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On October 16, 2024, the Federal Trade Commission announced its final “click-to-cancel” rule, expanding its prior rules on negative options to include all types of subscription sales.

A central element of the rule is a requirement that sellers make it as easy for consumers to cancel their enrollment as it was to sign up, meaning offering the so-called “click-to-cancel” mechanism. The rule also:

  • prohibits sellers from misrepresenting any material facts while using negative option marketing;
  • requires clear and conspicuous disclosures of material terms before obtaining consumers’ billing information and charging them; and
  • requires sellers to obtain informed consent to the negative option features before charging consumers.

The final rule covers B2B as well as B2C transactions, but recognizes that negative option provisions can be negotiated between businesses. Most requirements of the rule will go into effect 180 days after it is published in the Federal Register.

The proposed rule, announced in March 2023, garnered thousands of comments. The Commission decided against including two provisions it initially proposed. First is a requirement that businesses send consumers annual reminders about the negative option feature. Second is a requirement that sellers obtain unambiguous consent to send consumers “saves,” defined in the proposed rule as “an attempt by a seller to present any additional offers, modifications to the existing agreement, reasons to retain the existing offer, or similar information when a consumer attempts to cancel a negative option feature.” The latter provision in particular appears to potentially pose First Amendment issues. The Commission is not entirely abandoning these provisions, however. It plans to issue a Supplemental Notice of Proposed Rulemaking (SNPR) and will keep the record open on these points.

The vote was 3-2, with Commissioner Slaughter issuing a concurring opinion and Republican Commissioners Ferguson and Holyoak dissenting. Commissioner Holyoak issued a detailed dissenting opinion outlining her views of the procedural and substantive irregularities and deficiencies of the rule. It remains to be seen whether the rule will be challenged.

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On September 10, 2024, the U.S. Consumer Product Safety Commission (CPSC or the Commission) published a notice extending the comment period for its expansion of the eFiling Beta Pilot Test to October 10, 2024. This extension is referred to by CPSC staff in training materials as the “eFiling voluntary stage” to differentiate it from the initial Beta Pilot Test, which ended in June 2024. The initial Beta Pilot Test was conducted in consultation with U.S. Customs and Border Protection (CBP), which will also be involved in the “eFiling voluntary stage.” CPSC continues work on a revised rule on Certificates of Compliance (CoC or certificates), 16 C.F.R. Part 1110 (Rule 1110), which would establish requirements for eFiling of CoC data. (We previously wrote about the proposed revisions to CoCs here.) CPSC’s current proposal would impose onerous new requirements for importers to pair each product with its own CoC, including exclusion codes for products subject to certain exemptions. CPSC also created a list of disclaim codes for products outside CPSC’s jurisdiction, suggesting that importers should include this information in shipping documents to avoid hold-ups at the ports. With the extension of the comment period for expansion of the eFiling Beta Pilot Test, finalization of at least the eFiling requirements will almost certainly be delayed beyond this month (in training sessions, CPSC staff noted that “rollout” of final eFiling requirements is not expected until 2025). As the CoC proposed rule and eFiling initiative are intertwined, importers should keep a close watch on the timing of both. Read more here.

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On August 13, 2024, the Consumer Product Safety Commission (CPSC or Commission) published a Notice of Proposed Rulemaking (NPR) in the Federal Register proposing new rules for children’s toys containing button and coin cell batteries. This comes fewer than seven months after CPSC adopted the most recent revisions to the mandatory safety standard for children’s toys, ASTM F963, Standard Consumer Safety Specification for Toy Safety (Toy Safety Standard), which became effective in April 2024. The NPR was published less than a year after CPSC finalized regulations under 16 C.F.R. Part 1263 to implement Reese’s Law, Public Law 117-171. Reese’s Law was passed in August 2022 to protect children 6 years old and younger against hazards associated with the ingestion of button or coin cell batteries in other consumer products.

CPSC, however, now asserts that the revised Toy Safety Standard does not go far enough to address the specific hazards presented by button and coin cell batteries. The NPR argues for alignment of the Toy Safety Standard with the performance and labeling requirements contained in ANSI/UL 4200A.

Read more here.

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On August 14, 2024, the Federal Trade Commission (FTC or Commission) announced its Final Trade Regulation Rule on the Use of Consumer Reviews and Testimonials (Final Rule) to rein in what it believes is the widespread practice of using fake reviews and testimonials to boost sales of products or services. The long-awaited Final Rule was developed under the provisions of the Magnuson-Moss Warranty Act. Thus, it is the culmination of a two-year process that started in November 2022 with the publication of an Advance Notice of Proposed Rulemaking (ANPR), followed by a Notice of Proposed Rulemaking (NPRM) in July 2023, and a February 2024 informal public hearing. The Final Rule reflects some changes from the proposed rule set out in the NPRM, including clarifications and limitations that were based on feedback received during the public comment period. For example, a previously proposed section addressing reuse of consumer reviews written for one product, so that the reviews appear written for a “substantially different product,” was omitted from the Final Rule following multiple comments, including a comment that raised a disputed issue of material fact. The Commission decided not to finalize this provision at this time and reserved it for potential future rulemaking.

