FOR manufacturers interested in selling a product in the United States, there are countless business decisions to make. Important among these are critical legal considerations about how best to comply with the United States’ unique legal and regulatory systems. The Unites States regulatory model governs a product at every stage of development, from design to delivery. Government agencies police different industries by promulgating and enforcing regulations. There are federal and state product liability and consumer protection laws. Further, there are industry standards promulgated by various agencies. Ensuring compliance with U.S. laws, regulations and standards can be a daunting endeavor, and one that should be undertaken with the advice of knowledgeable counsel and, in some instances, other experts.
This article tracks the life cycle of a product’s development and marketing and provides insight into some of the most common legal hurdles faced by manufacturers entering the U.S. market. Chief among these are consumer protection lawsuits.
Every state in the United States has a consumer protection statute. These statutes are intended to protect consumers from predatory, deceptive, and unscrupulous business practices like advertising goods with the intent not to sell them as advertised, mis-representing certifications of a product, and representing that a product has characteristics, benefits or qualities that it does not possess. While the breadth of consumer protection statutes varies from state to state, many of the statutes create a private right of action, allowing aggrieved citizens to file suit against product manufacturers/suppliers.
Consumer protection lawsuits are often brought as class actions, as opposed to individual lawsuits, making them more of a financial threat to manufacturers. Indeed, even where a consumer protection lawsuit is meritless (as is often the case), the cost to a company to defend itself against such a suit can be substantial, and the potential financial benefit to plaintiffs’ attorneys (but not necessarily their clients) can be significant if the case is settled or goes to verdict.
Significantly, many consumer protection statutes permit the recovery of treble damages and attorneys’ fees.1
See, e.g., N.J.S.A. § 56:8-19 (delineating the right to treble damages and attorney’s fees under the New Jersey Consumer Fraud Act (CFA)).
While others, like New Jersey’s Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA),2
N.J.S.A. § 56:12-14, et seq.
include automatic statutory penalties for each violation.3N.J.S.A. § 56:12-17 (“Any person who violates the provisions of this act shall be liable to the aggrieved consumer for a civil penalty of not less than $100.00 or for actual damages, or both. . .”). The breadth of available damages, coupled with the use of the class action vehicle, makes consumer protection claims very dangerous for sellers of goods and services, but very attractive to plaintiffs’ attorneys.
Certain plaintiffs’ attorneys specialize in consumer protection litigation and seek out companies (small and large alike) to sue, with the goal of squeezing a quick settlement from the companies. Even if the named plaintiff/class representative receives little in the way of money damages, the attorneys stand to recover significant fees for the minimal effort it took to file the lawsuit.
The most common type of consumer protection litigation against product manufacturers are claims that allege a manufacturer or seller has either misrepresented or failed to disclose something about a product. These claims are simple to pursue; attorneys review product websites, packaging and labeling, consumer complaint blogs, websites or databases; pick apart the representations made by the manufacturer/seller; and then find a consumer (sometimes acquaintances) to purchase the product and allege “harm.” The harm alleged is often nothing more than a claim that the product did not perform as advertised, and therefore, the consumer did not get the benefit of its claimed bargain. There are even attorneys who personally purchase a product that purportedly did not comport with its marketed representations and then file suit under their own name and on behalf of other, unnamed, product users. Such suits are often followed by a telephone call from the “aggrieved” attorney demanding a “reasonable” settlement (usually a six or seven figure amount) to settle the case.
Similarly, attorneys often challenge the “science” behind a product’s promised benefit. For example, a complaint might challenge the independence of a manufacturer’s study, as a means of undermining the validity of the study’s results. Given the threat posed by consumer protection statutes, product manufacturers entering the U.S. market must be aware of those laws and advertise, market and test their products with an eye toward avoiding consumer protection lawsuits.
I. Defining the Product
The first question a manufacturer should ask is: how will its product be defined? Is it a children’s toy? Does it purport to treat a medical condition? Does it contain hazardous materials (or materials that are considered hazardous by virtue of some judicial or state regulation. California law must always be reviewed, if this is a concern)? How a product is defined will determine what agencies are involved and what laws or regulations are applicable.
The Consumer Product Safety Act (“CPSA”) was enacted in 1972 and established the U.S. Consumer Product Safety Commission (“CPSC”) as the governing agency to develop standards and bans in the pursuit of ensuring the safety of consumer products – such as toys, power tools and household chemicals.4
See generally 15 U.S.C. §§ 2051-2089; see also U.S. Consumer Product Safety Comm’n, About CPSC, https://www.cpsc.gov/About-CPSC/.
In 2008, the CPSA was amended by the enactment of the Consumer Product Safety Improvement Act (“CPSIA”), which provided the CPSC with new regulatory and enforcement tools. A prospective manufacturer should first determine if the product it wishes to market in the U.S. falls within the purview of the CPSC and, if so, ensure that the product complies with the standards, regulations and testing requirements put forth by that agency.
