Lobby Stores, Inc.,

Investigating Claims of Harassment – Part 2: Interviewing the Complainant and Planning the Investigation

February 15, 2018

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You have received a complaint of harassment.  What next?  In this second part of a six-part series, we focus on interviewing the complainant and planning the rest of the investigation.  As always, bear in mind that each harassment investigation is different and must be tailored to fit the particular circumstances.

The interview of the complainant is usually the first and most important interview that will be conducted, and therefore, should be carefully planned beforehand. This interview, and all others, should be conducted in a private, neutral meeting space at your location. The following provides an illustration of the areas that should be covered by the investigator during the interview of the complainant.

At the beginning of the meeting, the investigator should:

  • Identify his/her role as investigator (i.e., you are a neutral conducting an investigation on behalf of the company).
  • Ask the complainant whether he/she is comfortable with the investigator

New Security Standard for PINS Will Give Retailers Less Costly Processing Options

A new standard published by the Payment Card Industry Security Standards Council (“PCI SSC”)  may make it easier and less costly for retailers to take advantage of lower cost PIN based transactions in card present scenarios. The new standard addresses security  of PIN entry through software encryption solutions rather than only through hardware-based encryption devices.

The PCI Council’s catchy name for this new standard is the PCI Software-Based PIN Entry on COTS (SPoC) Standard. “COTS” refers to Consumer Off-the Shelf devices, e. g., your iPhone or iPad or Android equivalents that are used as Mobile point-of-sale or “MPOS” purposes.

The primary purpose of the SPoC standard is to enable secure entry of PINS on tablets and mobile phones used to accept cards instead of the conventional POS  terminals with dedicated PIN pads. The importance to retailers is that it may expand their ability to take advantage of lower

Investigating and Responding to Harassment Claims – Part 1: The Complaint

January 30, 2018

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What if you were the human resources manager or in-house counsel that received a complaint that Harvey Weinstein, Matt Lauer, Charlie Rose, or any of the other number of recently accused individuals sexually harassed an employee?  With the rise of sexual harassment allegations receiving increased scrutiny, retailers need to have proper procedures in place for handling claims of sexual and other harassment in the workplace.

This is the first of a six-part series that will address guidelines and suggestions for conducting investigations of harassment complaints. Each harassment investigation, however, is different, and any investigation should be tailored to fit the particular circumstances.

What Complaint?

A harassment “complaint” need not be written, nor does a “complaint” have to actually be made to anyone. Most of the time, an employee brings a complaint forward to a supervisor or to human resources. However, there are times that supervisors or human resources may “hear through the grapevine,”

Data Privacy and Security: A Practical Guide for In-House Counsel

January 26, 2018

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Partner David Zetoony published the 2018 edition of his handbook, Data Privacy and Security: A Practical Guide for In-House Counsel, on January 25 – Data Privacy Day. The guide provides an overview of laws relevant to a variety of data matters topics, statistics that illustrate data privacy and security issues, and a breakdown of these data-related issues.

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Retailers Anxiously Await Possible Changes to Taxation of Online Sales

January 19, 2018

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Retailers will be closely watching the outcome of the U.S. Supreme Court’s decision to revisit a 26-year-old case which has limited states’ taxing authority over online sales.

The Supreme Court, heeding calls from traditional retailers and dozens of states, has granted review of South Dakota v. Wayfair, Inc., in which retailers challenge the 1992 ruling in Quill Corp v. North Dakota as obsolete. Quill held – in a pre-internet era – that states cannot impose sales and use tax collection obligations on retailers without a physical presence within a state.  As a result, online retailers without a physical presence in a state have developed a pricing advantage over retailers located within the state.

In the meantime, Congress is considering a number of legislative proposals addressing state taxation of online sales, including the Remote Transactions Parity Act, which would allow states to require out-of-state sellers to collect sales tax.

Consumer Class Actions Take a Hit: Court Holds Made-For-Outlet Products Not Deceptive

January 18, 2018

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In the face of a growing number of lawsuits against retailers for deceptive sales, advertising and pricing practices, a California court recently affirmed dismissal of a consumer’s false advertising lawsuit against The Gap, holding that it is not false advertising for the retailer to put its brand and trademark on lesser quality goods sold at its outlet stores.

In Rubenstein v. The Gap, Inc., 14 Cal. App. 5th 870 (Cal. App 2d 2017), plaintiff argued that that advertising a Gap Factory or Banana Republic Factory item as “Gap” or “Banana Republic” was deceptive because the item was of lesser quality than a Gap or Banana Republic item. The California Court of Appeals rejected the argument that a brand’s use of its own name for its factory or outlet stores is deceptive. The court stated, “Gap’s use of its own brand name labels on clothing that it manufactures and sells at

A New Year for Online Businesses: DOJ Ends 2017 by Withdrawing Website Accessibility Rulemaking

2017 was a busy year for retailers and businesses with an online presence, as they faced a wave of demand letters and lawsuits alleging that their websites are inaccessible to the visually impaired and/or hearing impaired in violation of Title III of the Americans With Disabilities Act of 1990 (the “ADA”).  As we have previously reported, courts across the country weighed in on the issue throughout the year.  To bring an end to 2017, the Department of Justice (“DOJ”) withdrew its proposed rulemaking for accessible websites.

In July 2010, the DOJ announced an Advanced Notice of Proposed Rulemaking related to the issuance of new regulations to cover the accessibility of websites of public accommodations.  While businesses with an online presence were waiting for those regulations to be promulgated, plaintiffs began taking the issue to the courts, resulting in a patchwork of conflicting decisions.  As we previously reported, in

Beware of Listing Phantom Prices: Ann Taylor Settles False Discount Class Action

December 28, 2017

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Fashion retailer Ann Taylor has settled a false discounting class action in New York federal court alleging that prices at its outlet stores were listed as “marked down” from prices that never applied to the items. The named plaintiffs claim they were misled into believing they were getting a large discount, and would not have made the purchase if they knew the items were not heavily discounted.

