Delivering for Best-in-Class Wholesaler-Distributors
June 25, 2019

California Consumer Privacy Law Compliance Date is January 1, 2020

The California Consumer Privacy Act (Act) was signed into law on September 23, 2018 and is one of the most stringent privacy laws in the United States. It shares similarities with the European Union’s General Data Protection Regulation (GDPR), including its extraterritorial reach and grant of expansive rights to California residents on how their personal information is collected, used and disclosed. Businesses worldwide that collect California consumers’ personal information will be affected and will face a compliance date of January 1, 2020.

What Businesses are Covered?

The Act will apply to a business and its subsidiaries if it collects or receives personal information from California residents, directly or indirectly, and meets one or more of the following criteria:

  • The business has annual gross revenue that exceeds US $25 Million;
  • the business annually receives, buys, sells or shares, directly or indirectly, the personal information of 50,000 or more California residents, devices, or households; or
  • 50% or more of its annual revenue is derived from the sale of personal information about California consumers.

Personal Information is Broadly Defined

The Act defines “personal information” as information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household (e.g., name, alias, postal address, unique personal identifier, online identifier, email address, account name, social security number, driver’s license number, passport number, biometric information, employment information, internet activity or other similar identifiers).

Non-Compliance Penalties

California’s attorney general is empowered to bring an action against any company or individual person violating the Act. The Act allows for fines of up to $2,500 per violation or $7,500 per intentional violation. There is no cap on the total amount of fines. Businesses have a period of 30 days to remedy alleged violations of the law before a fine can actually be assessed.

For example, under the Act a violation impacting 1,000 California consumers could carry a penalty of $2.5 million for an unintentional violation and as much as $7.5 million for an intentional one.

Private right of action

The authorizes a private right of action that allows consumers to seek statutory or actual damages if their sensitive personal information is subject to unauthorized access, theft or disclosure as a result of a business’s failure to implement and maintain required reasonable security measures. Statutory damages can be between $100 and $750 per California resident “per incident,” or actual damages, whichever is greater. The damages provision does not apply if the personal information is redacted or encrypted.

Click here for additional information.

 

FTC Launches New Task Force to Monitor Technology Markets

The Federal Trade Commission’s Bureau of Competition has created a new task force, dedicated to monitoring competition in U.S. technology markets, investigating any potential anticompetitive conduct in those markets, and taking enforcement action when warranted.

The Bureau’s Technology Task Force will draw upon existing staff and expertise to enhance the enforcer’s focus on technology-related sectors of the economy, including markets in which online platforms compete. The task force team will include approximately 17 staff attorneys and economists from divisions within the Bureau, with unique expertise in complex product and service markets and ecosystems, including markets for online advertising, social networking, mobile operating systems and apps, and platform businesses.

FTC Chairman Joseph Simons noted, “it makes sense for us to closely examine technology markets to ensure consumers benefit from free and fair competition.” The Technology Task Force will focus exclusively on technology markets to ensure they are operating in accordance with the antitrust laws. When they are not, the FTC pledges to take enforcement action.

In addition to examining industry practices and conducting law enforcement investigations, the Technology Task Force will consult with FTC staff on prospective merger reviews in the technology sector and reviews of consummated technology mergers. Whether this move will produce increased scrutiny of the increasing consolidation among the tech titans (e.g., Alphabet, Amazon, Facebook, Apple) remains to be seen.

In a poll of registered voters conducted by Morning Consult/Politico after the FTC announcement, 44% of the respondents agreed that that the technology companies have too much power and should be more regulated. On this question, Democrats (43%) and Republicans (46%) were in agreement.

 

Non-members Cannot Be Forced to Pay Union Lobbying Expenses

In a 3-1 decision, the National Labor Relations Board ruled that unions may no longer require a non-member objector to contribute toward union lobbying costs. (United Nurses & Allied Professionals – Kent Hospital, 367 NLRB No. 94).