For example, all toys sold in the United States must satisfy the safety requirements established by the ASTM International.5
ASTM International is an international organization that sets standards for a wide- range products, “from the toy in a child’s hands hand to the aircraft overhead.” ASTM International, About ASTM International, https://www.astm.org/ABOUT/overview.html.
ASTM F963 – “Standard Consumer Safety Specification for Toy Safety” addresses possible hazards associated with toys, including “small objects,” and requires specific cautionary labeling.6
See, e.g., ASTM F963 § 5.11.2 (providing a specific warning label that must be included “[f]or toys and games intended for children at least 3 years old but less than 6 years of age”).
The CPSC made ASTM F963 the mandatory consumer product safety standard, and incorporated its requirements into Section 106 of the CPSIA.7
15 U.S.C. § 2056b; see also 16 C.F.R. § 1250.
Non-compliance with these regulations can carry significant consequences, including civil and criminal penalties and a fine of up to $100,000 per violation.8
See 15 U.S.C. §§ 2069 & 2070.
Furthermore, non-compliance can also serve as powerful evidence against a manufacturer in a civil lawsuit where a plaintiff claims to have suffered harm as a result of using or coming into contact with the product. In all, the CPSC promulgates and enforces regulations and standards for a wide array of consumer products, including “highly flammable” clothing and interior furnishings, and toys.9
CPSC, Regulations, Laws & Standards, https://www.cpsc.gov/Regulations-Laws--Standards/Regulations-Mandatory-Standards-Bans; see also CPSC, Age Determination Guidelines: Relating Children’s Ages to Toy Characteristics and Play Behavior, available at https://www.cpsc.gov/PageFiles/113962/adg.pdf.
In addition, the U.S. Food and Drug Administration (“FDA”) establishes regulations and policies for, among other things, food, drugs, cosmetics, and medical devices.10
For more information, see the FDA’s website at https://www.fda.gov/. The laws established by the FDA are codified under 21 U.S.C. § 301, et seq.
Prior to entering the U.S. market, all products that fall within the mandate of the FDA must be evaluated and approved by that agency.11
FDA, Overview of Device Regulation, available at https://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/Overview/default.htm.
For medical devices and pharmaceuticals, the FDA approval process is comprehensive and often requires considerable information detailing a device’s safety and efficacy, including the results of clinical trials.12
21 U.S.C. § 814; FDA, Premarket Approval (PMA), available at https://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/HowtoMarketYourDevice/PremarketSubmissions/PremarketApprovalPMA/default.htm.
As technology advances, the FDA is constantly changing its definition of medical devices, and manufacturers should be vigilant in ensuring they are aware of and compliant with the most up-to-date guidance. It may not always be apparent that a product is considered a medical device and addressing this issue directly and early in the product development process can be critical.
The Federal Trade Commission (“FTC”) also regulates some consumer products, like disposable diapers, light bulbs, and sponges.13
See 16 C.F.R. § 503.2(b) for a list of products that the FTC considers within its purview.
The FTC works towards “protect[ing] consumers by preventing anticompetitive, deceptive, and unfair business practices, enhancing informed consumer choice and public understanding of the competitive process, and accomplishing this without unduly burdening legitimate business activity.”14
Federal Trade Commission, About the FTC, https://www.ftc.gov/about-ftc.
It has several statutes under which manufacturers and its products are governed, including the Federal Trade Commission Act.15
15 U.S.C. §§ 41 – 58. For a full list of currently enacted statutes, see https://www.ftc.gov/enforcement/statutes.
Automobile parts are regulated by the Department of Transportation,16
U.S. Dep’t of Transportation, Regulation, https://www.transportation.gov/regulations.
organic products by the United States Department of Agriculture,17
U.S. Dep’t of Agriculture, USDA Organic, https://www.usda.gov/topics/organic.
and pesticides are regulated by the Environmental Protection Agency.18
U.S. Envtl. Prot. Agency, Pesticides, https://www.epa.gov/pesticides.
Once a manufacturer has properly defined the type of product it intends to distribute in the United States and determined what laws/standards/regulations apply to it and which agency will regulate it, then – and only then – can the manufacturer begin ensuring that its product complies with those rules.
II. Safety Information
Another crucial legal consideration for a manufacturer is whether the safety information accompanying its product is adequate under the law. “Failure-to-warn” product liability cases are common in the U.S. However, these cases are avoidable, or at least defensible, so long as the warnings both on the product and in the product contain literature that conforms to industry standards and regulations. In some instances, the requirements of the manufacturer’s home country with respect to product warnings may conflict with U.S. law. A manufacturer must take the time to understand those differences, and not simply rely on a product’s certification under foreign law (e.g., CE mark).
