The Learned Concierge
Welcome to your monthly legal insights on the trends impacting the Retail, Hospitality, and Food & Beverage Industries.
Cybersecurity & Privacy
The Monthly Rundown of All Things Cyber, Privacy, and Technology
Click here to read the Right to Know – March 2024, Volume 15.
ESG & Sustainability
Neglecting ESG in Retail May Lead to Increased Reputational Risks
Retail businesses need to make greater progress on environmental, social, and governance (ESG) issues to protect their reputation, according to WTW’s latest Reputation Risk Readiness Survey.
Environmental, social and governance (ESG) concerns are an increasing driver of reputation in retail. According to Google search data, interest in “ethical brands” and “ethical online shopping” grew by 300% and 600% respectively in 2020 alone.
Meanwhile the sector faces increasing public scrutiny and regulation on a range of topics, from fast fashion and potential human rights abuses in the supply chain to climate-related financial disclosures and use of non-recycled plastic.
These pressures were reflected in our Reputation Risk Readiness survey, with environmental, social and governance issues emerging as three of the top five reputational risks. However, the results a suggest that progress in managing ESG and reputation risks may be stalling or even going backwards compared to our last survey two years ago.
Click here to learn about the key findings from the Reputation Risk Readiness survey.
France Puts the Breaks on Fast-Fashion Companies like H&M and Shein with Potential Penalties
A pioneering bill to curb the rampant pace of fast fashion won unanimous approval in the lower house of the French Parliament, making France one of the first countries in the world to target the influx of low-cost, mass-produced garments predominantly from China.
The fashion industry is among the world’s biggest producers of greenhouse gas emissions. France is seeking to reduce the allure of fast-fashion items, setting a precedent in the fight against the environmental degradation they cause. For more details on this bill, please click here.
Retailers ASOS, Boohoo and Ada Reach Compromise with the UK’s Competition and Markets Authority (CMA)
June of 2022, the CMA launched an investigation into the three retailers used claims of unsubstantiated marketing messages of the sustainability of their products, such as use of recycled materials, sources, manufacturing techniques that were “green.” In Agreements with the CMA, each retailer promised to use clear marketing messages and avoid generic environmental terms such as eco, sustainable and all claims must be supported by verifiable environmental data.
SEC Climate Suits Head Toward Lottery to Pick Single Court
Business interests, Republican state attorneys general, and environmentalists flocking to upend the SEC’s recently approved emissions reporting rules have spread at least nine lawsuits across six federal courts. Each case has been filed in a circuit with an ideological bent that meshes with the filers, though they have no sway in what is expected next.
Ultimately, the cases are poised to land as soon as this week in one randomly selected court that would begin to determine the regulations’ fate. For more details, click here.
Food & Beverage Mislabeling
USDA Enforces “Product of USA” Label Clarity
The USDA has introduced a pivotal regulation to address the growing consumer demand for transparent food labeling. The newly published final rule stipulates that the “Product of USA” and “Made in the USA” labels are reserved for meat, poultry, and egg products derived entirely from animals within the United States, from birth to processing. This guideline is designed to eliminate misleading labels and ensure that consumers have accurate information about the origin of their food.
Accompanying the rule, the USDA has also released updated labeling guidance to assist establishments in adhering to these new standards, with a public comment period available. The deadline for compliance with this rule is set for January 1, 2026. To learn more, click here.
New York Proposes Bill Targeting Unhealthy Food Advertising To Children, With Broader Implications
New York quietly proposed a bill intended to protect children from advertising of unhealthy foods and the “disastrous health outcomes that follow the overconsumption of these products,” suggesting that such marketing is “inherently misleading.” While the law’s stated goal is to protect children from these negative health consequences, the law goes much further and would open the floodgates to litigation. To learn more about the proposed law, please click here.
Food & Beverage
Virginia Governor Signs Bill to Permanently Make To-Go Cocktails Legal
Virginia Governor Glenn Youngkin signed sixty bills on Wednesday, including one that permanently allows the sale of cocktails to-go in the Commonwealth.
To-go cocktails were temporarily allowed during the COVID-19 pandemic but were set to expire as of July 1. However, with the signing of House Bill 688, cocktails to-go can permanently be sold from bars, restaurants and distilleries. For more details, click here.
Michigan Reports Sharp Drop in Illegal Shipments of Wine – Here is Why it Matters
Michigan saw a sharp drop in wine illegally shipped into the state during the first quarter of this year compared to the same time in 2023.
According to the Michigan Beer & Wine Wholesalers Association (MB&WWA), 84,381 bottles of wine were illegally shipped into the state from January to March. That is a 21% decrease from last year’s amount of 107,000 bottles. To learn more, click here.
Labor & Employment
Judge Blocks US Labor Board Rule on Contract and Franchise Workers
A federal judge in Texas struck down a U.S. National Labor Relations Board (NLRB) rule that would treat many companies as employers of certain contract and franchise workers and require them to bargain with unions representing them. For more details on this ruling, click here.
Texas Federal Court’s Invalidation of 2023 NLRB Joint Employer Rule Buys Employers Time
Lidia Koelbel authored an article, “Texas Federal Court’s Invalidation of 2023 NLRB Joint Employer Rule Buys Employers Time.” The United States District Court for the Eastern District of Texas just struck down the National Labor Relations Board’s (NLRB) new rule that broadened the test for determining when separate businesses may be considered joint employers within the meaning of the National Labor Relations Act. The decision was issued days before the NLRB’s new rule was supposed to go into effect on March 11.
