Continued FTC Crackdown on False Product Reviews
Consumer protection wins again! The Federal Trade Commission (FTC) announced a final order settling its complaint against Rytr LLC, an artificial intelligence (AI) writing assistant tool that was capable of producing detailed and specific false product reviews using AI technology.
The FTC further alleged that Rytr subscribers used the service to generate product reviews potentially containing false information, deceiving potential consumers who sought to use the reviews to make purchasing decisions. The final order settling the complaint, which was published on December 18, 2024, bars Rytr from engaging in similar illegal conduct in the future and prohibits the company from advertising, marketing, promoting, offering for sale, or selling any services “dedicated to or promoted as generating consumer reviews or testimonials.”
The decision highlights increased scrutiny against AI tools that can be used to generate false and deceptive content, which may mislead consumers. AI developers should prioritize transparency in how AI-generated content is created and used and ensure that AI services comply with advertising and consumer protection laws. The decision also reflects the need for AI developers to balance innovation with ensuring their innovations do not harm consumers.
Out with a Bang: President Biden Ends Final Week in Office with Three AI Actions — AI: The Washington Report
President Biden’s final week in office included three AI actions — a new rule on chip and AI model export controls, an executive order on AI infrastructure and data centers, and an executive order on cybersecurity.
On Monday, the Department of Commerce issued a rule on responsible AI diffusion limiting chip and AI model exports made to certain countries of concern. The rule is particularly aimed at curbing US AI technology exports to China and includes exceptions for US allies.
On Tuesday, President Biden signed an executive order (EO) on AI infrastructure, which directs agencies to lease federal sites for the development of large-scale AI data centers.
On Thursday, Biden signed an EO on cybersecurity, which directs the federal government to strengthen its cybersecurity systems and implement more rigorous requirements for software providers and other third-party contractors.
The actions come just days before President-elect Trump begins his second term. Yet, it remains an open question whether President Trump, who has previously supported chip export controls and data center investments, will keep these actions in place or undo them.
In its final week, the Biden administration issued three final actions on AI, capping off the administration that took the first steps toward creating a government response to AI. On Monday, the Biden administration announced a rule on responsible AI diffusion through chip and AI model export controls, which limit such exports to certain foreign countries. On Tuesday, President Biden signed an Executive Order (EO) on Advancing United States Leadership in Artificial Intelligence Infrastructure, which directs agencies to lease federal sites for the development of AI data centers. And on Thursday, Biden signed an Executive Order on Strengthening and Promoting Innovation in the Nation’s Cybersecurity, which directs the federal government to strengthen its cybersecurity operations.
The new AI actions come just days before President-elect Trump takes the White House. What Trump decides to do with Biden’s new and old AI actions, as we discuss below, may provide the first indication of the direction of his second administration’s approach to AI.
Rule on Responsible Diffusion of Advanced AI Technology
On Monday, the Department of Commerce’s Bureau of Industry and Security announced a sweeping rule on export controls on chips and AI models, which requires licenses for exports of the most advanced chips and AI models. The rule aims to allow US companies to export advanced chips and AI models to global allies while also preventing the diffusion of those technologies, either directly or through an intermediary, into countries of concern, including China and Russia.
“To enhance U.S. national security and economic strength, it is essential that we do not offshore [AI] and that the world’s AI runs on American rails,” according to a White House fact sheet. “It is important to work with AI companies and foreign governments to put in place critical security and trust standards as they build out their AI ecosystems.”
The rule divides countries into three categories, with different levels of export controls and licensing requirements for each category based on their risk level:
Eighteen (18) close allies can receive a license exception. Close allies are “jurisdictions with robust technology protection regimes and technology ecosystems aligned with the national security and foreign policy interests of the United States.” They include Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, South Korea, Spain, Sweden, Taiwan, and the United Kingdom.
Countries of concern, including China and Russia, must receive a license to export chips. A “presumption of denial” will apply to license applications from these countries.
All other countries are allowed to apply for a license, and “license applications will be reviewed under a presumption of approval.” But after a certain number of chips are exported, certain restrictions will apply for these countries.
The rule’s export controls fall into four categories depending on the country, its security standards, and the types of chips being exported.
Orders for chips of up to 1,700 advanced GPUs “do not require a license and do not count against national chip caps.”
Entities headquartered in close allies can obtain “Universal Verified End User” (UVEU) status by meeting high security and trust standards. With this status, these countries “can then place up to 7% of their global AI computational capacity in countries around the world — likely amounting to hundreds of thousands of chips.”
Entities not headquartered in a country of concern can obtain “National Verified End User” status by meeting the same high security and trust standards, “enabling them to purchase computational power equivalent to up to 320,000 advanced GPUs over the next two years.”
Entities not headquartered in a close ally and without VEU status “can still purchase large amounts of computational power, up to the equivalent of 50,000 advanced GPUs per country.”
The rule also includes specific export restrictions and licensing requirements for AI models.
