Consumer Advertising Law Blog

Biggest Circuit Adopts Strict Class Cert Standard but Certifies Wal-Mart-Sized Class

What do you get when the nation's largest circuit court of appeals reviews en banc a super-sized class certified against the country's largest discounter? One hundred thirty-eight pages of opinions that reach a conclusion by the narrowest of margins. Never shy about dancing to the beat of its own drum, in a sharply split 6-5 en banc decision, the United States Court of Appeals for the Ninth Circuit affirmed the certification of one of the largest classes in history. This opinion is important for any company defending a class action in the wild west, including consumer fraud cases and those brought under California’s UCL.

The case is Dukes v. Wal-Mart Stores, Inc. The claim is sex discrimination in violation of Title VII of the Civil Rights Act of 1964. The class the court approved is breathtaking and unprecedented: it consists of every woman working in Wal-Mart’s retail stores, encompassing up to 1.5 million employees at 3,400 stores spread over all 50 states, ranging from hourly workers all the way up the ladder to store managers. Although the class was certified under Rule 23(b)(2) (the section intended to address injunctive relief classes), the plaintiffs also seek monetary awards of back pay and punitive damages -- awards that could easily climb into the billions of dollars. (In one of Wal-Mart’s few victories, the court remanded the certification of the punitive damages claims with instructions to reconsider the certification -- but hinted that certification of these claims might well be appropriate).

This gargantuan class engendered an equivalent set of opinions. A thorough evaluation of the opinions is beyond the scope of this blog (and, in any event, there will be no shortage of such discussions in other media outlets). Suffice it to say that from an employment law perspective it was not a good day for business. As the scathing dissent, authored by Judge Sandra Ikuta (and joined by Chief Judge Alex Kozinski), put it, “the door is now open to Title VII lawsuits targeting national and international companies, regardless of size and diversity, based on nothing more than general and conclusory allegations, a handful of anecdotes, and statistical disparities that bear little relation to the alleged discriminatory decisions.”

Whether the court was correct in certifying this sprawling leviathan of a class is already being hotly debated, and may well be decided by the Supreme Court (Wal-Mart has already announced it will seek Supreme Court review). But for advertising and consumer protection lawyers, the key take-away is this: in Dukes, the Ninth Circuit expressly instructs district courts to apply a class certification standard that conforms to the rigorous standards applied in the Second Circuit (via the landmark decision, In re IPO), as well as most other Circuits. The Dukes court described IPO as “now the leading case on the extent to which a district court must resolve Rule 23 issues that overlap with the merits of the case. IPO held that factual disputes concerning each of the Rule 23 factors must be analyzed and resolved,” a holding that Dukes repeatedly embraced as its own. As the majority opinion stated, “the IPO court explained, and we agree, that . . . [t]he district court must analyze underlying facts and legal issues going to certification questions regardless of any overlap with the merits.” In so holding the court slammed the door on the argument that courts may not consider facts relevant to whether the requirements of Rule 23 have been satisfied simply because these same facts are also relevant to the merits inquiry -- an argument, the court noted, that is based on a misreading of the Supreme Court’s 1974 decision in Eisen v. Carlisle.

The court’s opinion represents a complete about-face from the Ninth Circuit’s original panel opinion in Dukes, which had held that district courts may not weigh conflicting evidence in determining whether the Rule 23 requirements have been satisfied. It is now clear that in the Ninth Circuit, as in most of the other circuits, plaintiffs must prove that they satisfy all of the Rule 23 requirements, and can no longer rely on their pleadings or a perfunctory evidentiary showing. And, courts must examine all of the evidence bearing on certification, and must resolve factual disputes to the extent they are relevant to the certification decision.

The court’s adoption of the more rigorous standard is, from the defense perspective, a welcome development. It is no secret that certification of a class can create tremendous pressure to settle anemic or even meritless lawsuits for large sums of money. The standard announced this week in Dukes provides district courts in the Ninth Circuit with the tools they need to relieve some of this pressure. To be sure, this development provides little comfort to Wal-Mart right now. But for businesses generally, the new standard beats the old one hands down.

