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Retail Law Advisor

The Ascendency of Accessibility: Surge in Website Lawsuits Continues

Posted in Compliance, Employment, Restaurants, Retail, Technology

Keyboard - access key Contact usThe proliferation of accessibility lawsuits under Title III of the Americans with Disabilities Act (ADA) has not abated. It is well-documented that ADA-related litigation increased by 37% from 2015 to 2016, which is symptomatic of long-term trends. Growth is fueled in part by litigants’ increased focus on internet-based technologies, including websites and mobile applications. This trend is unlikely to wane in the near future, especially given the continued expansion in e-commerce and internet-enabled applications that retailers, hospitality providers, and other commercial enterprises rely on for advertising, customer engagement, and sales growth.

Title III of the ADA prohibits discrimination against disabled persons in places of “public accommodation.” As a result, businesses that provide goods or services to the public must provide disabled persons with the same type of access to those goods and services, and must remove certain existing barriers to access. Although individuals may have legitimate claims under Title III, the majority of these lawsuits are filed by a small cadre of plaintiffs’ attorneys and advocacy groups. These attorneys and groups specialize in identifying potential ADA violations, locating suitable plaintiffs, and then filing numerous lawsuits that typically settle quickly for nuisance amounts. The incentive for these serial litigants is the ADA’s private enforcement incentive: plaintiffs who prevail on their claims generally recover attorneys’ fees, expert witness costs, and other legal expenses.

With few exceptions, courts interpret Title III as applying to websites and mobile applications. In particular, courts have viewed websites and mobile applications as “public accommodations” where they enable the public to purchase, view, or reserve goods and services. This implicates most websites and mobile applications offered by retailers, restaurants, and hospitality and other service providers.

Title III’s specific technical requirements are complicated and often misunderstood.  In addition, there are currently no specific ADA standards for websites or other internet-enabled technologies. To address this void, the Department of Justice is working on regulations. The Department of Justice began that process in back in 2010, with the anticipated publication date sometime in 2018. However, the current political climate and associated regulatory uncertainty may further delay these regulations.

This lack of regulations creates challenges for businesses—whether designing or modifying their websites or responding to a demand from a plaintiff’s attorney. As we mentioned in an earlier post, the Department of Justice has used the Web Content Accessibility Guidelines 2.0 when entering into settlement agreements with businesses. We suspect that the Department of Justice’s internet accessibility regulations, whenever they are issued, will be based on these or similar guidelines. For that reason, until the issuance of definitive regulations, some businesses have decided to look to these guidelines when designing or modifying their websites and mobile applications. The guidelines include detailed technology and design recommendations, including:

  • Providing alternative text for screen reader technology (converting text to audio);
  • Providing captions for video, and providing transcripts for audio;
  • Making file downloads accessible;
  • Not relying on color alone to convey meaning; and
  • Making sure content is structured, clearly written and easy to read.

The lack of Title III website accessibility guidelines creates uncertainty for businesses. Until definite regulations are promulgated, many business owners have concluded that incorporating principles and recommendations from the Web Content Accessibility Guidelines 2.0 is the best approach. That also may help persuade potential litigants trolling for their next lawsuit to look elsewhere. Businesses are well-advised to be proactive, remain vigilant with their website and mobile application design and maintenance, and seek legal counsel to address any questions or concerns.

ICSC Mid-Atlantic Conference & Deal Making Recap

Posted in Landlords, Leasing, Real Estate, Restaurants, Retail, Tenant

ICSCWith seemingly all of the country’s attention focused on Washington DC lately, we snuck out of the District and across the Potomac River to National Harbor last week for ICSC’s 2017 Mid-Atlantic Conference and Deal Making. The conference was very well attended, and the mood among attendees and presenters was generally upbeat. Anecdotally, the sentiment seemed to be that for, retail real estate in this region, the sun is still shining—for the moment.

Restaurants Are Leading the Charge . . .