In a 1988 decision, the U. S. Supreme Court ruled that private-sector nonmember employees may be required to pay that portion of union fees necessary for the union’s performance of “the duties of an exclusive representative of employees in dealing with the employer on labor-management issues.” Duties deemed necessary include collective bargaining, contract administration and grievance adjustment. (Communications Workers v. Beck).

In the United Nurses case, the Board ruled lobbying expenditures to support or oppose state legislation were outside the scope of a union’s statutory duties, i.e., unrelated to collective bargaining, contract administration, or grievance adjustment. As such, these expenses are not chargeable to non-member objectors.

 

Copyright Registration Necessary Before Filing an Infringement Action

In a unanimous ruling, the U. S. Supreme Court ruled that before a federal copyright infringement case can be filed, the owner must have obtained registration of the work in the U.S. Copyright Office. (Fourth Estate Public Benefit Corp. v. Wall-Street.com LLC, No. 17-751). Registration occurs, and a U.S. copyright owner may commence an infringement suit under the federal Copyright Act, once the Copyright Office registers the work and issue its certificate of registration. Upon registration, the owner may then seek damages for infringements that occurred before and after the date of registration. Registration of a copyright may be obtained at the time the work is created, or anytime thereafter.

 

U.S. Supreme Court Win on State Sales Tax Issue:  Quill Decision Overruled

On June 21, 2018, the U. S. Supreme Court issued its 5-4 decision in the Wayfair case, and decided that an online seller without a physical presence (e.g., office, store, warehouse, employees) in a state may nevertheless be required to collect state sales tax on sales made to residents in the state. A South Dakota law imposing such a sales tax collection requirement on remote sellers without an in-state physical presence does not violate the Commerce Clause of the U. S. Constitution.  (South Dakota v. Wayfair, Inc., et al., No. 17-494).

The physical presence rule announced in prior Supreme Court precedents – Quill Corp. v. North Dakota (1992) and National Bellas Hess v. Illinois (1967) – were overruled as “unsound and incorrect.”  Candidly, the court acknowledged that Quill has come to serve as a judicially created tax shelter for out-of-state sellers, granting them an unfair competitive advantage over their in-state rivals.

The South Dakota sales tax law at issue requires out-of-state sellers without a physical presence in the State to collect and remit sales tax on sales made to South Dakota residents. The law only applies to sellers that, on an annual basis, deliver more than $100,000 of goods and services into the State or engage in 200 or more transactions for delivery of goods and services into the State.  The law is not applied retroactively and has been stayed until its constitutionality is clearly established.

NAW and other business groups file Amicus briefs in this case, urging the Court to overrule Quill and abandon the physical presence rule.   Our brief cited the rule’s adverse economic consequences for the community-based brick-and-mortar wholesaler-distributor:

“NAW member companies who have a distribution center, a sales office, a branch office, make deliveries in a state, or have some other form of physical presence in a state are forced to operate at a clear and substantial economic disadvantage vis-à-vis remote internet sellers competing in the same markets. This disadvantage results in lost sales revenue and hampers the ability of locally present wholesaler-distributors to grow their businesses, invest in the community, and produce in-state employment opportunities.”

Next Steps

The Court has remanded the case to the South Dakota Supreme Court, to address the question “whether some other principle in the Court’s Commerce Clause doctrine might invalidate the Act.” These principles include: the tax must be fairly apportioned; the tax must not discriminate against interstate commerce; and, the tax must be fairly related to State services provided to the seller.

On a positive note, the Court observed that “South Dakota’s tax system includes several features which appear designed to prevent discrimination against or undue burdens upon interstate commerce.”

In his dissenting opinion, Chief Justice Roberts would have deferred to Congress to correct the Quill decision.  From 2001 to 2017 Congress has considered, but not passed, legislation concerning interstate sales tax collection and three bills are currently pending – including the Marketplace Fairness Act of 2017 supported by NAW and other business groups. “Nothing in today’s decision precludes Congress from continuing to seek a legislative solution,” notes the Chief Justice.

Click here to view the Court’s decision.

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