The NLRB rule lists the essential terms and conditions of employment, which are: Wages, benefits, and other compensation; hours of work and scheduling; assignment of duties to be performed; supervision of the performance of duties; work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline; tenure of employment, including hiring and discharge; and working conditions related to the safety and health of employees.
Litigation
Hermès Faces Class Action Suit Over Birkin Sales Practices
Hermès is being accused of unlawful “tying” in a class action lawsuit in the US.
Two California shoppers allege they were required to buy ancillary products from other categories (such as the brand’s apparel, scarves, and homeware) before being allowed to purchase the Paris-based brand’s sought-after Birkin handbags.
Counsel for the plaintiffs claim that Hermès in in violation of US antitrust regulations, which define certain practices of bundling goods or tying them to other purchases as an abuse of market power. For more details, click here.
Real Estate
Will Commercial Real Estate Sink or Swim in 2024?
Audrey Hornisher authored an article, “Will Commercial Real Estate Sink or Swim in 2024?”
In 2024, we anticipate that the commercial real estate industry will continue to face distress with some stabilization. This alert focuses on three subsets of the commercial real estate market: retail, office, and multi-family. Each subset has its own outlook. We predict that the retail industry will likely see fewer bankruptcy filings than in 2023, but the distress in office space and multi-family will rise.
Retail: The Savior of Office?
It’s no surprise that the office sector continues to struggle, faced with maturing debt and the ongoing tug-of-war between return-to-office and work-from-home (which impacts vacancies). Indeed, there has been much talk about converting office space to residential use. And Colliers’ report, “The Interdependency of Office and Retail: How Landlords and Retailers are Teaming Up,” throws shops, restaurants and other retail into the mix as a potential savior of office. For more details, click here.
International Trade
Court Finds Provisions in Retailer Supply Contract Allow for Cancellation of Orders Suspected of Forced Labor
Over the last several years, U.S. Customs and Border Protection (“CBP”) has increasingly enforced detention of goods suspected of being made using forced labor. Such detained shipments have often needed to be re-exported or destroyed causing delays and significant costs for unsuspecting importers, including retailers. To protect themselves, importing companies have begun including forced labor warranty clauses into their supplier contracts. The courts have started to weigh in on the validity of those provisions.
On March 11, 2024, in Smart Apparel (U.S.) v. Nordstrom, the U.S. District Court for the Western District of Washington ruled that Nordstrom’s cancellation of purchase orders pursuant to CBP’s detention was warranted because the retailer’s supply contract allowed it to refuse delivery of goods made with forced labor. The court found that the supplier, Smart Apparel’s parent company Zhejiang Sunrise Garment Group Co., breached that contract’s terms and conditions, which clearly included forced labor as a condition.
The court’s decision is instructive for retailers to include forced labor provisions in their supplier contracts. This is especially relevant to importers who have found it difficult to conduct up-stream due diligence with their foreign suppliers in efforts to trace their supply chain and minimize the risk of forced labor allegations and product detentions.
If you have any questions regarding the content of this alert or forced labor laws in general, please contact Mark Ludwikowski (mludwikowski@clarkhill.com; 202-640-6680), Sally Alghazali (salghazali@clarkhill.com; 202-572-8676), or other members of Clark Hill’s International Trade Business Unit.
East Coast, Gulf Coast Dockworker Talks Are Starting Under Threat of a Strike
A union that represents 45,000 workers at ports from Maine to Texas says it will walk out if contract is not reached by October. Contract talks at East Coast and Gulf Coast ports are starting this year under very different circumstances than the West Coast negotiations that rattled supply chains over the past two years. For more details, click here.
Industry Trends
How AI Enabled Smart Carts Can Bring Retail Into The 21st Century
Not all innovations make it for the long haul, however, even those born of necessity. But countless pressures that started with COVID are compelling supermarkets to work harder to find solutions for labor shortages, supply chain issues, competition from online channels, inflation, theft, and personalization of the in-store shopping experience. For more information, click here.
How Will 2023 Influence This Year’s Retail Development?
As 2024 settles into its stride, few retailers are hoping for a repeat of 2023. Rapid inflation combined with low consumer confidence played out against a backdrop of geopolitical uncertainty and heralded challenging times for both brick-and-mortar retailers and e-commerce practitioners.
Many of the obstacles the retail industry faces this year will be familiar. Ever-tightening margins and a cut-throat retail environment mean retailers must take full advantage of every competitive edge they can find. As is often the case, technology offers solutions to an increasing number of retail problems. To learn about the three biggest challenges affecting retail as the industry wrestles with a new year and un uncertain economic landscape, click here.
5 Retail Trends Steering Product Content Journeys
Data is – and always will be – the most important asset for any company. It is what powers their entire operation. In retail, the data that drives product content is what makes a business come alive. It is how retailers make their products discoverable, enticing, and purchasable.
However, the road to delivering perfect product content to consumers is constantly changing, making it crucial for every retailer to adapt to evolving trends. In analyzing today’s intersection of technology and consumer behavior, we are seeing five key trends steering product content journeys: personalization, omnichannel strategies, returns management, consumer engagement, and AI integration. Click here to learn more.