-James Speyer, Trent Norris, & Gabe Padilla

Plain Language Consumer Financial Disclosures...Less Can Be More Clear

The Center for Plain Language, will hold its first ever awards ceremony on Thursday April 29 for the best and worst use of plain language in government and business. This nonprofit, which was reportedly started by a group of federal government employees who wanted the government to provide plain language forms to the public, is holding this ceremony at the most opportune time.

The last two years has seen a proliferation of new disclosure requirements being imposed on providers of financial products and services. Examples include:

• New mortgage loan disclosure requirements issued by the US Department of Housing and Urban Development (HUD) under the Real Estate Settlement Procedures Act (RESPA)
• New credit card and gift card disclosure requirements issued by the Federal Reserve under the CARD Act of 2009
• New overdraft program requirements on debit card and ATM transactions issued by the Federal Reserve under the Electronic Funds Transaction Act

Each of these new disclosure rules come with model forms. But some of these new rules and model forms are so complicated that pages of questions and answers have been released by the agencies to help providers set them up. (A good example is the new Good Faith Estimate form for mortgage loans, which is so complicated that HUD has had to even put on webinars to assist providers in filling out the form). 

The financial reform legislation being debated by Congress will undoubtedly engender more disclosure requirements. Indeed, one of the primary purposes of the proposed Consumer Financial Protection Bureau is to ensure that “consumers are provided with timely and understandable information to make responsible decisions about financial transactions.” [Senate Bill, Section 1021]. To that end, the Bill specifically gives the Bureau the authority to issue rules ensuring that “that the features of any consumer financial product or service both initially and over the term of the products or service are fully, accurately and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits and risks associated with the product or service.’ [Senate Bill, Section 1032]

The Center’s director, Annetta Cheek, is certainly aware that most consumer financial disclosures are hopelessly complicated. In interviews with the press publicizing the event, she used credit card disclosures and other financial disclosures as examples of the worst use of plain language (other press links can be found here and here). Hopefully, future efforts can be spent on not just the amount but also the quality of the disclosure. For some times, less rather than more can be better - and certainly clearer.

- Beth DeSimone

Hey, Who Put the Hard Drive in My Photocopier?

A recent CBS News investigative report revealed that most copiers made since 2002 contain a hard drive that stores up to 20,000 of the documents copied, faxed, or scanned on the copier. That likely came as a surprise to many folks, and particularly copy machine owners and lessees. As a result, subsequent owners or lessees of the copier may gain access to a company’s confidential intellectual property, business and legal strategy, or individuals’ confidential personal information. A CBS News team bought four machines from a used copier retailer and found confidential documents from the sex crimes unit of a city police force, including incident data and lists of sex offenders, and 300 pages of medical records and health care information from a New York insurance company. Compounding the issue, many copiers are now networked so that the hard drive on the copier may also contain internal information about a company’s network, and its security, making breaches easier.

In a world of data storage, networked desktop computers, laptops, and internet access, none of these issues are new to businesses, what is different about the storage of private information on photocopiers is that many businesses may not have known that it was happening. At least 60% of Americans did not know that copiers stored images of everything that they copied on their hard drives, according to a survey conducted by Sharp Imaging and cited in the same CBS report.

So, perhaps add copiers to the list of office equipment for which data protection steps need to be taken. Companies may need to review policies for access to copiers and wipe hard drives before copiers are removed from their offices. Copiers could also become yet another battleground in the area of electronic discovery. On the other hand, maybe copiers could be designed to delete the stored images as soon as they are used and encrypt the images until then. Clearly many users weren’t aware that copiers were storing this information on a long-term basis or using this feature. So, is it really necessary in most cases?

- Ronald Lee, Suzanne Wilson, and Peter Roman

Is Congress putting the FTC on Steroids?

As reported in February on this blog, the Federal Trade Commission (FTC) has been urging Congress to grant the FTC increased powers to safeguard consumers from unscrupulous providers of financial products and services. The US House of Representatives included provisions that expanded the FTC’s rulemaking authority in the version of financial reform legislation that passed in that Chamber in December. Specifically, the House-passed bill included provisions that gave the FTC powers similar to the “notice and comment” rulemaking authority given to other federal agencies under the Administrative Procedures Act.

