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Subscription-Based Business Models: An Overview of Auto-Renewal Regulations

The demand for subscription-based and recurring revenue business models is growing faster than ever.  According to a 2014 report by The Economist Intelligence Unit, 80 percent of customers are demanding new consumption models including subscribing, sharing, and leasing.  As a result, most companies are changing, or are in the process of changing, how they price and deliver their goods and services.  With 6.8 billion potential subscribers on mobile, social and web, the market is ripe for the business models first made popular by companies such as BirchBox and Dollar Shave Club.

A natural corollary to the recurring revenue streams driven by subscriptions is the need to comply with laws regulating purchases that automatically renew.  While subscription services (sometimes referred to as auto-renewal programs) can be lucrative, companies should be mindful of the applicable laws to avoid the costs of fighting off the type of lawsuits that led to Sirius

The New FLSA Regulations: Impact Will Be More Than Just Higher Salaries for Exempt Employees

As has been widely publicized in the press, on May 18, 2016, the U.S. Department of Labor (“DOL”) released the final rule updating the regulations regarding the white collar exemptions from overtime compensation under the Fair Labor Standards Act (“FLSA”). These regulations apply to workers who fall under the executive, administrative, or professional exemptions from the FLSA’s minimum wage and overtime protections as well as to the highly compensated employee.  The new regulations will likely be challenged, but, barring a court injunction or other action, they will go into effect on December 1, 2016. While the DOL did not alter the duties test for the overtime exemptions, the impact on employers will be much more profound than just higher salary levels.


Under the new regulations:

  • The salary threshold increases from $455 per week (i.e., $23,660 per year) to $913 per week (i.e., $47,476 per year).
  • The total

Recommendations for Evaluating Your Company’s Use of Social Media

The majority of retailers utilize social media to market their products and services, interact with consumers, and manage their brand identity. Many mobile applications and websites even permit users to sign-in with their social media accounts to purchase items or use the applications’ services.

While using third party social media websites has significant advantages for businesses, it also raises distinct privacy concerns. Specifically, the terms of use that apply to social media platforms may give the platform the right to share, use, or collect information concerning your business or your customers. To the extent that the social media platform’s privacy practices are not consistent with the practices of your own company, they may contradict or violate the privacy notice that you provide to the public.

Here is a list of issues to consider when evaluating your company’s use of social media:

  • How would a data breach of social media platforms
  • No Common Sense – Today’s Cost of Doing Business

    May 23, 2016


    What is a retailer to do? The world today is filled with people assuming they are being disrespected and believing they are being defrauded. It’s not just that some customers can be surly and demanding when they are in your store, they often seek to sue you on behalf of all your customers, wreaking havoc on your business operations and driving up your legal expenses. Common sense, courtesy, and consideration may be the retailers’ best tools both at the point of sales and in court.  Remember even when they sue, people are your customers.

    Over the past several years, there has been a rash across the country in “consumer protection” class actions. Not health and safety challenges; those obviously should be first order of priority both from the standpoint of risk to the company and from the standpoint of reputation and “doing the right thing.” For example, labeling class action

    Gender-Based Price Discrimination: California Seeks to Extend Law to Prohibit Discrimination in Pricing of Gender-Specific Goods

    California is taking on gender price discrimination. California law already prevents businesses from gender-based price discrimination for services such as haircuts, alterations, and dry cleaning.   A recently proposed bill (Senate Bill 899, Hueso) would extend that law to “retailers” and prohibit price discrimination in the sale of “goods.”

    SB 899 recently passed out of the Senate Judiciary Committee, where several positive amendments were made after comments from the California Retailers Association and others.  One significant change from the original proposed legislation is elimination of a requirement that retailers post the prices of all goods so that consumers could determine if “men’s” and “women’s” products were priced the same.  The bill also removed food products from its broad scope.

    The bill as amended states: “No business establishment . . . may discriminate, with respect to the price charged for goods of a substantially similar or like kind, against a person

    Data Breach Litigation Report: An Analysis of Federal Class Action Lawsuits Involving Data Security Breaches

    Data security breaches – and data security breach litigation – dominated the headlines in 2015 and continue to do so in 2016.  While data breach litigation is an important topic for the general public, and remains one of the top concerns of general counsel, CEOs, and boards alike, there remains a great deal of misinformation reported by the media, the legal press, and law firms. At best this is due to a lack of knowledge and understanding concerning data breach litigation; at worst some reports border on sensationalism or fearmongering.