To read more, including key provisions of the Final Rule, click here.

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As widely predicted, on July 30, 2024, the Senate passed the Kids Online Safety Act (KOSA) and the Children and Teens’ Online Privacy Protection Act (COPPA 2.0) in a bipartisan vote of 91-3. Echoing criticism from both civil liberties groups and industry, Senators Rand Paul (R-KY), Mike Lee (R-UT), and Ron Wyden (D-OR) voted no, citing concerns that KOSA could be used to censor information and would impose sweeping responsibilities on platforms to prevent and mitigate unspecified harms. The bills now head to the House where their fate is uncertain.

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The interagency Kids Online Health and Safety Task Force, which was created last year and is led by the Department of Commerce (through the National Telecommunications and Information Administration) and the Department of Health and Human Services (through the Substance Abuse and Mental Health Services Administration), released a report on protecting minors online, Online Health and Safety for Children and Youth: Best Practices for Families and Guidance for Industry. The report highlights the benefits and harms of digital media to minors’ health, safety, and privacy and provides guidance for parents and industry. It also identifies knowledge gaps and areas for future research.

The report provides ten recommendations for businesses to promote safe practices for children and teens online:

  1. Design age-appropriate experiences.
  2. Make privacy protections for youth the default.
  3. Reduce and remove features that encourage excessive or problematic use.
  4. Limit “likes” and social comparison features for youth by default.
  5. Deploy mechanisms and strategies to counter child sexual exploitation and abuse.
  6. Disclose accurate and comprehensive safety-related information about apps.
  7. Improve systems to identify and address bias and discrimination online.
  8. Use data-driven methods to detect and prevent cyberbullying and other forms of online harassment and abuse.
  9. Provide age-appropriate parental control tools that are easy to understand and use.
  10.  Make data accessible for verified, qualified, and independent research.

The Task Force also advocates for additional efforts at the federal level, including bipartisan legislation to promote accountability for online platforms. Congress has wasted no time advancing legislative efforts to expand protections for minors online, including the introduction of a new version of the Kids Online Safety Act and updates to the Children’s Online Privacy Protection Act (COPPA) 2.0 bill. On July 25, 2024, the Senate invoked cloture on both bills, which will likely proceed to a floor vote next week. These efforts are set against the backdrop of significant developments at the state level, including a challenge to the California Age-Appropriate Design Code Act on First Amendment grounds and a Ninth Circuit decision that COPPA does not preempt state privacy claims. More recently, the U.S. Supreme Court heard oral arguments in two cases involving the constitutionality of laws in Texas and Florida implicating the scope of First Amendment rights of social media platforms. The courts, Congress, state legislatures, and federal agencies are all looking to expand legal protections for kids and teens in the online ecosystem, and changes could affect businesses that do not consider themselves to be in the kid or teen space.

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The FTC recently released Complying with the Made in USA Standard, which further interprets the 2021 Made in USA Labeling Rule and the FTC’s 1997 Enforcement Policy Statement on U.S. Origin Claims.

The new guidance reiterates the FTC’s position that unqualified “Made in the USA” claims require “all or virtually all” U.S. content and processing. In determining whether this standard is met, the FTC considers the percentage of a product’s total costs that come from domestic parts and processing, “how far removed any foreign content is from the finished product,” and “the importance of the foreign content to the product’s form or function.”

The Labeling Rule, which is specific to unqualified “Made in the USA” claims, never actually discusses that last part on “the importance of the foreign content.” However, that concept has long been part of enforcement and closing letters. This new addition to the guidance, thus, should be a welcome reminder to companies, making compliance a little easier.

As the new guidance reiterates, qualified claims like “Made in USA of U.S. and imported parts” may also be used as long as a few requirements are met. First, the product’s “last substantial transformation,” as defined by U.S. Customs standards, must have occurred in the United States. Second, any U.S.-claimed parts or processing must meet the “all or virtually all” standard. Finally, and this is where it gets a little tough, U.S.-claimed parts or processing must be at a level that is either more than “negligible” or, possibly, “significant.”

That last point is a bit unclear, given wording in the new guidance. A longstanding example from prior guidance discusses the parts of a treadmill to demonstrate that the U.S. content must be more than “negligible” – with negligible in that instance being “only three percent of the total cost of all the parts.” The new guidance substantially repeats the example, but with introductory language suggesting the example means that there must be a “significant amount of U.S. content or U.S. processing.” No further information is given on what “significant” might mean.

As with many guidance documents that the FTC has released in recent years, companies are well-advised to be aware of where the FTC appears to be increasing pressure, even if new, stricter stances do not always align well with case law or, as in this case, even the FTC’s own prior guidance.