Right now, the FTC is constrained in its rulemaking by the so-called “Magnuson-Moss” rules. These rules require the FTC Staff to engage in an industry-wide investigation, prepare draft staff reports, propose a rule, and engage in a series of public hearings, including cross-examination opportunities prior to issuing a final rule in any area. These processes are so burdensome that the FTC has not engaged in a Magnuson-Moss rule-making in 32 years. The bill would also give the FTC authority to go after parties for aiding and abetting an unfair or deceptive practice.

The Senate is poised to consider its version of the financial reform legislation starting this week. It is expected that this bill will give this broader authority to the FTC as well as to the new proposed Consumer Financial Protection Bureau. However, if the legislation is enacted as proposed, it is the Bureau that will have primary rulemaking, enforcement and regulatory authority over providers of consumer financial products and services (including non-banks), including over whether these providers offer these products and services in an unfair and deceptive or abusive manner. The FTC is only proposed to have backup authority in this area.

It would appear therefore that the more important implication of this proposal is the effect any broader FTC rulemaking authority would have on entities that offer consumer products and services outside of the financial services area. Chairman Leibowitz spoke at the conference of the Association of National Advertisers (ANA) last month in an effort to assure businesses that the FTC had no intent to run amok with APA authority. He described the FTC’s use of APA procedures when the agency has been specifically authorized by Congress to use them (such as in the Do Not Call Act) as judicious. There, the Staff spent considerable time gathering information and engaging with industry before proposing rules. In the Chairman’s own words “Put differently, we’d be stupid if we tried to solve every problem with a rule; we’d be smart to use our authority very judiciously.”

But businesses and the FTC may have different views of “judicious.” In his speech, Chairman Leibowitz noted areas ripe for rule-making, such as negative option or free offers in online sales. Areas not ripe for rulemaking would be in industries where self-regulation was robust and showing promise and in and new areas where business and consumer expectations are evolving. Nevertheless, business groups overall are opposed to the expansion of FTC authority, and expressed as much in a letter to Congress late last week. Indeed, some advertisers are particularly worried about the proposal on the ground that the FTC will use this power to crack down on such practices as online behavioral advertising, which involves tracking Internet users on-line usage to target ads at them. National advertising groups have urged that if passed, the result would be an “FTC on steroids” with the power to make rules in general areas such as children’s advertising or green marketing even in cases where the Commission has not identified an prevalence of bad actors. Arguments also are being advanced of potential fall out from these provisions, including potentially less innovation and financial growth in industry sectors that had nothing to do with the financial crisis. For that reason, businesses are urging that any change in FTC powers be considered not as a political compromise in the CFPA debate but as part of a separate FTC reauthorization act.

Nevertheless, the Senate bill appears to be on a fast track to passage. While the bill’s primary architect, Senator Christopher Dodd, D-CN, continues to try to work out a compromise with leading Republicans, all reports are that the majority of amendments will be limited to issues outside of the consumer area. Thus, those involved in the consumer area even outside of financial services may wake up soon to find themselves subject to new regulatory requirements.

- Beth DeSimone & Amy Mudge

New Internet Policy Task Force Seeks Comments on Information Privacy, Innovation, Internet, and Economy

The Department of Commerce has put together four terms important to our readers and to all consumers -- Information Privacy, Innovation, Internet, and Economy -- as the topic of a newly launched review of the nexus between privacy policy and innovation. Commerce’s newly-formed Internet Policy Task Force, announced coincident with the issuance of their Notice of Inquiry, is chartered with identifying and evaluating a wide range of public policy issues associated with the “U.S. private sector's ability to realize the potential for economic growth and job creation through the Internet,” and has already suggested it will address privacy, innovation, cyber security, online copyright protection, and barriers to international data exchanges supporting commerce. Commerce’s Internet Policy Task Force will consider comments before issuing a report as part of the Administration’s domestic policy and international engagement in Internet privacy.