    Bryan Cave LLP began its survey of data breach class action litigation four years ago to rectify the information gap and to provide clients, as well as the broader legal, forensic, insurance, and security communities, with reliable and accurate information concerning data breach litigation risk.  The 2016 report covers litigation initiated over a 15 month period from the fourth quarter

    Native Advertising: Recent FTC Cases Require Disclosure of Paid Endorsements on Social Media

    May 12, 2016


    Two recent cases by the Federal Trade Commission (“FTC”) demonstrate its position that paid endorsements in social media must be disclosed. These cases reinforce the FTC’s stance on transparency in native advertising, which is paid advertising made to look like the media content around it.

    The FTC has approved a final consent order with Machinima, Inc. requiring the company to disclose when it has compensated “influencers” to post online videos or product endorsements. According to the FTC’s complaint, the California-based online entertainment network engaged in deceptive advertising by paying influencers to post online videos endorsing a home video game system and several games, without disclosing that they were being paid for their opinions.

    Although not yet final, the FTC has also proposed a consent order with department store chain Lord & Taylor, based on that company’s advertising campaign for a new apparel line using a paid article in online fashion

    The Hidden Danger for Retailers Doing Business in New Jersey: Alert Regarding the Truth-in-Consumer Contract, Warranty and Notice Act

    A New Jersey statute intended to prevent deceptive practices in consumer contracts recently has become a focus for litigation in the state.

    The Truth-in-Consumer Contract, Warranty and Notice Act, N.J.S.A. §56:12-14 et seq., (“TCCWNA”) prohibits the use of illegal terms in consumer contracts and also provides that consumer contracts may not state that any of its provisions are void, unenforceable or inapplicable in some jurisdictions “without specifying which provisions are or are not void, unenforceable or inapplicable within the State of New Jersey.” See TCCWNA at §56:12-16. In other words, a general disclaimer regarding a consumer contract that is directed to New Jersey residents is not sufficient. Instead, it appears the customer-facing language used by a retailer should identify the specific provisions of its contracts, warranties, notices, loyalty programs, signs, etc. that are void, unenforceable or inapplicable in New Jersey.

    Courts have interpreted the statute to apply to language

    ADA Website Accessibility Cases Continue to Grow

    An increasing number of retailers are facing lawsuits or threats of lawsuits regarding website accessibility under the Americans With Disabilities Act (“ADA”), despite the fact that the ADA and its implementing regulations do not expressly address website accessibility.

    The Department of Justice first announced in 2010 that it would issue formal regulations regarding website accessibility, but they now are not expected until 2018. In the meantime, the number of cases against retailers and others continue to mount, and judges show no propensity to dismiss or stay the cases while the DOJ works on its regulations.  Last month, a federal magistrate judge in a website accessibility case against Harvard University and the Massachusetts Institute of Technology rejected arguments that the court should dismiss or stay those cases pending issuance of the DOJ regulations.

    Further, for what is believed to be the first time in any court, a California judge recently

    UPDATE Regarding California Prop. 65: Revised Warning Requirements for BPA in Canned Foods Effective May 11, 2016

    May 5, 2016


    The Proposition 65 warning requirement for Bisphenol-A (“BPA”) takes effect on May 11, 2016, but a recent emergency regulation has revised the warning requirements for food and beverage products only.

    Pursuant to an emergency regulation proposed by California’s Office of Environmental Health Hazard Assessment (OEHHA), the Proposition 65 warning for such food and beverage products may be posted at all point-of-sale devices. The warning should be at least 5 inches by 5 inches, and the language as revised should state:


    Many food and beverage cans have linings containing bisphenol A (BPA), a chemical known to the State of California to cause harm to the female reproductive system.  Jar lids and bottle caps may also contain BPA.

    You can be exposed to BPA when you consume foods or beverages packaged in these containers.

    For more information, go to:


    EEOC Proposes to Collect Pay Data from Certain Employers

    April 25, 2016


    EEOC Proposes to Collect Pay Data from Certain Employers

    April 25, 2016

    Authored by: Nancy Franco

    The Equal Employment Opportunity Commission (“EEOC”) recently proposed a revision to the Employer Information Report (“EEO-1”) that would require certain employers to submit aggregate data on employee pay and hours worked.