In the United States, the American National Standards Institute (“ANSI”) establishes what many consider to be the industry standard for warning labels and, while not legally required, failure to comply with its guidelines is very often cited by plaintiffs in product liability lawsuits and may often be considered by a jury determining such suits.19
ANSI, Introduction to ANSI, https://www.ansi.org/about_ansi/introduction/introduction?menuid=1.
Specifically, the current standard for warnings is ANSI Z535, which governs cautionary labeling on products ranging from acoustical devices to construction equipment.20
ANSI, About ANSI, https://www.ansi.org/about_ansi/overview/overview?menuid=1.
ANSI requires that the manufacturer identify the seriousness of the hazardous situation related to the product and use one of three “Signal Words,” depending on the severity, within a hazard alerting sign: “DANGER,” “WARNING,” or “CAUTION.”21ANSI Z535.4-2011 § 5.1. “DANGER” should be used in extreme situations to warn of “a hazardous situation that, if not avoided, will result in death or serious injury.”22
Id. at § 4.14.1.
“CAUTION,” on the other hand, “[i]ndicates a hazardous situation that, if not avoided, could result in minor or moderate injury.”23
Id. at § 4.14.3.
ANSI Z535 also specifies, among other things, the colors to use, the label format, and font size and style.24
See generally ANSI Z535.1, Z535.3, & Z535.4.
For example, “DANGER” must be in “safety white letters on a safety red background.”25ANSI Z535.4-2011, § 7.2.1.
While ANSI reigns in the United States, the International Organization for Standardization (“ISO”) is the creator of international standards and is comprised of the national standards institutes of 161 countries.26
ISO, About ISO, https://www.iso.org/about-us.html.
Comparatively, ANSI standards are based on signal words, safety symbols, and message panels, while ISO’s system is symbol-based.27
Jonathan R. Cooper and Arun J. Kottha, WARNING: Conflicting Issues Regarding Warning Labels May Be Hazardous to Your Company’s Health, In-House Defense Quarterly, at 37 (Spring 2011), available at https://www.tuckerellis.com/files/conflicting_issues_regarding_warning_labels_copy1.pdf.
Under ISO, manufacturers must use at least one of the following three safety signs with a pictogram inside depicting a hazard, an action, or instruction: “(1) an equilateral yellow triangle, which singles a warning; (2) a red circle with a slash, which signals a prohibition; or (3) a blue circle, which signals a mandatory action.”28
Id. (citing ISO 3864-2:2004, § 6.2).
ISO has other guidelines for certain colors to use depending on the severity of harm a person may encounter and what type of text can and should be included.29
Id. at 37-38.
Designing effective warning labels and ensuring that they properly accompany the product is critical. Compliance with ANSI and ISO is the first step, and it may be wise to conduct market research to understand what competitors are informing consumers of and how specific states analyze warnings in failure to warn lawsuits. It is, of course, essential to fully understand the potential harm that a product can present, preferably through some type of objective testing or analysis so that any hazards requiring a warning are known to the manufacturer.
There are many resources to which a manufacturer can refer for guidance on appropriate safety instructions. For example, the CPSC has valuable information on its website including safety guides and alerts, and even advisory opinions.30
CPSC, Safety Education Resources, https://www.cpsc.gov/Safety-Education/Safety-Guides; see also CPSC,Office of General Counsel Advisory Opinions, https://www.cpsc.gov/Regulations-Laws-Standards/Advisory-Opinions.
Other agencies, such as the Department of Trade and Industry (DTI), have published research and analysis reports which explain best practice for safety instructions.31
Dep’t of Trade and Indus., Government Consumer Safety Research, Writing Safety Instructions for Consumer Products (Nov. 1998), available at https://www.humanics-es.com/saftyins.pdf.
In its report, the DTI provides recommendations on the most effective means to deliver safety instructions – such as through the use of a leaflet or permanent labels on the container, the most effective location for instructions, and the type of language that should be used.32
III. Product Manuals/ Instructions for Use
Product manuals – paper, electric, or both – are a popular vehicle for providing consumers with necessary information. While the makeup of a manual will vary depending on the type of product it accompanies, the need for clear instructions and cautions for use and handling exists universally.
User instructions are critical to ensure that the consumer knows how to use the product and what risks he or she may subject themselves to if improperly (or even properly) used. As mentioned earlier, plaintiffs commonly file lawsuits claiming that the product warnings or literature did not properly explain its risks or failed to clearly describe how to correctly use the product. Indeed, in evaluating the safety of a product, instructions for “assembly, use, maintenance and disposal of the product, as well as warnings given” are all specific areas where a manufacturer should take extra care to instruct consumers appropriately.33
Dep’t of Trade and Indus., Government Consumer Safety Research, Writing Safety Instructions for Consumer Products, at 1 (Nov. 1998), available at https://www.humanics-es.com/saftyins.pdf.