Examples of guidance documents with similar new stances include the 2023 updated Endorsement Guides, with new stances on “clear and conspicuous,” and the 2022 Health Products Compliance Guidance. (For anyone interested in a deep dive into new, troubling stances in that last guidance, check out the Council for Responsible Nutrition’s petition to the FTC, which Keller and Heckman attorneys helped author.)

Keller and Heckman will continue to monitor developments on FTC guidance, including “Made in USA” standards.

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On June 18, 2024, the California Attorney General (AG) and Los Angeles City Attorney jointly announced that video game developer and publisher Tilting Point Media LLC (Tilting Point) agreed to a $500,000 settlement for violations of the California Consumer Privacy Act (CCPA), Children’s Online Privacy Protection Act (COPPA), and California Unfair Competition Law (UCL) based on the company’s collection and processing of children’s personal information without consent and age-inappropriate advertising to children. The settlement highlights the increased focus by state regulators on the collection and processing of personal information from children and advertising directed to children. To read more, click here.

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Below is an overview of the in-depth Environmental Law Reporter article, “Why Sustainability Needs Antitrust,” authored by Keller and Heckman Senior Counsel Peter de la Cruz and Partner Sheila Millar, published on June 3, 2024.

Governments are promoting sustainability initiatives, including circular economy, recycling, and climate change. The success of those initiatives rests on both individual efforts and increased collaboration. Antitrust asks whether collaboration among competitors will harm competition. Precisely because the social value of sustainability is widely recognized, companies may mistakenly assume that good intent is an antitrust defense. That is not true, even if the action advances government environmental and social policies. 
 
Sustainability and antitrust have laudable goals, but neither precisely answer how their goals are best achieved in any particular situation or identify when past solutions need to be reconsidered for changing circumstances. Sustainability sets more expansive goals for the planet and its people, while antitrust seeks to preserve competition and prevent joint action by private entities that harms competition or manipulates markets. 
 
Globally, countries are taking different approaches, informed by their varying competition laws, market conditions, and histories. However, the probability is low for new legislation in the United States that creates a sustainability exemption from antitrust laws, and the need to act is increasingly urgent. The logical and expedient approach is for businesses to work together to advance sustainability goals consistent with antitrust considerations. Further, ignoring antitrust may lead to less competition and less innovation in the long term, clearly antagonist to sustainability goals. These are not aspirations or academic projections, but realistic objectives based on the authors’ experience in counseling companies and associations seeking to improve their sustainability and ESG performance.

The article demonstrates that antirust:

  • Can help ensure healthy competition in markets relevant to sustainability and avoid harm to competition from standard-setting, certification, and statistical programs that might hinder innovation or unfairly exclude competitors; 
  • Does not consider whether an action promotes or deters sustainability, nor is that a proper role for competition authorities; 
  • Reviews of competitor collaborations need to consider the context and structure of modern markets, as do sustainability evaluations; and 
  • Allows meaningful and constructive joint efforts to promote sustainability. 

Antitrust is not an enemy of sustainability goals, but an essential companion and a helpful analytical tool in finding the optimum balance among sustainability’s goals to maintain modern markets that support competition-driven efficiencies and innovation, which promote consumer choice and truthful commercial communications.

To read more about this topic, please click here for the full article, “Why Sustainability Needs Antitrust,” published in the Environmental Law Reporter on June 3, 2024. If you have questions, please do not hesitate to contact the authors, Peter de la Cruz (delacruz@khlaw.com) and Sheila Millar (millar@khlaw.com).

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As we predicted in our assessment of U.S. advertising and privacy trends in February of this year, states have continued to adopt comprehensive privacy laws during their 2024 legislative sessions. To date, nineteen states (California, Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Kentucky, Maryland, Minnesota, Montana, Nebraska, New Hampshire, New Jersey, Oregon, Tennessee, Texas, Utah, and Virginia) have enacted comprehensive privacy laws that provide consumers with certain rights regarding their personal data and impose obligations on businesses that process personal data. Another significant privacy law is pending in Vermont. The Kentucky, Maryland, Minnesota, Nebraska, New Hampshire, and New Jersey laws were enacted most recently (in 2024). Five of the state laws are currently effective, and all the laws impose disparate obligations that will certainly complicate compliance for covered entities. Businesses should review the threshold requirements for applicability of each state’s law to determine which laws apply.

At the federal level, Senate Committee on Commerce, Science, and Transportation Chair Maria Cantwell (D-WA) and House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-WA) unveiled new federal legislation, the American Privacy Rights Act (APRA or Act), in April, and the bill was formally introduced on May 21, 2024. From a business perspective, APRA’s restrictive definitions, weak preemption clause, and private right of action fail to strike the right balance needed in a national privacy framework. Consumer advocates, on the other hand, prefer a federal law that serves as a floor so states can adopt additional requirements and restrictions.

To review our summary of key similarities and key differences in the state privacy laws that have been enacted to date in 2024 and APRA, click here.