CPSC Releases Revised Draft Age Appropriate Guidelines for Consumer Products

By Sheila Millar and Nathan Cardon on April 2, 2018 Posted in Product Safety, Regulations

The U.S. Consumer Product Safety Commission (CPSC) announced potential changes to its 2002 Age Determination Guidelines Relating Children’s Ages to Toy Characteristics and Play Behavior (2002 Guidelines). The new draft guidance, titled Guidelines for Determining Age Appropriateness of Toys (Draft 2018 Guidelines), “addresses toys that have come onto the market since the last update and provides changes to the recommended age group for certain classic toys.” The plan to issue a Federal Register notice was announced at the International Consumer Product Health and Safety Organization (ICHPSO) conference in February 2018, and the updated draft was formally published on March 27, 2018. Congress specifically made the 2002 version of the guidelines one of four key factors for determining whether a consumer product is a children’s product, so this proposed set of changes will affect the children’s product industry.

The Draft 2018 Guidelines have been updated to take account of new toys that have come onto the market since 2002, changes in consumer purchasing behavior, and children’s access to toys. The Draft also reassesses the 2002 Guidelines’ age determinations based on a broad literature review, parent toy survey, and observational study of 243 children, ages 1 to 8 years old, and their parents across four age brackets: 1 to 1.5 years old; 1.6 to 2 years old; 3 to 5 years old; and 6 to 8 years old. The guidelines contain four levels, each representing an increasing level of detail: play categories; toy subcategories; age groups; and toy characteristics. The agency staff’s draft revisions were developed with input from the Child and Family Research Section staff at the National Institute of Child Health and Human Development (NICHD) within the National Institutes of Health (NIH).

The 2018 Draft Guidelines make age-grade recommendations for new products, such as play touchscreen phones, suction cup building pieces, wooden trains with magnetic pieces, and magnetic puzzles. The 2018 Draft Guidelines also recommend changes for a variety of toys, including microscopes, colorful wooden blocks, large basketball hoops, and toy cameras with viewfinder function. Other revisions include recommended testing changes, such as shifting existing small parts or use-and-abuse testing requirements based on age grades that are different from the 2002 Guidelines.

CPSC staff explains that “many toy-related injuries could be prevented by age-labeling products for the age group for whom they are intended. Providing the consumer product toy industry with better age-grading guidance, and describing how these principles can be applied to their products, can help reduce product-related incidents and reduce costly compliance and enforcement actions.”

The CPSC’s Age Determination Guidelines play an important role in determining not just the suitability of toys for children in different age ranges, but also which safety requirements apply to a particular toy. Interested stakeholders should carefully review the updated Draft 2018 Guidelines with a view to identifying whether the CPSC and NIH staff’s assessments, evaluations, and test results match their information and experience. Focus group testing and evaluations from manufacturers, industry groups, or other outside groups could help improve and inform CPSC staff’s conclusions.

Comments on the Draft 2018 Guidelines may be submitted here until June 11, 2018.

CPSC Sues to Force Jogging-Stroller Recall

By Sheila Millar and Nathan Cardon on March 6, 2018 Posted in Product Safety

The U.S. Consumer Product Safety Commission’s (CPSC) first lawsuit of 2018 is against the maker of popular lines of jogging strollers, Britax Child Safety, Inc. The complaint, to be heard in administrative proceedings, concern’s Britax’s B.O.B. jogging strollers. The company and its 2011 merger partner, B.O.B. Trailers, Inc., have been importing and distributing the strollers since 1997. At issue are about 493,000 jogging strollers imported and distributed between December 2011 and September 2015. They include a range of single- and double-seated models.

Detaching front wheels are the central issue of the case. CPSC takes the view that the three-wheeled stroller models can operate when the front wheel is not properly secured, leading to the front wheel detaching when the stroller is moving, which in turn causes the stroller to stop and tip over. The CPSC’s position is that the detachment issue reflects a design defect. The company argues that improper use, rather than any design flaw, is the cause of the problem, saying: “the[ detachments] involve an improperly secured quick[-]release mechanism … or jogging with the swivel wheel unlocked.”

According to the agency’s press release, it has received about 200 complaints about wheels coming off the stroller since 2012, with reports of 50 injuries to children and 40 to adults, including head and teeth injuries, bruises, torn ligaments, and cuts.

When CPSC asked the company to conduct a recall, the company refused, arguing that misuse rather than any defect in the product was the cause. By a 3-to-1 vote, a majority of CPSC Commissioners approved filing an administrative complaint seeking to compel Britax to recall the strollers, inform the public of the defect, and offer a remedy in the form of repair, replacement, or refund.