In this digital age, it is very common for product manuals and instructions for use to be provided on the manufacturer’s website. Indeed, manuals may get lost over time and consumers are likely to refer to and rely on the materials that they find online. Manufacturers who choose to make their product literature available online should make sure that it is identical to the literature and labeling provided with the product.
When it comes to instructions for use, there are several standards with which manufacturers would be wise to conform. ANSI Z535.6 is the United States standard for “Product Safety Information in Product Manuals, Instructions, and Other Collateral Materials.”34ANSI Z535.6. It includes a wide array of specifications, ranging from proper message components (such as the use of signal words and safety messages) and message content, to the location and format of the instructions. There are international standards that manufacturers outside of the U.S. should be aware of and compliant with, as well. For example, ISO Guide 37:2012 establishes principles and recommendations for designing and formulating instructions for the use of products by consumers.35
ISO, ISO/IEC Guide 37:2012, Instructions for use of products by consumers, available at https://www.iso.org/standard/39881.html.
Importantly, it sets forth a “common criteria for the assessment of the quality of instructions for use” of the products.36
IEC 82079-1:2012 is another international guideline used to establish detailed requirements for “all types of instructions for use that will be necessary or helpful for users of all kinds of products.”37
ISO, IEC 82079-1:2012, Preparation for instructions for use -- Structuring, content and presentation -- Part 1: General principles and detailed requirements, available at https://www.iso.org/standard/55833.html.
While these standards set forth clear guidelines for manufacturers, there is a chance that the requirements overlap or conflict depending on the product at issue. Manufacturers should thus be careful to look beyond ISO when drafting manuals and instructions for products that will be marketed in the United States.
IV. Warranty Provisions
Warranty provisions are another common subject of litigation. Clear and conspicuous warranty language is critical to avoiding, or at least limiting, a product manufacturer’s potential product-related liability. The risks attendant to a weak – or worse, unenforceable – warranty are significant. A poorly crafted product warranty can extend a manufacturer’s liability for issues with its product beyond a length of time that is desirable or foreseeable. In addition, it could subject a manufacturer to penalties and fees. As such, the below considerations are essential when crafting a product warranty.
Warranties for consumer products are governed by the Magnuson-Moss Warranty Act,38
15 U.S.C. § 2301, et seq.
the rules promulgated by the FTC, and sometimes by state law.39
16 C.F.R. § 701, et seq.
Under the Magnuson-Moss Act and the rules, a manufacturer must, among other things: (1) title the warranty as either “full” or “limited”;4015 U.S.C. §§ 2302 & 2303. (2) properly disclose certain information about warranty coverage in a single document;4116 C.F.R. § 701.3; 15 U.S.C. § 2302(a). and (3) make sure that the warranties are available to consumers before they purchase the product.4216 C.F.R. § 702.3; 15 U.S.C. § 2302(b).
The second requirement calls for disclosure of information, such as a clear description of the product, actions that the manufacturer will take in the event of a defect, duration of the warranty, and to whom the warranty will be extended.4316 C.F.R. § 701.3(a). In certain circumstances, a manufacturer would be wise to include in its warranty a provision that allows the manufacturer the opportunity to cure a purported defect. Further, to satisfy the third requirement above, manufacturers should consider including their product warranty on their website, mobile applications, and other electronic-facing platforms.
Many consumer contracts in the United States are also governed by the Uniform Commercial Code (“UCC”), which implies warranty of merchantability and fitness for a particular purpose into every contract for the sale of goods.44U.C.C. §§ 2-314 & -315. The implied warranty of merchant-ability ensures that the good is “fit for the ordinary purposes for which such goods are used” and “pass[es] without objection in the trade under the contract description.”45
Id. at § 2-314(2).
The warranty of fitness for a particular purpose promises that the good at issue is suitable for the specific purpose for which the buyer is purchasing the product.46
Id. at § 2-315.
A seller may, however, limit the duration of implied warranties to the duration of its written warranty.47
Id. at § 2-316.
Limiting implied warranties is important, as many plaintiffs’ attorneys will include in product related suits breach-of-implied-warranty claim, consumer fraud and breach-of-contract claims as a means of “upping the ante.” Manufacturers should also include in their due diligence process a review of state-specific warranty laws, as their requirements may differ.48
See, e.g., New Jersey’s Uniform Commercial Code, N.J.S.A. § 12A:1-101, et seq.