Commerce’s Notice of Inquiry suggests some areas in which commentators may wish to weigh in, including whether the US privacy law regime should be modified better to support innovation, fundamental privacy principles, and evolving consumer expectations; the impact of the laws of the 50 states on companies’ compliance costs and product development costs; difficulties in complying with the multiplicity of privacy laws across borders; alternatives to sector-specific privacy laws and regulations; and the role and promise of privacy-enhancing technologies.

While these topics are highly thematic, general, and timeless, the Notice of Inquiry (“NOI”) specifically requests comment on how data privacy laws of different countries cause difficulties for organizations using cloud computing models in which they collect, store, access and process data in various locations around the world. And, as mentioned in the NOI, these issues are also being addressed in other venues, most notably through a series of online privacy roundtables just held by the FTC. While some details may still be developing about the work of Commerce’s task force, and what may emerge from this NOI, the organizations under the Department of Commerce that are leading this task force (NTIA, NIST, ITA and the PTO), suggest that technical standards and initiatives to support businesses’ use of technology and data will receive much attention.

While individuals and organizations will have other opportunities to comment on these issues in the future, providing practical experience-based perspectives and suggestions now might focus deliberations and trigger action down the road.

Comments are due 45 days after publication of the notice in the Federal Register. Commerce’s Notice of Inquiry here.

- Ronald Lee and Tiana Russell

New Balance Tries to Create New Balance in Consumer Perception of Made in USA Claims

As Made in USA historians recall, it was, in part, a proposed FTC consent order against the New Balance shoe company that prompted the FTC to considering loosening, but ultimately retaining, its policy on Made in USA claims.  As a result, the FTC's current view remains that "Made in USA" means essentially that all or virtually all of the costs of manufacturing the product are domestic in origin. 

Now New Balance is using the notion of a disclaimer to try to redefine the term.  New Balance communicates on its website and in various other promotional materials that when it uses the "Made in USA" claim, it means that at least 70% of the value is domestic.  Given that the FTC in its prior review rejected a 75% safe harbor, it seems pretty clear that New Balance's definition does not comport with the FTC's definition.  The question, though, is can the company use a different definition as long as it clearly communicates to consumers what that definition is?  As the FTC's deception guides make clear, that may be difficult to do when the claim is pretty cut and dry.  You may, for instance, have trouble telling consumers that you're defining black to mean white and white to mean black.  But when the claim is more ambiguous, such as "Made in USA" and really depends solely upon how consumers perceive it, perhaps redefining such a claim might not be misleading. 

Are there risks?  Of course, any attempt at redefinition would have to be clear and prominent so that consumers really get it.  Second, competitors or the FTC might try to argue that unless you explicitly tell consumers that you are using the term in something other than its "typical" meaning, consumers may be mislead into believing that your "Made in USA" claim is the equivalent of "Made in USA" claims made by other companies which, in fact, comply with the more stringent FTC definition.  Of course, if the Chamber of Commerce launched a campaign on behalf of manufacturers generally to "educate" consumers as to how industry intends to use the term could that redefine the term more generally?  Perhaps so, if the meaning of "Made in USA' depends upon consumer perception and consumer perception is altered by whatever fashion then perhaps the claim is altered as well. 

Will the FTC challenge New Balance yet again?  If it happens we'll let you know. 

- Randy Shaheen

Federal Reserve Releases Consumer Friendly Information On New Gift Card Rules

Yesterday, the Federal Reserve Board released information on its web site that explain in simple terms its new gift card rules which go into effect on August 22, 2010. Called "What You Need to Know: New Rules for Gift Cards," this on-line information is the third in a series designed to explain Fed regulations to consumers in an easy-to-understand format. The first issuance explained the Federal Reserve’s new credit card rules that became effective in February, and the second explained the new overdraft rules that will apply to debit card and ATM transactions effective in June 2010.

The latest issuance describes the types of gift cards that are covered under the Federal Reserve’s new gift card rules and those cards that are not covered. The issuance also highlights key consumer protections contained in the new rules, including limits on expiration dates, clear fee disclosure requirements, and certain fee restrictions.

