Though “fashion law” is an area of law that has always existed, its recent prominence within the legal field is bringing to light many issues that retailers and brands weren’t thinking about before. For example, a recent Corporate Governance Report by Bloomberg Bureau of National Affairs discussed what legal issues may be affecting retailers and brands within the fashion industry in 2015.
The report highlighted 8 trends that brands should be aware of this year, ranging from the prominent unpaid internship class action lawsuits, to new regulations on employee social media policies.
One of the major trends the report discusses is the “Made in USA” litigation. Over the past year 8 brands and retailers were sued by consumers who alleged that these companies failed to adhere to California’s statute that prohibits companies from using a “Made in the USA” label unless every single element used in the creation of the piece was completely made in the USA.
The report discusses how most of these cases brought under this California statute in the past were settled. However, many of the lawsuits brought in 2014 will probably be decided this year. The defendants argue that the California statute is in conflict with the federal statute, which doesn’t require that every piece of the clothing be made in the USA to use the “Made in the USA” label, and to adhere to both statutes is burdensome and difficult.
Most of the lower courts have disagreed with this argument and have allowed the lawsuits to proceed. This shows that brands must be aware of the labeling they decide to use for the products they create, especially if they are doing business in California.
The second major trend the report discusses is the influx of unpaid internship lawsuits that have hit just about every major brand in America. From Marc Jacobs, and Oscar de la Renta to Burberry and Tommy Hilfiger, brands are being hit with unpaid internship class action lawsuits. These lawsuits allege that the brands misclassify interns, who are in fact doing the work of employees.
As I’ve discussed in previous posts, all of these lawsuits are being brought under New York state law rather than the normal practice of filing based on the federal Fair Labor Standards Act. The New York state law imposes greater restrictions on what is required for an intern to be classified legally as an intern.
The report discusses how these lawsuits are still in the early stages of litigation, but they expect that some of them will be resolved in 2015.
An interesting trend the report discusses, that I hadn’t really heard of before is deceptive pricing lawsuits against outlet stores. Plaintiffs who have brought these kinds of lawsuits against retailers, ranging from Neiman Marcus to Michael Kors, argue that these retailers use fictitious “Compare at” or MSRP prices at their outlet locations and that this practice is deceptive and misleading.
No substantive decisions have been made by courts regarding this litigation; however, the report expects that some decisions will be made in 2015, with the first being the lawsuit brought against Nordstrom. In that case, the report mentions that the retailer “claims that California’s Unfair Competition Law does not even apply because Nordstrom Rack’s ‘Compare at’ prices are different from the ‘former prices’ regulated by the statute; even if the law were to apply, Nordstrom argues, the case should be dismissed because the plaintiff failed to show that Nordstrom Rack’s pricing is inaccurate, deceptive or unfair.”
It will be interesting to see how the Nordstrom case and other cases are decided because it can have a profound effect on discount store’s pricing practices. One of the major selling points of most of these outlet stores is the idea that you are getting a great, high-end piece for a steal.
The report touched on several other legal issues that will affect the fashion industry, including employment background checks lawsuits, data breach legislation, and California’s Beverly-Song Credit Card Act litigation.
To be competitive in such a saturated marketplace, fashion brands and retailers need to not only be aware of trends in clothing, accessories and footwear, but also trends in legal issues that will be affecting the industry as a whole.