Restaurants, particularly unique, local, and slightly funky concepts (such as food halls) are generally regarded as increasingly being responsible for driving traffic to shopping centers. Seemingly every demographic that carries a smart phone—millennials, boomers, tourists, etc.—is seeking the next trendy dining-out experience, presumably to actually eat a meal, but definitely to fill up their Instagram, Snapchat, Twitter, and other social media accounts. The social media cycle is seemingly a positive force for brick-and-mortars: consumers have become crowd-marketers to their friends and followers.

Landlords hoping to capitalize on the burgeoning restaurant scene are crafting a tenant mix that makes it easy and enjoyable to mix dining and shopping. Food courts, once features designed to maximize convenience, are being turned around into restaurants that maximize experience and emphasize quality foods. Among the restaurants and regional fast casual chains generating buzz were Taylor Gourmet, La Colombe, Honeygrow, and First Watch Café.

. . . Discount and Value Retailers Are Also Doing Well

While some high-end anchors were creating major ripples or capturing the president’s attention for reasons most retailers strenuously avoid, discount and value retailers have been building on a hot streak. The consensus we’ve heard on discount retailers is that they have been able to undercut department store competitors on price without sacrificing much by way of style or quality. As a result, consumers seemingly cannot get enough.

But Other Deals Are Getting Harder and Taking Longer

The ICSC conference highlighted restaurants and discounters as the clear leaders of the retail sector. However, we heard that for other categories of retailers, deals are not coming together as quickly. Both landlord and tenants may be experiencing some trepidation—whether about possible changes to tax laws, a recession that many predict should be coming soon, general uncertainty as a new administration finds its way, or some combination of these reasons and others—deal velocity seems slightly down relative to recent hot years.

Recent news that Whole Foods is closing several stores, pulling back from a number of high profile deals and otherwise scaling back new store development, was at the forefront of many conversations. It is clear that other large format retailers are also possibly scaling back expansion plans, or at the very least, taking a pause to re-examine the relationship between their online and brick and mortar presence.

Rising Interest Rates: Will Landlord’s Be Able to Keep Up?

One of foremost macro concerns for nearly every landlord is the near term interest rate climate. The past several quarters have been a steady stream of speculation that interest rates are due to hike again. Landlords may face a situation in the near future where deal velocities stay low and depress rents while debt costs rise.

The Power of the Melody Pushes Fashion Forward

Posted in Retail, Retail Sales

The many genres of music – particularly, rock, pop, hip-hop and country – have always pushed the needle forward in fashion. Musical icons from today and yesteryear have given a voice to fashion by creating a kinetic experience full of imagery and a visceral aesthetic that retailers long to foster in their brick and mortar retail stores. Today, music’s grip and influence on fashion have become more and more evident with the boom of music festivals that have become Millenial’s and Gen Z’s version of Woodstock and Glastonbury. Music festivals, including SXSW, Panorama, Bonnaroo, and Coachella have become “see and be seen” fashion experiences. And, recently, retailers have taken notice and launched festival-inspired fashion capsules in an effort to ride the wave of music festivals. Major international retailers, such as ASOS, Nordstrom and Macy’s, have designed comprehensive campaigns appealing to music festival fans. By promoting these music festivals on social media and creating festival-worthy fashion lines, these retailers have inspired brand loyalty among a target market of Gen Z and Millenial consumers, and, more importantly, offered festival fashionistas a streamlined method of outfit shopping. In the coming years, competition among retailers courting music festival fans will only increase as the international love affair with music festivals further escalates.

Music festivals, which are a perennial draw for A-list celebrities and social-media influencers, celebrate street style as much as the music they are supposed to exhibit. In a strange twist, music festivals have become a social calendar event where what fashion-conscious onlookers are wearing is just as important as the artists performing. These content creators all have the ability to jumpstart a new trend that will become the next #Instafashion moment. Given the enormous popularity of music festivals – evidenced by each #hashtag and geotag – on social channels such as Snapchat, Instagram and Youtube, savvy retailers have capitalized by sponsoring these events and opening up pop-up stores on site. These retailers hope to capture the heart of the Millennial customer who will now associate the brand with an experience, hopefully engendering brand loyalty going forward. Nordstrom was one of the first retailers to open up pop-up shops at music festivals, which included a photo booth where customers were encouraged to upload the photos to social media and use its hashtag. Marketing campaigns that are seamlessly integrated into event experiences tend to resonate with consumers on a deeper level. By leveraging the social capital of music festivals, retailers such as Nordstrom have been able to cast a wider net in an effort to sell their products to future festival goers.