Note too, that there are state laws that prohibit certain language in product warranties, notices and signs. For example, New Jersey’s Truth-in-Consumer Contract, Warranty, and Notice Act (TCCWNA), is a statute that prohibits sellers from offering to any consumer, or entering into, any written consumer contract, or displaying any written consumer warranty, notice or sign, that includes a provision which violates a “clearly established legal right” of a consumer or responsibility of a seller.49N.J.S.A. § 56:12-15. The statute also provides that consumer contracts may not state that a contract term is void, unenforceable or inapplicable in some jurisdictions without specifying whether they are void, unenforceable or inapplicable in New Jersey.50N.J.S.A. § 56:12-16. Importantly, TCCWNA does not itself create or establish any substantive consumer right, which must instead be supplied by another state or federal law.51Watkins v. DineEquity, Inc., 591 Fed. Appx. 132, 134 (3d Cir. 2014). Given TCCWNA’s broad application and minimal proof requirements, it has become a popular and common basis for consumer fraud litigation in New Jersey and one that a manufacturer should be aware of if it sells a product in New Jersey.
Note, however, that the New Jersey Supreme Court recently issued an opinion confirming the limited scope of TCCWNA in response to repeated misuse of the statute, holding that a consumer cannot state a claim under TCCWNA unless he or she is able to demonstrate actual monetary damages or other adverse consequences suffered by the alleged violation.52Spade v. Select Comfort, 232 N.J. 504, 524 (N.J. 2018). This interpretation offers much-needed protection to companies doing business in New Jersey. The Court’s decision evinces a potential change in the interpretation of similar statutes across the United States, and manufacturers should keep a watchful eye on such developments.
V. Dispute Resolution & Arbitration Agreements
Another important legal consideration for manufacturers (selling in any market) is how and where they want to handle disputes with consumers. In order to have realistic expectations regarding the dispute resolution process over products sold in the United States, a manufacturer must understand what types of dispute resolution provisions are enforceable and how that information must be communicated to consumers. While this section describes particular provisions in contracts that cover dispute resolution, negotiation terms may also be covered in warranty provisions or marketing materials. As such, the following legal considerations may reappear at various stages of the development process.
Arbitration agreements are commonplace in consumer contracts in the United States, and the Federal Arbitration Act reflects a strong federal policy in favor of resolving disputes through arbitration.53Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24 (1983). Indeed, arbitration serves many benefits for manufacturers including a faster timeline for resolving disputes, and therefore a less costly litigation overall, and limited grounds for overturning awards.54
9 U.S.C. § 1, et seq. See Asa Lopatin, What Constitutes Arbitration for Federal Arbitration Act Purposes?, American Bar Ass’n. (June 16, 2014), htttps://apps.americanbar.org/litigation/committees/adr/articles/spring2014-0614-federal-arbitration-act.html/.
Furthermore, arbitration provisions serve as road-blocks to consumer fraud litigation by making such lawsuits more difficult to pursue and less financially attractive.
Because “[a]rbitration is a creature of contract, a device of the parties rather than the judicial process,”55AMF Inc. v. Brunswick Corp., 621 F. Supp. 456, 460 (E.D.N.Y. 1985). manufacturers must ensure that their arbitration provisions are clear and conspicuous to consumers. To further ensure enforceability, manufacturers should require consumers to affirm their understanding of the provision and affirmatively assent to arbitrate. Enforcement of arbitration clauses is a dynamic and hotly contested topic, and keeping abreast of developments in this area is important.
In addition to arbitration provisions, other dispute-resolution considerations for manufacturers include choice-of-law provisions and forum selection clauses. Choice-of-law provisions provide certainty for consumers and businesses alike because they establish what jurisdiction’s laws will govern any dispute that arises under the contract. Depending on the product being sold, manufacturers should consider whether a particular state has favorable laws that it wants to have applied to their agreements. Forum selection clauses, on the other hand, dictate the forum in which any dispute arising under the contract will be resolved. Sometimes this may be through arbitration, but it can also be mediation or a particular court system. For example, a manufacturer, if it so chooses, may decide to have all disputes arising under its contract litigated in a specific district within a specific state.
While these provisions are important to include in contracts, and can be extremely helpful, care must be taken to not insert terms that may be considered so severely one-sided or advantageous to the manufacturer that a court will refuse to enforce them. All contracts are subject to the doctrine of unconscionability. For contracts governed by the UCC, Section 2 302 provides that if an agreement – or any clause therein – is found to be unconscionable, then that specific provision or the entire contract may be rendered unenforceable.56U.C.C. § 2-302(1). That principle is commonly applied to all other types of contracts as well.57
See Restatement (Second) Contracts, § 208 (“If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any unconscionable result.”).
The basic test applied by courts in the United States “is whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract.”58
A classic example of where this principle may be applied is where the contract contains critical terms – such as the waiver of certain claims – that are written in a way a layperson would not understand. Sometimes a forum selection clause will be subject to scrutiny if it results in unfairness to a consumer – i.e., if a consumer who lives in Maine would have to travel to California to file a lawsuit.