Britax has been willing to conduct recalls with CPSC before. In 2011, for example, the company jointly recalled its B-Nimble strollers over a risk of brake failure. It conducted other recalls with CPSC in 2014, 2016, and 2017. Notably, although CPSC has been receiving complaints about wheel detachment since 2012, only now has the agency attempted to force a recall. The company’s refusal to conduct a recall in this situation suggests its conviction that user error is to blame, a point emphasized in the company’s statement: “While we respect the CPSC and its mission, we cannot agree to recall a product that is not defective.”

Questions of safety and user misuse are complicated and necessarily involve subjective judgments. Additionally, hazards that appear clear in hindsight are often hazy at the outset. It is common for reasonable people, including safety experts inside and outside government, to disagree about what constitutes a safety hazard, the scope of a company’s responsibility for improper installation or misuse of a product by consumers, and about what constitutes an acceptable degree of risk.

Although administrative and judicial lawsuits to force recalls have been exceedingly rare for CPSC, the agency has initiated several in recent years. These include suits to force recalls and to recover civil penalties from companies who were allegedly late in reporting substantial product hazards. The Britax suit represents a continuation of this hard-charging enforcement effort. Further, it suggests the willingness of a majority of commissioners to support pursuing administrative remedies when companies disagree with agency conclusions. Companies working with CPSC on potential safety issues should bear this in mind as they work on joint solutions, just as they should remember that the agency’s jurisdiction extends to products that fail to comply with a regulatory requirement, pose an unreasonable risk of serious injury or death, or contains a defect that poses a substantial risk of harm.

Online Talent Company Settles with FTC Over Alleged COPPA Violations

By Sheila Millar, Tracy Marshall and Nathan Cardon on February 9, 2018 Posted in Data Security, Privacy

Online talent search company Explore Talent just landed in the spotlight of the Federal Trade Commission (FTC). The Vegas-based company was charged with violating the Children’s Online Privacy Protection Act (COPPA), which requires that companies collecting information online must obtain informed, verifiable parental consent before collecting any information from a child under 13. The company also allegedly violated the FTC Act by deceiving paying customers into thinking they were getting access to specific roles and casting agents when they weren’t.

Explore Talent – aka Prime Sites, Inc. – promotes itself as the world’s largest talent resource, claiming to provide actors, models, and other performers with information on auditions and access to casting agencies. The site contends to have over 10 million members – more than one hundred thousand of whom are registered as children under the age of 13. Per the FTC, the site violated COPPA on several grounds:

To use the site, customers, including children under age 13, were required to create an account by submitting personal information including names, photos, email addresses, telephone numbers, and mailing addresses. This information was made publicly available, including to adults registered on the site (who could then send private messages to children) as well as to non-registered adult users, without parents’ knowledge or consent.
Explore Talent had a privacy policy available by a hyperlink buried in fine print at the bottom of its homepage. The policy stated that children under 13 must have their profile created by a legal guardian, but the company took no steps to verify who submitted children’s profiles.
Despite Explore Talent’s assurance that it did not knowingly collect personal information from children under the age of 13, the site “disclosed children’s personal information without accurately describing its collection, use, or disclosure practices, and without notifying or obtaining consent from the children’s parents.”

Acting FTC Chair Maureen Ohlhausen said “Explore Talent collected the personal information of more than 100,000 children, but failed to adhere to the safeguards required by law. Today’s settlement provides strong relief for consumers and will help ensure children are protected going forward.”

In addition, the FTC alleged that Explore Talent misled customers over its “pro membership” benefits in violation of the FTC Act. Although initial membership to the site was free, access to specific jobs and casting calls required an upgrade to “pro membership” costing $39.99 a month. And, according to the FTC, the advertised jobs did not, in fact, exist.

The settlement with the FTC requires Explore Talent to pay a $500,000 civil penalty, to be suspended upon payment of $235,000. The company is required to abide by COPPA, is prohibited from using or disclosing children’s personal information, and must delete the information it has collected from children. The company is also forbidden from making false representations about its services, including telling customers they have been chosen for a role in an upcoming film or that they have attracted the interest of casting directors.

The FTC recently updated its COPPA compliance guidance, which offers advice on COPPA-compliant privacy policies, how to get verifiable consent from parents in different circumstances, and exceptions to the COPPA rules. Following on the heels of the FTC’s settlement with Vtech, this is the second COPPA compliance action to date in 2018. Any online service provider who deals with kids need to ensure they understand and comply with COPPA, or they may find it’s lights, camera, FTC action!