Music festivals are fast becoming the Super Bowl (Congrats! @Patriots) in the fashion calendar. And, considering the global reach of music festivals, retailers’ opportunities to increase sales and reach new consumers appear endless. For retailers that step up to the plate and create interactive experiences on the festival grounds or at a star studded sponsored private party, music festivals can be a home run marketing opportunity that engages both festival-goers and followers on social media.

The (Border) Adjustment Bureau: Hold On to Your (Imported) Hats

Posted in Cross Border, Retail, Retail Sales, Tax

euro and dollar sign_dreamstimefree_2840174Retailers would be wise to pay close attention to the upcoming tax-plan deliberations of the 115th U.S. Congress. A proposal currently being considered would adjust the U.S. corporate tax by making imports a non-deductible expense. This adjustment is intended to create incentives for domestic production, as companies would no longer be able to reduce their taxable income by deducting their overseas expenditures.

Here’s an example. Currently, if Joe Retailer imports $1 million of goods, spends $500,000 on domestic costs and sells the products for $2 million, Joe could deduct the cost of the imports and all domestic costs from the sales amount, and would pay 35% in taxes on $500,000, for a total tax hit of $175,000. Under the proposed plan, however, Joe would be able to deduct only the $500,000 in domestic costs, and would pay 20% in taxes on $1.5 million, for a total tax hit of $300,000.

Thus, some retailers importing goods made abroad fear a looming tax crunch. Recent media reports have highlighted the potential effects of the proposal on the apparel, toy, and electronics industries, although other import-heavy industries find themselves in a similar situation. According to one RBC Capital Markets analyst, cited in a recent Wall Street Journal article, the earnings loss to six large retailers from a “border adjustment” could total $13 billion. Other economists, however, are downplaying these concerns, noting that such companies could recoup any tax losses with gains from decreased importation costs and a stronger U.S. economy. Companies may also attempt to pass increased tax costs through to the consumer by raising the price of goods.

Of course, the final fully-negotiated tax plan may look vastly different from the current proposal. Indeed, President Trump has publicly criticized the border-adjustment component of the GOP tax plan, saying “Anytime I hear border adjustment, I don’t love it.” Even if passed in its current form, the economic effect of the proposal on retailers, consumers, and the overall economy is hotly debated. Nonetheless, it is worth keeping an eye on the result of negotiations concerning the “border adjustment”.

A final thought: Despite the murkiness of the future under the new administration and Congress, one outcome is crystal-clear:

Let me tell you how it will be
There’s one for you, nineteen for me
‘Cause I’m the taxman
Should five per cent appear too small
Be thankful I don’t take it all

–       The Beatles



Oh the Sidewalks Outside Are Frightful, But Landlords Will Make Them Delightful… or Will They?

Posted in Compliance, Landlords, Leasing, Real Estate, Retail, Tenant

ShovelAlthough we haven’t seen much snow accumulation in the northeast to date, we know that this can (and likely will) change before the warmer weather returns. Before the snow really begins to fall, it would behoove both landlords and tenants to become informed about their snow clearing responsibilities and to ensure removal plans are in place that are compliant with laws and lease documents.

The City of Boston (City) and other major cities such as Chicago and New York require property owners to bear the responsibility of removing snow and ice from sidewalks abutting their properties. Although each local ordinance differs with respect to the nature of the accumulation and time of day that the snow must be removed, all ordinances impose fines for non-compliance. Currently, the fine for failure to comply with the City’s snow removal ordinance ranges from $50-$200.  A Bill was proposed in March, 2015 which would give the City the authority to increase these fines, but due to the widespread impact and the potentially steep increase in the fines, the Bill initially met some opposition. However, it seems that concerns for pedestrian and vehicular safety tipped the scales, and on December 30, 2016, Massachusetts’ Governor Charlie Baker signed the new Bill into law giving the City the authority to increase the fines. This new law enables the City to impose fines up to $1,500.00 on owners of commercial properties and buildings containing more than six residential units who fail to remove snow or ice from sidewalks as required or if the snow is placed in the public way. The Mayor and the Boston City Council are now responsible for determining the new fines.