Advanced Closed-Weight AI Models: A license is required to export any closed-weight AI model —“i.e., a model with weights that are not published” — “that has been trained on more than 1026 computational power.” Applications for these licenses will be reviewed under a presumption of denial policy “to ensure that the licensing process consistently accounts for the risks associated with the most advanced AI models.”
Open-Weight AI Models: The rule does “not [impose] controls on the model weights of open-weight models,” the most advanced of which “are currently less powerful than the most advanced closed-weight models.”
The new chip export controls build on previous export controls from 2022 and 2023, which we previously covered.
Executive Order on AI Infrastructure
On Tuesday, Biden signed an Executive Order on Advancing United States Leadership in Artificial Intelligence Infrastructure. The EO directs the Department of Defense and Department of Energy to lease federal sites to the private sector for the development of gigawatt-scale AI data centers that adhere to certain clean energy standards.
“These efforts also will help position America to lead the world in clean energy deployment… This renewed partnership between the government and industry will ensure that the United States will continue to lead the age of AI,” President Biden said in a statement.
The EO requires the Secretary of Defense and Secretary of Energy to identify three sites for AI data centers by February 28, 2025. Developers that build on these sites “will be required to bring online sufficient clean energy generation resources to match the full electricity needs of their data centers, consistent with applicable law.”
The EO also directs agencies “to expedite the processing of permits and approvals required for the construction and operation of AI infrastructure on Federal sites.” The Department of Energy will work to develop and upgrade transmission lines around the new sites and “facilitate [the] interconnection of AI infrastructure to the electric grid.”
Private developers of AI data centers on federal sites are also subject to numerous lease obligations, including paying for the full cost of building and maintaining AI infrastructure and data centers, adhering to lab security and labor standards, and procuring certain clean energy generation resources.
Executive Order on Cybersecurity
On Thursday, President Biden signed an Executive Order on Strengthening and Promoting Innovation in the Nation’s Cybersecurity. The EO directs the federal government to strengthen the cybersecurity of its federal systems and adopt more rigorous security and transparency standards for software providers and other third-party contractors. It directs various agencies — with some deadlines as soon as 30 days from the EO’s issuance — to evaluate their cybersecurity systems, launch cybersecurity pilot programs, and implement strengthened cybersecurity practices, including for communication and identity management systems.
The EO also aims to integrate AI into government cybersecurity operations. The EO directs the Secretary of Energy to launch a pilot program “on the use of AI to enhance the cyber defense of critical infrastructure in the energy sector.” Within 150 days of the EO, various agencies shall also “prioritize funding for their respective programs that encourage the development of large-scale, labeled datasets needed to make progress on cyber defense research.” Also, within 150 days of the EO, various agencies shall pursue research on a number of AI topics, including “human-AI interaction methods to assist defensive cyber analysis” and “methods for designing secure AI systems.”
The Fate of President Biden’s AI Actions Under a Trump Administration?
It remains an open question whether Biden’s new AI infrastructure EO, cybersecurity EO, and chip export control rule will survive intact, be modified, or be eliminated under the Trump administration, which begins on Monday. What Trump decides to do with the new export control rule, in particular, may signal the direction of his administration’s approach to AI. Trump may keep the export controls due to his stated commitment to win the AI race against China, or he may get rid of them or tone them down out of concerns that they overly burden US AI innovation and business.
Key Considerations for the Construction Industry in 2025 Under President-Elect Trump
As President-elect Trump prepares to take office on January 20, the construction industry must anticipate shifts in trade policy, particularly concerning tariffs. These changes are expected to have significant implications for various sectors, including energy and clean technology.
The industry’s growing reliance on energy-efficient and clean technology components is driven by sustainability goals and regulatory requirements. For example, the US Department of Energy (DOE) guidelines on “Zero Emissions Building” provide a framework for sustainable practices, offering benchmarks for energy efficiency, zero on-site emissions, and clean energy use. Similarly, New York City’s Local Law 97 (LL97) sets ambitious emissions reduction targets for buildings, focusing on energy efficiency and renewable energy.
However, potential tariffs on imported clean technology materials could lead to increased costs, hindering compliance with regulations that rely on the imports of energy-efficient materials, and posing challenges to the adoption of sustainable building practices.
As these developments unfold, the construction sector must remain vigilant in monitoring policy changes that could affect the availability and cost of clean technology components in 2025.
Key Points to Watch in 2025
1. Evolving Tariff Policies:
The topic of tariffs under Trump’s second Administration has been a source of concern as President-elect Trump has already threatened to impose universal tariffs in addition to other country-specific tariffs.
At this juncture, we can anticipate an increase in tariff measures, but the specific measures are still unknown in part due to the uncertainty surrounding the rate of potential new tariffs, the countries they may affect, and the mechanisms that will be used to impose them, which will impact the timing any tariffs will take effect.
Because the Trump Administration’s trade policies have particularly focused on imports from Mexico, Canada, and China, such targets could significantly impact the import of construction materials, such as steel, aluminum, softwood lumber, concrete, glass, and binding materials.