The guidance makes clear that even if a card is not covered by these new gift card rules, consumers should be clearly informed of any expiration dates and fees that would apply to that card.

The Federal Reserve’s explanation of its new rules is very simple and clear. Hopefully, the issuance can be more widely disseminated beyond the Federal Reserve’s official web site, because it can be of real benefit to consumers - especially those that may not have access to computers or that do not regularly read government websites.

- Beth DeSimone

Common Sense Privacy Legislation Passed Last Week

In the midst of the high stakes political rhetoric swirling around the US Senate last week concerning financial reform legislation, the US House of Representatives quietly passed some common sense legislation in the area of privacy disclosure. The legislation, aptly called the “Eliminate Privacy Notice Confusion Act,” (H.R. 3506) would allow financial institutions that do not disclose nonpublic personal customer information to third parties (other than to service or market the institution’s own accounts and certain other exceptions) and have not changed their privacy policies during the previous calendar year to not have to send an annual privacy disclosure notice to their entire customer base.

Currently, all financial institutions must send a copy of their privacy policy to their entire consumer customer base on an annual basis (whether or not the policy has changed during the previous year), or give a customer an opportunity to opt out prior to disclosing nonpublic personal information to a third party. Press reports indicate that many customers are confused by the annual requirement, as it looks like their financial institution has changed their policy when it has not. It also is costly for institutions to send the notices. This burden seems unnecessary if the privacy policy has not changed.

The legislation would allow those institutions that (i) do not provide nonpublic person information to third parties in a manner that would require an “opt-out” notice to a customer and (ii) have not changed their privacy policy in the last year to not have to send those annual notices.

The legislation does not affect the requirement that an institution provides its privacy notice when a customer opens an account, nor does it affect those institutions that are required to send out notices to customers.

This is common sense reform. The legislation has not been referred to the Senate. Hopefully, in the midst of the Senate’s financial reform debate, the Senate will be able to slip this provision into the bill it is considering. Otherwise, it may be some time before this small, but good, change is made.

- Beth DeSimone

Social Networking Site Gets Tagged . . . Again

Earlier this week, the San Francisco District Attorney announced that the city had reached a $650,000 settlement with Tagged.com over allegations of unfair business practices. We previously blogged here about the settlements totaling $750,000 that Tagged reached in November 2009 with the states of New York and Texas over similar allegations.

The San Francisco settlement is especially noteworthy because it marks an expansion of the company’s legal obligations pursuant to the injunctions entered in New York and Texas. Under the San Francisco settlement, in addition to providing clear and conspicuous disclosures prior to accessing a customer’s email contacts, Tagged must also implement new procedures allowing customers to read and approve any message sent under that customer’s name to the people in the customer’s email contacts list.

As we previously noted, social networking sites and web-based member communities must remain abreast of the data security and privacy laws of the jurisdictions (local, state, and national) in which they and their members reside (Tagged.com is based in San Francisco). Failure to do so could lead to similar consequences, including interruptions in regular business operations and multiple sources of potential liability.

- Taja-Nia Y. Henderson

No Decision on Legality of Search Engine’s Sale of Keywords

Last month, Google Inc. and Rescuecom Corp. settled their long fight over Google’s sale of the RESCUECOM mark as a search engine keyword, which permitted Rescuecom’s competitors to display “sponsored listings” when Internet users searched for Rescuecom. The dismissal settles Rescuecom’s trademark infringement and dilution claims, and comes after the parties took their dispute up to the Second Circuit, which found in favor of Rescuecom and remanded the case for further proceedings. The dismissal itself contains no clues as to why the parties finally decided to end their six-year dispute.