In addition to the obligations imposed by the City, property owners also have common law duties in connection with snow removal. In a previous article, we discussed the Massachusetts Supreme Judicial Court (SJC) case Papadopoulos v Target Corp, 457 Mass, 368 (2010) which established a new standard of measuring liability for tort actions involving snow removal. In particular, property owners are now required to act as a “reasonable person under all the circumstances”. Accordingly, it is of particular importance that landlords allocate snow and ice responsibilities in lease documents.

In a typical retail lease, landlords are responsible for the maintenance of common areas, including the removal of snow and ice. However, it is not uncommon for a retail lease to include a provision that obligates the tenant to remove snow and ice from its entryway and the sidewalks abutting its space. While tenants are reluctant to obligate themselves to perform this duty, particularly when they are paying common area maintenance costs, it may be in the best interest of both parties for tenants to be responsible for snow removal from certain areas close to the premises. Even when a landlord actively works at the property to remove the snow, significant accumulations often make it difficult for a landlord’s crew to keep up with clearing all parking areas and sidewalks to satisfy the City’s ordinance and the common law. On the other hand, tenants are uniquely situated to ensure that the snow is cleared in an expeditious manner that permits its customers to safely access their business. Regardless of how the duties are assigned in your lease, keep in mind the long term implications on your snowy day fund if you fail to follow the requirements of the City’s ordinance or the lease and pay careful attention to compliance.

Upscale Food Halls—On Trend and On The Rise

Posted in Landlords, Leasing, Real Estate, Restaurants, Retail, Retail Sales

forks_86449_imageThe growth of high-end food halls is taking off around the country as consumers seek fast, fresh, high-quality, chef-driven meals with a local touch, and as landlords seek to cash in on the continued growth of fast-casual dining. These boutique-style, upscale food halls are modeled more after famous European markets like Barcelona’s Mercado de la Boqueria than after airport or suburban mall food courts. Following the success in New York City of Eataly, Todd English Food Hall at the Plaza and Chelsea Market, food halls are experiencing a wave of growth across the country.

Eataly, which launched its first store in Turin, Italy in 2007, opened in New York City in 2010 with a mix of restaurants and retail market stands selling high quality Italian food products from both Italian and New York area producers, with New York celebrity chef and restaurateurs Mario Batali and Joe Bastianich providing an imprimatur of quality and authenticity. Eataly New York features gourmet groceries, coffee and pastries, a variety of grab and go options and full service restaurants to drive business throughout the day. Eataly now operates two markets in New York City and one in Chicago, is developing a store in Los Angeles, and has just opened a 45,000 square foot store at Boston’s Prudential Center. Eataly’s newest store in Boston will have its own local flair, a collaboration with local Boston celebrity chef Barbara Lynch and products from producers across New England to compliment the wide range of Italian products offered for sale.

Rather than a single entity operating all of the stands and restaurants, as is the case at Eataly, New York’s Chelsea Market, located near the High-Line, but a tourist destination in its own right, offers a well-curated selection of high-quality shops, food stands, and restaurants, with a focus on local, New York businesses. This template is being replicated in different neighborhoods across New York City with new food halls such as UrbanSpace Vanderbilt, and Gotham West Market. It is also being replicated in other cities across the country, as evidenced by Union Market in Washington DC, Ponce City Market in Atlanta, and the Pine Street Market in Portland, to name a few.

Food halls sit at the intersection of a number of trends and desires. For consumers, these include increasing spending on food and, in particular, on restaurants, preferences shifting toward unique experiences, and demand for fresh, healthier food, with a local twist. For restaurants, food halls offer a great location and the ability to open a physical presence for a fraction of the capital commitment of a standalone store. And for landlords, food halls are a highly desirable retail amenity, in a retail sector experiencing strong growth, with the ability to mitigate risk across a larger number of smaller tenants. Food halls may not be the answer for every retail space. But with high-end food halls operating successfully in many different markets across the country, the number of these upscale food halls seems likely to continue increasing each year.