Oftentimes these agreements will not be open to negotiation. As such, consumers will be quick to argue that they had no choice but to sign the contract (commonly referred to as a contract of adhesion) and were not aware of the actual terms it contained. To successfully defend against these allegations, manufacturers should be sure to write their contracts in a clear and understandable fashion so that there is no room for confusion or uncertainty.
VI. Packaging and Labeling
In addition to requirements related to safety information, the packaging and labeling of certain products is heavily regulated in the United States. For products being sold by online distributors like Amazon.com, Jet.com, etc., strict compliance with U.S. packaging and labeling requirements is a prerequisite to sale. To avoid having to redesign product packaging and labeling late in the game, and at an additional cost, manufacturers should review and consider the applicable rules and regulations as early as practicable. Preliminarily, all products imported into the United States must comply with 19 U.S.C. § 1304 and 19 C.F.R. § 134.59
National Institute of Standards and Technology (NIST), Compliance FAQs: Packaging and Labeling in the US, (last updated Aug. 9, 2018), https://www.nist.gov/standardsgov/compliance-faqs-packaging-and-labeling-us.
Pursuant to these regulations, all imported goods of foreign origin must, among other things, “be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article.”6019 U.S.C. § 1304(a); 19 C.F.R. § 134.11. The regulations go on to identify specific marking requirements depending on the product, including the location of markings.61
See generally 19 U.S.C. § 1304; 19 C.F.R. § 134.43.
In addition, manufacturers should be cognizant of The Fair Packaging and Labeling Act (FPLA),6215 U.S.C. §§ 1451 – 1461. and the Uniform Packaging and Labeling Regulation (UPLR). The FLPA requires, among other things, that the label specify the name of the commodity, the name and place of the manufacturer, packer or distributor, and the net quantity of its contents.6315 U.S.C. §§ 1453(a)(1) & (2). The UPLR provides similar specific requirements and is delineated in a handbook published by the National Institute of Standards and Technology.64
NIST, Handbook 130, at 51-94 (2018), available at https://www.nist.gov/sites/default/files/documents/2017/11/29/iv-a-pkglblreg-18-h130-final.pdf.
Broadly speaking, the UPLR provides for three primary labeling requirements: (1) declaration of identity, (2) declaration of responsibility; and (3) declaration of quantity.65
Id. at 59-72.
These requirements differ somewhat depending on whether a manufacturer is shipping a consumer versus a non-consumer commodity.66
Id.; see also 15 U.S.C. § 1459(a) (defining “consumer commodity” to be “any food, drug, device, or cosmetic (as those terms are defined by the Federal Food, Drug, and Cosmetic Act [21 U.S.C. 301 et seq.]), and any other article, product, or commodity of any kind or class which is customarily produced or distributed for sale through retail sales agencies or instrumentalities for consumption by individuals, or use by individuals for purposes of personal care or in the performance of services ordinarily rendered within the household, and which usually is consumed or expended in the course of such consumption or use.”).
While effective marketing is one of the most critical aspects to successfully entering a new market, misrepresentations or false statements in a marketing campaign can expose manufacturers to vexatious, and successful, lawsuits by consumers. Like every other stage of product development, there are many regulatory bodies and statutes of which to be aware.
The Federal Trade Commission (“FTC”) is the federal regulatory body whose main focus is to protect consumers and promote the economy.67
Federal Trade Commission, What We Do, https://www.ftc.gov/about-ftc/what-we-do.
Through the FTC’s primary governing statute, the Federal Trade Commission Act (the “FTC Act”), it is empowered to, among other things, thwart unfair tactics to competition and “unfair or deceptive acts or practices in or affecting commerce.”68
See 15 U.S.C. §§ 41-58; FTC, Statutes Enforced or Administered by the Commission, https://www.ftc.gov/enforcement/statutes.
The FTC Act prohibits unfair or deceptive marketing and provides guidelines and tips from which manufacturers can refer.69
See, e.g., FTC, Advertising and Marketing on the Internet: Rules of the Road, https://www.ftc.gov/tips-advice/business-center/guidance/advertising-marketing-internet-rules-road.
For example, in a 2013 publication, the FTC provided detailed practical tips for making effective, and legal, disclosures online. Preliminarily, it explained that, “[b]efore disseminating an ad, advertisers must have appropriate support for all express or implied objective claims that the ad conveys to reasonable consumers. When an ad lends itself to more than one reasonable interpretation, there must be substantiation for each interpretation.”70
FTC, .com Disclosures: How to Make Effective Disclosures in Digital Advertising, at 4 n.12 (March 2013), available at https://www.ftc.gov/system/files/documents/plain-language/bus41-dot-com-disclosures-information-about-online-advertising.pdf.