European Court of Justice Throws Out Class Action in Latest Schrems Battle

By Sheila Millar, Tracy Marshall and Nathan Cardon on February 7, 2018 Posted in Data Security, Privacy

In the latest round of the ongoing battle between Austrian privacy activist Max Schrems and Facebook, the European Court of Justice (CJEU) ruled that Schrems did not have standing to bring claims on behalf of Austrian consumers over Facebook’s alleged violations of users’ privacy rights. The court did, however, allow for Schrems to continue with the lawsuit as an individual.

In 2014, Schrems sued Facebook in local court in Vienna over alleged consumer privacy violations. He brought the complaint both as an individual and as a collective action on behalf of 25,000 Facebook users worldwide. Facebook’s global headquarters are based in Ireland, and the company argued against Schrems’ standing to sue on two grounds: (1) Schrems, who uses Facebook to promote his books and events, has a professional interest in the case therefore cannot be regarded as a “consumer” under European consumer protection law; and (2) Facebook is not located in Schrems’ home country. These questions were referred to the European Court of Justice by the Supreme Court of Austria.

The CJEU’s decision on the first issue follows the Advocate General’s opinion in November 2017. On the second point, however, the CJEU ruled that consumer privilege applies “only to an action brought by a consumer against the other party to the contract,” so Facebook users cannot assign their claims to other citizens outside their home countries.

Although the European Commission recommended in 2013 that member states introduce a collective redress mechanism, nine countries have yet to do so. However, this will change in May, when the new General Data Protection Regulation (GDPR) takes effect. Article 80 of the GDPR states that data subjects “shall have the right to mandate a not-for-profit body, organisation or association …. to lodge the complaint on his or her behalf.” It is no surprise that Max Schrems has already founded his own NGO specifically for this purpose. In addition, EU Justice Commissioner Vera Jourova announced at a conference last September that the Commission will be proposing new legislation in March 2018 (now expected in April) to provide collective redress.

While the Schrems challenge now returns to the Supreme Court of Austria, the EU data privacy landscape may soon become more litigious.

ICC Launches Free E-Course on Responsible Marketing and Advertising

By Sheila Millar on February 5, 2018 Posted in Advertising

The International Chamber of Commerce (ICC) Commission on Marketing and Advertising has launched a free, two-hour interactive ethical marketing and advertising course designed to help companies and other stakeholders apply the fundamental principles of the ICC Marketing Code. Created in conjunction with the ICC Academy and modeled on a program developed by international business school INSEAD, the course aims to provide participants with practical guidance on producing responsible marketing communications.

The ICC code was developed in broad consultation with industry and marketing experts and is the global gold standard for ethical communications. It is used by more than 35 countries worldwide to create self-regulatory marketing programs and is updated regularly. The e-course provides a grounding in ICC basics of responsible advertising, and offers case studies and best practices in online marketing and advertising.

Marketing communications touch many areas of business communications. In an increasingly global marketing environment, a harmonized global code of marketing communication practice helps to enhance consumer trust and reduce regulatory differences. In addition to helping build brand loyalty, marketing communications that adhere to the ICC’s ethical marketing standards can reduce compliance and reputational risk at the same time.

Senate Bill Would Give FTC Enforcement Power Over Credit Bureaus

By Sheila Millar, Tracy Marshall and Nathan Cardon on January 17, 2018 Posted in Data Security

In response to the Equifax data breach last September, when hackers gained access to the personal information of 143 million consumers, Senators Elizabeth Warren (D-MA) and Mark Warner (D-VA) have introduced a bill, The Data Breach Prevention and Compensation Act of 2018, that would ultimately impose security obligations on credit reporting agencies (CRAs). The bill would expand the Federal Trade Commission (FTC)’s authority, establishing a new Director and Office of Cybersecurity with power to promulgate cybersecurity regulations and conduct cybersecurity investigations at CRAs that earn more than $7 million a year from the sale of consumer information. The Equifax breach prompted a flurry of legislation, but if passed, this bill would be the first to create data security standards for the credit reporting industry.

Both Warren and Warner have been active in attempting to rein in CRAs since the Equifax hack. Warner, a former tech executive who is vice chairman of the Senate Select Intelligence Committee, issued a statement in the wake of the Equifax breach in which he questioned “whether Congress should not only create a uniform data breach notification standard, but also whether Congress needs to rethink data protection policies.” Warner also wrote a letter to the FTC in September 2017, asking for an investigation into Equifax’s cybersecurity practices. Warren, who helped establish the Consumer Financial Protection Bureau, introduced (ultimately unsuccessful) legislation that would allow consumers to freeze their credit on demand and at no cost.