The Rescuecom case is just one of many trademark infringement and dilution cases filed in the US and in Europe against Google’s sale of third party trademarks as keywords in its AdWords program. For years, Google has defended these sales, and its “suggestion” tool that prompts customers to purchase the trademarks of others, by claiming that these sales do not fall within the definition of “use in commerce” under the Lanham Act’s trademark provisions. This has been a thorny issue for trademark owners, particularly in the Second Circuit, which includes New York. Last year, the Second Circuit’s decision in favor of Rescuecom cleared the way for trademark plaintiffs who sought to proceed past the complaint stage in lawsuits against search engines to be able to prove the substance of their trademark claims. Rescuecom Corp. v. Google, Inc.¸ 562 F.3d 123 (2d Cir. 2009). After last year’s appellate decision revived Rescuecom’s trademark infringement lawsuit against Google, many trademark owners were waiting to see how Rescuecom’s claims would proceed on their merits at the trial court.

Though the dismissal itself contains no settlement terms, news reports state that Rescuecom was ready to settle because it learned recently that Google had removed the RESCUECOM mark form its suggestion tool five years ago, which, when combined with Google’s stated policy of not allowing trademarks in ad text, would diminish the use and visibility of the RESCUECOM mark in competitors’ sponsored listings. Rescuecom is claiming victory in this settlement, trumpeting the dismissal as “A Case of David versus Googleiath” in a recent press release (available here). According to the press release, Rescuecom achieved two of its three objectives (i.e., removal of its mark from the suggestion tool and from the text of advertisements), though Rescuecom admits that it did not obtain relief on its third goal of preventing use of its mark as a keyword “trigger” for advertisements.

Google is still involved in other trademark keyword disputes but, with the settlement of Rescuecom, has avoided a trial on the merits of such a case for now. Meanwhile, Rescuecom is embroiled in another lawsuit, a declaratory judgment lawsuit it filed against Best Buy, which, ironically, seeks to prove that Rescuecom’s purchase of the GEEK SQUAD mark as a keyword is a fair use, among other things. See Rescuecom Corp. v. BBY Solutions, Inc. (NDNY filed Oct. 14, 2009).

- Suzanne Wilson and Catie Rowland

Everyone Loves A Bargain, Except Some State Pricing Laws

The FTC and most states have long had Guides or laws on their books regulating pricing claims. While there are slight differences, they all share the basic principle that it can be misleading to claim that something is on sale if it’s on sale a lot or you sell a significant amount of the product over time at the sale and not the regular price. Recognizing that low prices are good for consumers and that these rules could be used to chill discounters, the FTC has not brought a deceptive pricing case in over 30 years. Further, these laws seem counterproductive to many, including us, as they can deter price competition and result in consumer harm rather than protection. In other words, most consumers have never seen a sale they did not love, love, love and would rather pay less for a product or service on any given day rather than more. That said, our view is not always in line with enforcement priorities. Some states occasionally bring sale pricing cases, for example, the NY AG has gone after several department stores and a men’s clothing retailer a few years back.

Private plaintiffs have tried to evoke these pricing laws occasionally, as well, but often find significant hurdles as their burdens are typically higher than those faced by a state AG. In Kim v. Carters, Inc., the Seventh Circuit recently provided guidance to private plaintiffs on what “actual damages” means under the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505. In the case, plaintiffs brought a claim under the Illinois consumer protection laws against a retailer selling kid’s clothing under price tags listing a “Suggested Price,” but at the same time, frequently displaying signs in its stores advertising percent discounts off these suggested prices. For example, a children’s T-shirt will have a suggested price of $16.00 with a “30% off” sign next to the item. The purchaser ultimately pays the sales price of $11.20 at the register. Through these advertised percent-off savings, plaintiffs alleged consumers were led to believe they were receiving a substantial savings. Plaintiffs claimed that these savings were a sham because the “Suggested Prices” are substantially higher than what the garments actually sell for on a regular basis and that this practice amounted to a breach of contract and a deceptive sales practice under 815 ILCS 505/2.