While regulatory bodies like as the FTC are the first hurdle to pass, there are many statutes that can be implicated if your marketing is considered deceptive or untruthful. In the United States, there are various state consumer protection statutes that serve to protect individuals from, among other things, misrepresentations or false statements made about products that they purchase and use. As previously mentioned, consumer protection litigation is one of the most prevalent in the states.
A common cause of action against manufacturers in New Jersey is the alleged injury from a violation of the Consumer Fraud Act (“CFA”).71
N.J.S.A. 56:8-2, et seq.
New Jersey’s CFA is somewhat broad and makes unlawful “any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise.”72
From this definition, certain alleged misrepresentations or false assertions ̶ however big or small ̶ in a manufacturer’s warranty or advertisement can subject them to lawsuit. By way of example, putative class actions are sometimes filed against manufacturers of dietary supplements, alleging that the products’ labeling misstates the content of a certain nutrient. Those types of allegations are all too common and often baseless. Whether meritless or not, they can disrupt a business and be expensive to resolve.
To thwart future legal issues, manufacturers should be careful about how they advertise their products, particularly where the product’s labeling promises a medical benefit and/or claims to be backed by scientific research. (E.g., “proven to help users sleep” or “shown to reduce stress.”) Consumer suits often challenge the existence, independence, and rigor of science-based advertising.
Once a product has been developed in accordance with applicable laws, a manufacturer must consider how it will sell and distribute its product in the United States and the legal issues associated with those facets of its business.
As a result of technology, manufacturers face potential liability in connection with the sale of their products in ways they would not have a decade ago. For example, manufacturers who market and sell their products online must comply with Title III of the American with Disabilities Act (the “ADA”). Title III of the ADA prohibits discrimination against persons with disabilities by requiring places of public accommodation and commercial facilities to be accessible to qualified disabled persons.73
U.S. Dep’t of Justice and Civil Rights Div.,Public Accommodations and Commercial Facilities (Title III), https://www.ada. gov/ada_title_III.htm; 28 C.F.R. § 36.101.
In that light, recent cases have grappled with requiring that websites be accessible to the blind.74
See, e.g., Lucia Marett v. Five Guys Enterprises, LLC, No. 1:17-cv-00788-KBF, ECF No. 33, 2017 U.S. Dist. LEXIS 115212 (S.D.N.Y. July 21, 2017).
In Gil v. Winn-Dixie Stores, Inc., the United States District Court for the Southern District of Florida entered judgment against the defendant finding that it violated the ADA due to its lack of website accessibility for blind customers.75No. 1:16-cv-23020-RNS, ECF No. 63 (S.D. Fla. June 13, 2017). There, the plaintiff was visually impaired and legally blind, and relied on screen reader software to use computers.76
Id. at *2.
After overhearing an advertisement for Winn-Dixie’s website on television, the plaintiff attempted to navigate through the store’s website so that he could, among other things, refill his prescriptions without having to orally announce them in public in front of others.77
Id. at *3-*4.
Winn-Dixie’s website, however, was not accessible with screen-reader software and the plaintiff was precluded from using it to purchase goods.78
Id. at *4.
In Andrews v. Blick Art Materials, LLC, the Eastern District of New York denied a motion to dismiss a website accessibility action, finding that the defendant failed to provide the blind with the “‘full and equal enjoyment’ of the goods, services, privileges, advantages, facilities, or accommodations of its website” especially when “taking such steps would not impose an undue burden on [the defendant] or fundamentally alter the website.”79268 F. Supp.3d 381, 393 (E.D.N.Y. Aug. 1, 2017).
While the U.S. Department of Justice has opted not to issue regulations for website accessibility at the moment, there are other sources for guidance to which manufacturers should refer. Currently, the only official standard for website accessibility applies to federal agencies and is called the Website Content Accessibility Guidelines 2.0 Level AA (WCAG 2.0 AA) standard.80
The guidelines can be found at https://www.w3.org/WAI/WCAG20/quickref/.
These guidelines were developed by W3C, an international group that develops website standards to “ensure the long-term growth of the Web.”81
W3C, Homepage, http://www.w3.org/.
The U.S. Department of Health and Human Services also provides a basic checklist for making content accessible to people with disabilities.82
U.S. Dep’t of Health & Human Servs., PDF File 508 Checklist (WCAG 2.0 Refresh) (last updated Feb. 2018), https://www.hhs.gov/web/section-508/making-files-accessible/checklist/pdf/ index.html.
Finally, there are a number of free tools available that will give manufacturers a report card regarding its website’s accessibility.83
The Web Accessibility Evaluation Tool (“WAVE”) is a good source for a free review of the manufacturer’s website, and can be found at http://wave.webaim.org/.