Amazon Go: Let’s Get (More) Physical

Posted in Retail, Retail Sales

omnichannelWe recently noted that among the latest e-tail trends is the expansion of once exclusively online retail operations into physical store locations. In-store sales continue to dominate over online sales, with the U.S. Census Bureau reporting that online sales in the third quarter of 2016 accounted for only about 7.7% of all retail sales (which was true also for the first quarter of 2016). Breaking the comparison down into categories of sales, online purchases comprise only 4% of all food and beverage sales. This may be due, in part, to the fact that 80% of all Americans live within close (less than 2.5 miles) proximity to a supermarket. Whatever the reason, Amazon is paying attention and its confidence in the staying power of brick and mortar food shops is evidenced by its latest venture – Amazon Go.

Amazon Go locations (currently just one location – in Seattle, of course) will offer prepared foods, beverages and other grocery items to customers. The difference? No need to check out and, thus, no lines. Amazon’s so-called “Just Walk Out Technology” – a combination of computer vision, sensor fusion and deep learning, apparently similar to the technology used in self-driving cars – enables customers, who gain access to the store (through electronic turnstiles similar to those used in many subway stations) through use of an app, to select what they want and simply walk out of the store. Customers are charged based on what they pick up off the shelf (the price will be adjusted down for any items that are put back) without the need to wait in line to make a purchase with a cashier. No cashiers means substantially fewer employees, though someone will have to be there to restock the shelves and answer the inevitable questions about the process. And there will also be chefs on-site preparing many of the meals and snacks offered at the store. The first and only Amazon Go location is currently open exclusively to Amazon employees – it is housed within the ground floor of one of Amazon’s Seattle office towers – but Amazon plans to open the store to the public in early 2017. Presumably, Amazon will rollout additional stores after it irons out the kinks at the Seattle location.

Time will tell whether other retailers will similarly move in the direction of technology-based (as opposed to salesperson-based) sales, and what the overall impact on retail, as well as employment rates, will be. In discussing whether Amazon is destroying retail or merely reshaping it, Forbes recently took the position that the latter is the case and boldly stated that “Amazon is doing more than most store-based retailers to try to define what a store should truly be in the future.” The ultimate success of Amazon Go, not to mention the ability of other retailers to afford to purchase and implement technology similar to Amazon’s patented Just Walk Out Technology, will determine whether this latest Amazon endeavor will actually reshape retail or if it is only a fad. Regardless of its long-term implications, we think it’s pretty cool [cue the Jetsons theme song].

Mobile Payments: Exciting but Unknown

Posted in Restaurants, Retail, Retail Sales, Security, Technology

apple payMobile payment options are no longer the wave of the future. They are already here. It was projected that there would be almost 450 million mobile payment users worldwide by the end of 2016. These users generated $60 billion in mobile payment sales in 2016 alone.  Certain studies project that by the year 2020, 90 percent of mobile phone users will make a mobile payment, and those mobile payments will account for over $500 billion in sales in 2020. These numbers are significant. If retailers do not already offer a mobile payment option, they could miss out on a major source of revenue.

Retailers can offer their customers a mobile payment option in a variety of ways. Some stores have launched a payment feature within their own mobile application (e.g., CVS, Kohl’s and Wal-Mart). Other stores rely on already-established third-party payment platforms such as Apple Pay and PayPal. Regardless of the method, offering a mobile payment option provides certain advantages to both merchants and consumers, such as providing a faster checkout experience, developing loyalty through rewards programs, and allowing merchants to gain a better understanding of their customers’ purchasing habits.