The class action is just one of a growing number of deceptive pricing actions filed against retailers. As we previously reported, retailers can also face an action by the Federal Trade Commission or public prosecutors for such practices. This growing trend and Ann Taylor’s potential $6.1 million exposure should put retailers on notice of the repercussions associated with using phantom prices in an effort to advertise discounts.

The settlement has received preliminary approval from District Judge Paul Oetken, and provides both monetary and

Pier 1 Settles Class Action Over Call-In Shifts for $3.5 Million

December 27, 2017

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Pier 1 Import has agreed to pay $3.5 million to settle a class action lawsuit brought on behalf of about 9,300 retail store associates in California.  The lawsuit alleged the company owed workers pay for when they are scheduled to call the store to ask if they should report for work or stay home.

California requires employers to provide “reporting time pay” to employees.  Employers must provide a few hours of pay when an employee reports to work for a scheduled shift but is dismissed a short time later because business is slow.

The complaint alleged that Pier 1 violated this law by requiring employees to call in one to two hours before the scheduled shift.  Employees complained that the call-in shifts were mandatory, and required employees to schedule their time around the possibility that they may work after a call-in shift.  Pier 1 Import has since discontinued the scheduling

A Commentary on CFPB’s Delay in Announcing Further Delay of the Prepaid Card Rule

The Consumer Financial Protection Bureau has issued a brief press announcement that the Prepaid Card Rule would be further revised and that the effective date for compliance will be further postponed from the current deadline in April 2018.

The announcement creates more worry than relief – it’s just a tease. The announcement did not say what changes would be made or when the new deadline will be. It only said that amendments to “certain aspects” of the rule would be coming “soon after the new year.”  No doubt the Bureau meant for this announcement to be helpful to someone, but it is not clear if anyone is actually helped.

Prepaid card issuers are scrambling to implement the systems changes and new business processes necessary to support the sweeping changes required by the rule. With this announcement, they must now wonder which of those efforts will turn out to

New Tax Law Provides Relief for Retailers, Who Successfully Lobbied for Reform

The new tax law signed by President Trump today is the broadest rewrite of federal tax law in three decades and will have a widespread impact for retailers. The legislation is generally effective for taxable years beginning on or after January 1, 2018, but certain provisions could have a retroactive impact.

The final bill, which has been submitted to President Trump for signature, eliminates a wide range of corporate tax breaks and uses the money to lower rates for all businesses, large and small alike. The corporate tax rate is reduced from 35 percent to 21 percent, and owners of pass-throughs receive a deduction with respect to certain qualified income from pass-throughs.

The National Retail Federation had lobbied for tax reform and called passage of the tax bill “a major victory for retailers, who currently benefit from few of the deductions and credits that lower tax bills for other industries and consequently pay

Online Retailers Support Challenges to Repeal of Net Neutrality Rules

December 15, 2017

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In response to the Federal Communications Commission’s vote yesterday to dismantle the net neutrality rules regulating businesses that connect consumers to the internet, online retailers have responded that they will support legal and legislative efforts to challenge the repeal.

The FCC’s action reversed the agency’s 2015 Open Internet Order, during the Obama administration, to have stronger oversight over broadband providers. That order, commonly referred to as net neutrality rules, prohibits internet service providers from blocking websites, charging more for access to certain websites, or secretly slowing, or “throttling,” website content. The federal government will also no longer regulate high-speed internet delivery as if it were a utility, like phone service.

“The FCC has effectively ended net neutrality, undoing years of hard work and bipartisan agreement,” said Bill McClellan, Vice President of Government Affairs for the Electronic Retailing Association (ERA). “It is unfortunate that the FCC has disregarded the will of

Restaurants vs. Apparel: A Different Recipe for Restructuring a Retail Footprint

With the holiday season now upon us, analysts are closely watching the restaurant industry, particularly the casual dining segment. Reminiscent of the conditions in 2008-2009, many are speculating whether the increase in online consumer shopping that served as a catalyst for the current “Retail Apocalypse” will reduce crucial holiday shopper foot traffic and push some teetering dining chains over the edge.

In the first half of Q4 2017 alone, there were at least three Chapter 11 filings by national and regional casual dining chains, including Romano’s Macaroni Grill and Vasari LLC, the second largest franchisee of Dairy Queen franchises. In Q2 2017, Ignite Restaurant Group commenced its Chapter 11 cases to conduct a 363 sale process for Joe’s Crab Shack and Brick House. Meanwhile, industry commentators are keeping a close watch on some household name chains and other mid-market brands such as Bravo Brio and Bertucci’s.

Following in the footsteps

Don’t Get TARRed: FTC Continues to Scrutinize Misleading Marketing and Sales Methods

November 22, 2017

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The Federal Trade Commission has taken Tarr, Inc. and 18 other entities to task for fake news, unsubstantiated advertising claims, and fake celebrity endorsements.

A stipulated order for permanent injunction and monetary judgment announced on November 15, 2017 imposes a $179 million penalty against the online marketer on charges it sold weight-loss, muscle-building, and wrinkle-reduction products to consumers using unsubstantiated health claims, fake magazine and news sites, bogus celebrity endorsements, and phony consumer testimonials.

The injunction includes, among other things:

  • A permanent ban on the use of negative option features to sell dietary supplements, cosmetics, foods or drugs, products sold on a trial or sample basis, or products that are sold as add-ons when consumers purchase other products. Negative options occur when a customer accepts a supposedly free trial offer, but is enrolled in a continuity program, through which they are charged for the initial supply of products if
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