Another statute that has recently gained attention in the product market is the Health Insurance Portability and Accountability Act (“HIPAA”), which prohibits the use and disclosure of individually identifiable health information created or received by health plans, health care clearinghouses, and healthcare providers (“covered entities”). Health products like fitness trackers have become increasingly popular, and part of their functionality includes gathering and storing personal health information. While HIPAA is not presently understood to apply to manufacturers of wearable devices who interface directly with consumers, HIPAA has been deemed to apply to device manufacturers who interact with covered entities. If a wearable device manufacturer plans to market or sell its device to covered entities, it should conduct a thorough evaluation of how the device handles protected health information to ensure compliance with HIPAA and related privacy regulations.84
It is noteworthy to mention that those outside of the United States may also face issues with these types of products pursuant to the General Data Protection Regulation (“GDPR”), whose general information can be found at https://www.eugdpr.org/the-regulation.html.
There are many more ways in which a manufacturer can open itself up to liability simply by virtue of how it sells its products and to whom. Understanding that potential for liability is critical to decreasing a manufacturer’s exposure, and limited this exposure will improve profitability in the long run.
United States legal implications do not end when a product is sold. The international shipment of products carries a host of considerations for manufacturers. Of course, the method and means of shipment will depend largely on the type of product that is being transported and its container.
The U.S. Customs and Border Protection (“CBP”) website is a useful place to start.85
U.S. Customs and Border Prot., Tips for New Importers and Exporters, (last updated Jan. 8, 2018), available at https://www.cbp.gov/trade/basic-import-export/importer-exporter-tips.
While the CBP is ordinarily recognized as an organization focused on protecting the U.S. from foreign terrorists and weapons, its leading responsibility is to control, regulate, and facilitate the movement of carriers and the like between the U.S. and foreign nations.86
U.S. Customs and Border Prot., About CBP, https://www.cbp.gov/about; see also U.S. Customs and Border Prot., Importing into the United States: A Guide for Commercial Importers, at 5 (last updated 2006), available at https://www.cbp.gov/sites/default/files/documents/Importing%20into%20the%20U.S.pdf.
As such, the CBP is the first command in enforcing and ensuring compliance with domestic laws.87
Importing into the United States A Guide for Commercial Importers, at 5 (last updated 2006), available at https://www.cbp.gov/sites/default/files/documents/Importing%20into%20the%20U.S.pdf.
For manufacturers shipping into the U.S., all goods pass through a port of entry or are transferred to a CBP mail branch for clearance.88
A detailed list of ports of entry are provided at https://www.cbp.gov/ contact/ports see also U.S. Customs and Border Protection, Internet Purchases, https://www.cbp.gov/trade/basic-import-export/internet-purchases.
There, CBP agents inspect the goods and relevant documentation that must accompany the shipment.89
Importing into the United States A Guide for Commercial Importers, supra n. 87, at 20-24 (last updated 2006), available at https://www.cbp.gov/sites/default/files/documents/Importing%20into%20the%20U.S.pdf.
To avoid obstacles at this stage, importers should ensure that the merchandise is properly packaged, in compliance with all applicable laws, and that everything is properly invoiced.90
There are also additional considerations for products containing certain ingredients/ materials beyond the general considerations that apply to all products imported. The shipment of hazardous materials are governed by Article 49 of the Code of Federal Regulations, Subchapter C.91
See generally 49 C.F.R. §§ 171–180.
Any material qualifying as hazardous must be prepared and packaged in a specific manner to enter the United States.92
49 C.F.R. § 171.2 (describing general requirements for shipments of hazardous materials into the United States); 49 C.F.R. § 173.2.
The shipment of carbon dioxide and lithium batteries are just two examples of the many materials that are considered “hazardous” and require special attention.93
See, e.g., 49 C.F.R. § 173.115 (defining Division 2.1, 2.2. and 2.3 gases); 49 C.F.R. § 173.185 (delineating packaging and other requirements for lithium batteries).
The FedEx Corp. (commonly referred to as “FedEx”), United Parcel Service (commonly referred to as “UPS”), and United States Postal Service (commonly referred to as “USPS”) are among those approved for shipping hazardous materials into the United States.94
FedEx, Shipping Dangerous Goods and Hazardous Materials With FedEx, http://www.fedex.com/us/hazardous-materials/; UPS, UPS Guide for Transporting Hazardous Materials, https://www.ups.com/us/en/help-center/packaging-and-supplies/special-care-shipments/hazardous-materials.page; USPS Public-ation 52 – Hazardous, Restricted, and Perishable Mail, https://pe.usps.com/text/pub52/welcome.htm.
From design to delivery, a manufacturer has so much to consider when selling a product in the United States. The U.S. government, as well as independent agencies, police nearly every facet of product development, and the regulations are constantly changing in light of both technological and scientific advancements and changes to their enabling legislation. The pitfalls of failing to comply with the myriad of rules are too great to ignore. While this article highlights just some of the most important considerations, we strongly encourage manufacturers looking to enter the U.S. market to engage appropriate consultants and counsel to audit their product development process.