These potential advantages suggest that the use of mobile payments will only continue to grow. One area of mobile payments that experts expect to expand in 2017 is “contactless” or “proximity” transactions – i.e., transactions that will be completed by tapping a card against a machine or using a digital wallet to pay for a productBloomberg Technology has noted that, according to certain studies, by 2019, “the total value of transactions made by tapping a phone on an in-store terminal will reach $210 billion, up from $8.7 billion in 2015.” Because of the nature of the retail environment, retailers can expect to receive the majority of that revenue. One study shows that, in 2015, 61 percent of all “proximity mobile” payments in the United States took place in the retail environment.

Further, not only will the number of mobile payment users continue to grow, mobile payment technology will continue to evolve. Google recently announced a new mobile payment application that uses Bluetooth or Wi-Fi to allow the user to make a payment without even taking their smartphone out of their pocket or purse. Other tech companies are focusing on developing technology that will allow consumers to use their clothing and accessories to make purchases.

These trends all lead to the same conclusion. Within the next few years, consumers will expect their retailers to provide them with a mobile payment option of one sort or another. In response, retailers will, and in fact have already started to, race to develop and implement the most efficient and profitable mobile payment option available. However, this race to provide a mobile payment option as quickly as possible has resulted in a “fragmented marketplace with different technology types and business models.” The lack of consistency among stakeholders has complicated the already difficult task of regulating the mobile payment industry, which in turn has opened the door for possible failures or weaknesses, such as fraud and lack of security over consumers’ personal information.

The bottom line is that retailers must adapt by providing their customers with the mobile payment option that best suits the needs of both the retailer and their customers. However, in doing so, retailers must also acknowledge that the mobile payment industry is still developing and that there is not yet an established global regulatory framework that will protect them from potential failures or weaknesses. As a result, retailers should proceed cautiously and should take proactive measures to avoid failures and weaknesses in their mobile payment options.

Happy New Year to the Retail Industry!

Posted in Holiday

new-year-2016-imagesAs we welcome 2017, we wish to recognize our Retail Law Advisor readers and subscribers as we begin our 5th year of blogging this January. Because of you, we proudly mark this milestone with the blog’s inclusion on the ABA Journal’s Blawg 100 list. This list of blogs, created through a nomination process across thirteen categories, is a sought-after award for legal bloggers. We enthusiastically continue our commitment to providing the retail industry with a top-notch resource for trending topics and important updates relevant to your businesses.

We wish you a happy and successful New Year!

Warmest Wishes,
The Retail Law Advisor editorial board

Coming to a Retailer Near You: Made in USA Labeling Requirements

Posted in Regulatory, Retail, Retail Sales

dreamstimefree_17461Patriotism is a hot topic in the United States. One study shows 51% of American consumers will pay higher prices to buy American made products. Not surprisingly, manufacturers actively promote products with the red, white and blue labels proudly proclaiming “Made in USA” to capture those consumers. In fact, some iconic American brands such as Ford, Kraft and GE, are working to get more of their products made in America. There is a lot of pride among American consumers evidenced by spending habits for the products carrying the promise that they were made on home turf. Much was made during the presidential campaign about Donald Trump’s products and whether or not they are manufactured in the US or abroad.

But how do we know the validity of the “Made in USA” promise? Since the 1990s, there have been standards in place for labeling products “Made in USA” to address concerns that manufacturers could overstate the extent to which they meet the requirements. The Federal Trade Commission (FTC), the party responsible for preventing deception and unfairness in the marketplace, states that products must be assembled or ‘substantially transformed’ in the United States and must only contain ‘negligible foreign content’. While the Commission does not pre-approve advertising or labeling claims, it does not mean companies can skirt responsibility.  Any consumer can make a complaint to the FTC that a brand is engaging in deceptive advertising practices through mislabeling products. We see increased enforcement activity by the FTC, but with the upcoming transition from the Obama administration to the Trump administration, there are additional enforcement uncertainties.

Ultimately, the question for manufacturers and retailers is: Will the “Made in USA” label mean more than ever over the next four years?  Time will tell, but if that is the case, it is important for businesses to understand how to meet the standards for the “Made in USA” label, including how state laws regulate American manufacturing. What to do?  For starters, companies should consider ways to keep careful tabs on what goes into their products and consult with legal counsel on how to keep the labels legally compliant.