    Employers with 100 or more employees and federal contractors with 50-99 employees already are required to submit the EEO-1 to the EEOC by September 30 of each year.  The current version of the EEO-1 requires employers to report the number of individuals they employ by ten job categories, sex, race, and ethnicity. Under the new proposal, beginning with the September 30, 2017 report, private employers and federal contractors with 100 or more employees would also report the number of employees and the employees’ total W-2 earnings for the prior twelve month period within twelve designated pay bands.

    For example, an employer would report that it employs 5 Latina women who are Senior Level Officials in the twelfth pay band

    Certification of Compliance with Flammability Standards No Longer Required for “Inherently Safe” Adult Clothing

    Until recently, federal law required many adult clothing manufacturers and importers to issue certificates of compliance with applicable flammability standards, even though certain fabrics had already been determined to meet such standards.

    Effective March 25, 2016, however, the Consumer Product Safety Commission (“CPSC”) gave the industry a reprieve – a new policy eliminating the need for certificates of compliance for adult clothing made from certain fabrics. The relevant fabrics include plain surface fabrics weighing at least 2.6 ounces per square yard and all fabrics that are made from acrylic, modacrylic, nylon, olefin, polyester or wool. The policy is expected to save manufacturers roughly $250 million yearly in certificate preparation costs. Click here for more information.

    Department of Labor Will Investigate Compliance with Distribution Rules for Defined Benefit Plans

    Employers in the retail industry often experience significant employee turnover, and it can be difficult to keep track of former employees once they have moved on.  Thus, retailers should be aware that the Department of Labor (“DOL”) has recently implemented an initiative to investigate the manner in which large employers comply with the required minimum distribution rules for defined benefit plans.

    The initiative is focused on the extent to which large employers have processes in place to (i) locate missing plan participants, (ii) inform deferred vested participants that a benefit is payable, and (iii) commence benefit payments in a timely fashion.  The minimum distribution rules generally require qualified plans to begin distributions no later than the April 1 following the calendar year in which a former employee reaches age 70½.  Since retail employers tend to face a particularly tough task in keeping track of former employees, those with defined benefit

    California Prop. 65 Warning Requirement for BPA to Take Effect

    April 14, 2016


    The California Proposition 65 warning requirement for Bisphenol-A (“BPA”) takes effect on May 11, 2016, and retailers, manufacturers, and distributors should act now to reduce potential liability.

    BPA is used in a wide variety of plastic consumer products, including the epoxy lining in food and beverage cans and bottle lids, some reusable food and drink containers, CDs and DVDs, and electronics and sports equipment made from polycarbonate plastics.  California has not yet adopted a safe harbor level for exposure to BPA below which no warning is required, but recently proposed a safe harbor level of 3 micrograms per day for dermal BPA exposure from solid materials.  The safe harbor level will not be adopted prior to May 11, however, when the warning requirement takes effect.

    In the meantime, California’s Office of Environmental Health Hazards Assessment (OEHHA) has proposed an emergency regulation to allow temporary use of a standard point-of-sale warning

    Putative Class Action Lawsuit Filed against J. Brand Jeans over “Made in California, USA” Label

    Plaintiffs in California continue to focus on labels. Recently, a putative class action lawsuit was filed against J Brand, Inc., the maker of designer J Brand jeans and other clothing. The complaint alleges that the label for J Brand jeans states they are “Made in California, USA,” but that more than 5% of the jeans consist of imported material. Specifically, the complaint alleges that the imported material used includes fabric, thread, buttons, subcomponents of the zipper assembly, and rivets.

    The plaintiff’s claim against J Brand, Inc. is based on an alleged violation of California Business and Professions Code section 17533.7, which provides that it is unlawful to use “Made in U.S.A.,” or similar words if the product has been “entirely or substantially made, manufactured, or produced outside of the United States.”

    There are two exceptions to the statute. First, a company may still use the “Made in U.S.A.” label if

    Credit Card Data Breaches: Protecting Your Company from the Hidden Surprises

    Debit and credit cards are now the primary form of retail payment. Many retailers may not realize, however, that by accepting credit cards, they expose themselves to the risk of a data security breach and significant potential costs and legal liabilities.

    Retailers should consider the major sources of direct costs following a data breach. These costs always include the retaining of a PCI (payment card industry) certified forensic investigator as required by the PCI Council. Costs also typically include the retaining of a privileged forensic investigator (often by the retailer’s law firm or general counsel); the hiring of outside counsel; public relations and crisis management; and consumer notification including printing and mailing costs and protection services offered to consumers.

    In addition to the direct costs following a data breach, retailers often face three forms of liability from third parties: payment card brand fees; regulatory costs arising from investigations from the

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