One of the most notable aspects of the bill is the power it gives to the FTC to impose massive fines for security breaches and reporting violations. CRAs would be subject to mandatory strict liability penalties for breaches involving consumer data. Violators would be required to pay $100 per consumer for data security breaches plus $50 for each piece of personal information compromised. This amount would be doubled and the maximum penalty increased to 75% of the CRA’s gross revenue for particularly egregious security lapses, failure to comply with the FTC’s data security standards, or failure to timely notify the agency of a breach. In addition, the bill requires the FTC to use 50% of each fine to compensate consumers.

The bill also contains stringent reporting requirements for CRAs, including a mandate to report breaches to the FTC within 10 days. CRAs would also be obligated to share detailed information concerning their security practices with the Commission, including their asset management, network management, and monitoring. A CRA must further create and maintain documentation demonstrating that it “is employing reasonable technical measures and corporate governance processes for continuous monitoring of data, intrusion detection, and continuous evaluation” of its security processes.

The FTC has initiated many enforcement actions for security failures under its existing authority, and multiple agencies, including the National Institute of Standards and Technology (NIST) have focused on developing risk management approaches to manage security. The bill itself appears to acknowledge the absence of any current generally recognized measures for evaluating, testing, and measuring the data security practices of CRAs, as it calls for a consultation on this point. The legislation appears unlikely to advance in the Senate.

CPSC Nominations Update

By Sheila Millar and Nathan Cardon on January 10, 2018 Posted in Product Safety, Regulations

President Trump resubmitted the nominations of Ann Marie Buerkle as chair and a second term as commissioner, and Dana Baiocco as commissioner (replacing Marietta Robinson (D)) of the Consumer Product Safety Commission (CPSC). The Senate received the nominations on January 8, 2018.

On December 21, 2017, the United States Senate returned some 120 nominations to President Trump. Under Senate Rules, nominations not acted on (neither confirmed nor rejected) during the yearlong Senate session in which the President submitted them are to be returned to the President. While this rule is typically suspended, as the Senate finished its business for the 2017 session, some senators refused consent for particular nominations, thus requiring resubmittal of them.

While both Buerkle and Baiocco must be approved by the Senate Committee on Commerce, Science, and Transportation for a second time, neither nominee will be required to go through a hearing again. Until the nominations are voted on, Democrats retain a 3-to-1 majority on the Commission.

FTC and FCC Enter into MOU For Broadband Enforcement

By Sheila Millar, Tracy Marshall and Nathan Cardon on December 19, 2017 Posted in Uncategorized

In furtherance of the Restoring Internet Freedom Order that was adopted by the Federal Communications Commission (FCC) on December 14, 2017, the Federal Trade Commission (FTC) and FCC have entered into a Memorandum of Understanding (MOU) that lays out how the agencies will coordinate consumer protection efforts and manage enforcement actions. The MOU will take effect on the effective date of the Restoring Internet Freedom Order.

The Restoring Internet Freedom Order, which was approved by a vote of 3-2 along party lines, repeals the FCC’s 2015 Open Internet Order and reclassifies high speed Internet access service as an “information service” rather than a “common carrier.” The Order eliminates the “general conduct standard” that established comprehensive FCC oversight of the business practices of Internet Services Providers, and confirms the FTC’s role in consumer protection matters.

Under the terms of the MOU, the FCC will monitor the broadband market, identify barriers to entry, and take enforcement actions against ISPs that fail to comply with disclosure requirements, and the FTC will investigate and take enforcement against ISPs for unfair or deceptive acts or practices, including those related to the accuracy of disclosures. The MOU establishes a plan for the agencies to coordinate efforts to prevent duplicative or inconsistent actions, but also provides that neither agency is bound by the other’s actions.

Learning From Facebook’s WhatsApp EU Privacy Challenges

By Sheila Millar and Tracy Marshall on December 13, 2017 Posted in Privacy

Nearly one year after it was first warned its privacy practices were inadequate under European law, popular messaging platform WhatsApp has been cited with privacy deficiencies for a second time. The Article 29 Data Protection Working Party (WP29), which is made up of data regulators from EU Member States and the Commission, sent a letter to the messaging app’s CEO on October 24, 2017 alleging that the company’s consent mechanism for sharing personal data of EU users remains “seriously deficient” and announcing the formation of a taskforce to implement a resolution. This action comes just months before the new EU General Data Protection Regulation (GDPR) takes effect on May 25, 2018, and reinforces the need for companies that process personal data of EU residents and individuals residing in the EU to carefully assess their privacy practices and take steps to align them with the new requirements.