In affirming dismissal for failing to state a claim, the court stated that the plaintiffs sufficiently alleged an ICFA claim because the regulations promulgated under the Act “specifically identify this type of comparison between actual and fictitious ‘suggested retail price[s]’ as an ‘unfair or deceptive act.’” The issue that needed to be decided was whether the plaintiffs suffered actual damages to sustain a private action under the ICFA. When individual consumers bring a private action under the ICFA, actual damages may occur when the seller’s deception deprives the plaintiff of “the benefit of her bargain” by causing her to pay “more than the actual value of the property.” The court concluded that the plaintiffs received the benefit of the bargain in this transaction. The plaintiffs agreed to pay a certain price for kids clothing, which they did not allege to be defective or worth less than what they actually paid. Nor did the plaintiffs allege that , but for the alleged deception, they could have shopped around and obtained a better price. As a result, the plaintiffs did not suffer any actual pecuniary damage. The court further stated that it was not enough that the price comparisons deceived the plaintiffs and induced them to buy the sale clothing. To sustain their private ICFA action, the plaintiffs must sufficiently allege actual pecuniary damage, which the court concluded, the plaintiffs failed to do.

As we have reported earlier, the California courts are struggling with very similar issues and the Kwikset case is currently before the California Supreme Court. Which way the law trends on this critical damage issue bears close watching.

- Amy Mudge

Music to Environmentalists' Ears: Government Ushers in Next Phase of Lacey Act Enforcement

On April 1, importers of a whole slew of items that contain wood -- including pianos, stringed instruments, billiards cues, umbrellas, walking sticks, hand tools and sculptures -- will be among those required to submit a declaration at the point of import noting the species of tree or plant used to make the product, the country of that tree's origin, and the quantity and value of the import. (A full list of the products that are now covered by the enforcement schedule can be found here.)

This is the next phase of the Lacey Act's declaration requirement.  Importers of wood charcoal, wooden frames, tableware, kitchenware and plywood have been required to file declaration forms since October 2009.  We reported in November that the Department of Agriculture decided to delay enforcing the declaration requirement for paper products; enforcement remains on course to start on September 1, 2010.  In the meantime, environmental groups are starting to use the Lacey Act and its increased enforcement to apply pressure on corporations that may be trading in plant products that were taken illegally and whose import into the United States therefore would constitute a violation of the Lacey Act.

- Marcus A. Asner & Grace Pickering

What's in Your Shampoo? Group Seeks to Expand USDA Authority to Regulate Organic Products

The Department of Agriculture regulates organic agricultural products through the Organic Foods Production Act of 1990 ("OFPA") and its National Organic Program ("NOP").  However, the regulatory status of personal care products has long been uncertain.  In 2008 USDA stated that such products could not falsely claim or imply that they meet USDA organic standards but that USDA did not otherwise have jurisdiction over the labeling of personal care products that are not made up of agricultural ingredients.  In 2009 the National Organic Standards Board recommended that the NOP regulations become mandatory for personal care products.  However, no action has been taken on that recommendation.  Finally, in a 2009 Lanham Act case a number of personal care product companies successfully argued that a claim that some of their products were falsely labeled as "organic" fell within the purview of USDA and must first be pursued there. 

That victory may turn out to be pyrrhic.  Recently the Organic Consumers Association ("OCA") and three organic personal care manufacturers filed a complaint with USDA against thirteen personal care product companies.  The complaint alleges that each of the thirteen companies processes agricultural products and manufactures personal care products that are labeled and sold as "organic."  However, the complaint alleges that the products consist primarily of non-organic agricultural material, including numerous petrochemicals, and that most products only contain water extracts of organic herbs and/or reconstituted aloe vera organic powder concentrate.  The complaint requests that USDA impose civil penalties for mislabeling and order the companies to cease and desist from labeling their products as "organic."

OCA's view is that USDA has the authority under the OFPA to impose civil penalties on any person knowingly labeling a product "organic" that is not in accordance with the Act.  If USDA adopts OCA's position, it could lead to a significant expansion of USDA's authority to regulate organic products.  In the meantime, OCA is also waging war on the public relations front.  Members of the group dressed as large shampoo bottles (we presume, nonorganic) stood outside the National Products Expo West mocking the allegedly offending products and handing out flyers detailing the lack of regulation on organic personal care products. These efforts may be bearing fruit.  Just today OCA announced that Whole Foods will tighten its requirements for organic claims on personal care products.    

- Randy Shaheen & Jessica Halbert