Background

WhatsApp, a popular messaging app that was purchased by Facebook in February 2014, issued an updated Terms of Service and Privacy Policy in 2016 that allowed it to share personal data collected from users with Facebook and its other companies (including Instagram and Facebook Messenger). WhatsApp notified users about the privacy changes through the app, and gave them 30 days to consent or opt out using pre-checked boxes. The WP29 expressed concern that the notice was not sufficient for users to give informed consent in a manner that complies with EU law. That prompted a subsequent letter to WhatsApp on October 24, 2017.

Other European data privacy regulators have questioned the privacy practices of Facebook and other U.S.-based companies in recent years. Areas of focus have included online tracking of users without their knowledge and the use of user data for advertising purposes without consent. Against that backdrop is a significant decision by the Irish High Court in October that referred the case of Data Protection Commissioner v. Facebook Ireland Limited & Maximilian Schrems, which concerns the validity of standard contractual clauses as a permissible mechanism for transferring personal data from the EU to the United States, to the Court of Justice of the European Union (ECJ). These actions are instructive for all companies involved in the processing of data of EU users as they seek to implement the GDPR and assess appropriate data transfer mechanisms that will survive legal challenge.

The EU Consent Requirement

The WP29’s actions against WhatsApp focus on the way the social media platform obtains consent from users to share their data with third parties. Consent is one of the lawful bases for processing personal data under EU law. The concept of consent as a lawful basis for processing data is grounded in the 1995 Data Protection Directive (95/46), and has been expanded upon in WP29 Opinions and the GDPR (2016/679). Directive 95/46/EC established that consent must be unambiguous, freely given, specific, and informed, and the GDPR goes a step further and requires that consent: consist of a statement or clear affirmative action; be demonstrable, clearly distinguishable, intelligible, and easily accessible; use clear language; and be capable of being withdrawn.

The WP29 determined that WhatsApp’s consent mechanism does not sufficiently allow for user consent that is unambiguous, freely given, specific, and informed, primarily because:

Users are not appropriately informed of the intended collection, processing, and use of data, as well as the specific information that is shared with third parties and for what purposes;
WhatsApp employs a “take it or leave it” approach whereby users must either consent to the sharing of data or stop using the services;
A blanket consent mechanism is insufficiently precise to ensure specific consent for a particular transfer or category of transfers;
A pre-checked box is ambiguous and leaves doubt as to the data subject’s intention; and
There is no process for consent to be easily withdrawn, as required by the GDPR.

The next step is for the company to work with the newly established taskforce to address the alleged deficiencies.

Conclusion

Having a lawful ground for processing personal data (and adhering to standards for obtaining consent when that is the legal basis of processing) is just one of the many requirements under the GDPR that companies must consider as they work on GDPR compliance strategies. The GDPR will give regulators the power to fine companies – at present, capped at 1 percent of global profits – up to 4 percent of their global profits or 20 million euros – whichever is higher. So, while Facebook’s latest fine of $1.4 million, is a drop in the bucket for a company that pulled in roughly $27 billion in 2016, it is a fraction of what it could be under the GDPR and the new rules should make everyone nervous.

Sears Seeks to Modify FTC Order on Online Tracking

By Sheila Millar, Tracy Marshall and Nathan Cardon on November 15, 2017 Posted in Cybersecurity

In 2009, Sears Holding Management settled with the Federal Trade Commission (FTC) over allegations that the company’s online tracking activity exceeded what they told consumers. Now, Sears has submitted a petition requesting that the FTC reopen and modify its settlement order, arguing that changing technology since 2009 has made the order’s definition of “tracking applications” too broad and has put them at a competitive disadvantage.

The 2009 FTC complaint charged that Sears “failed to disclose adequately the scope of consumers’ personal information it collected via a downloadable software application, telling consumers that the software would track their “online browsing,” without telling them that it also collected information from third-party websites consumers visited such as their shopping cart information, online bank statements, and drug prescription records. Sears was required to stop collecting data from participating consumers and to destroy what they’d collected.

Sears now argues that the definition of “tracking application” in the FTC’s order now applies to most software on nearly all platforms, making them “out of step with current market practices without a corresponding benefit in combatting threats to consumer privacy.” The definition of tracking applications is so broad, Sears claims, that it “encompasses all of Sears’ current mobile apps, forcing Sears to handle disclosures differently than other companies with mobile apps and disadvantaging Sears in the marketplace.” Sears claims that modification of the order would allow the retailer to align with current tracking practices used by their competitors.

Public comments may be submitted here until December 8, 2017.