For example, tariffs could benefit domestic manufacturers by increasing demand for locally produced materials, such as mass timber, but could create vulnerabilities for the construction sector that relies on imports raw materials used for energy efficiency and sustainable buildings that are sourced from Canada, Mexico, or China.
2. Material Cost Fluctuations:
Be prepared for possible increases in material costs due to tariff adjustments. This could lead to higher project expenses and necessitate budget recalibrations.
Contractors may face challenges in predicting material costs and securing project financing due to economic uncertainty and potential price volatility.
3. Supply Chain Adjustments:
Anticipate disruptions in supply chains as suppliers adapt to new trade regulations. This may result in delays and increased lead times for material availability.
Evaluate current supply chain dependencies and explore alternative sourcing options to mitigate risks.
How Can We Help?
As the new administration takes office, the construction industry must remain vigilant and proactive in addressing potential challenges posed by evolving tariff measures. Companies may need to adjust their project plans to account for potential cost increases and supply chain disruptions. Strategies such as seeking alternative suppliers, exploring domestic options, and reevaluating project budgets and timelines will be crucial in navigating these challenges.
Strategic planning and collaboration with trade experts and legal advisors will be crucial in navigating these changes. Here are some strategic ideas to consider:
Diversify Suppliers: Consider expanding your supplier base to reduce reliance on any single source, particularly those affected by tariffs.
Explore Alternative Materials: Investigate the use of alternative materials that may offer cost advantages or are less impacted by tariffs.
Contractual Safeguards: Review and update contracts to address “escalation,” “force majeure,” or other potential political risks, trade restrictions, and cost fluctuations.
Engage in Advocacy: Participate in industry advocacy efforts to influence policy decisions and promote favorable outcomes for the construction sector.
Monitor Trade Policy Developments: Monitor announcements from the new administration regarding free trade agreements (FTAs) and tariff adjustments that could affect material costs. These could include benefits from the United States-Mexico-Canada Agreement (USMCA) and exclusions from tariffs, such as the Section 301 tariffs on products from China.
Industry members seeking detailed analysis and guidance are encouraged to consult with trade experts and legal advisors specializing in construction and trade policy.
Trump’s Second Term: Implications for Tariffs and Enforcement in the Solar Industry
As President-elect Trump prepares to take office for a second term, his presidency will undoubtedly reshape US international trade policy, impacting US and foreign manufacturing. We can expect that his administration will implement new and increased tariffs. Whether those tariffs come in the form of universal tariffs, tariffs targeted to a few countries, industries or products, or tariffs targeted to certain companies will likely be known once Trump assumes office. The solar industry, particularly solar products originating from China, is expected to be a focus point of potential future tariff measures.
In addition to potential tariff increases, the solar industry is likely to continue to be a high priority sector for forced labor enforcement under the Uyghur Forced Labor Prevention Act (UFLPA) by US Customs and Border Protection (CBP), particularly due to the significant use of polysilicon, a key raw material in solar panels, which is often sourced from Xinjiang, a region in China where forced labor concerns is prevalent.
How Tariffs Could Impact the Solar Industry
As President-elect Trump prepares to take office, the specific tariff actions he may pursue remain uncertain. Historically, tariff increases have followed extensive investigations by US government agencies under statutory authorities like Section 301 and Section 232. However, it is plausible that Trump could leverage alternative powers, such as the International Emergency Economic Powers Act (IEEPA), to swiftly enhance protections for domestic solar manufacturers. This could involve the rapid imposition of targeted tariffs on imports of solar panels and components.
These targeted tariffs could take various forms. For instance, they might focus solely on imports from China or extend to other regions with growing photovoltaic (PV) panel production, such as Vietnam, Malaysia, and Thailand. As developments unfold, we will continue to monitor and provide updates on potential impacts to the solar industry.
Solar Imports Will Continue to Be an Enforcement Priority for CBP
Silica-based products, particularly polysilicon, continue to be classified as “High Priority” sectors for forced labor enforcement by CBP. Indeed, an analysis of CBP’s enforcement data from FY 2023 and FY 2024 reveals that solar goods and components have been a significant target of enforcement actions.
The incoming Trump Administration’s stringent stance on Chinese imports, combined with US Congress’s proactive oversight of UFLPA enforcement, is expected to sustain the momentum of forced labor enforcement within the solar industry. Companies in the solar industry, therefore, should consider conducting regular due diligence of their supply chains to ensure compliance with the UFLPA and other forced labor laws.
How Can We Help?
As the solar industry braces for potential shifts in trade policy and enforcement under President-elect Trump’s second term, it is imperative for companies to remain vigilant and proactive. Our team is here to support your business in navigating these changes.
With the expected increase in tariffs and the ongoing focus on forced labor enforcement, we understand the challenges and opportunities that lie ahead for solar manufacturers and importers. We are committed to keeping you informed and prepared to thrive amidst these developments.
FTC Announces Final Junk Fees Rule Applying to Live-Event Tickets and Short-Term Lodging
On December 17, 2024, the U.S. Federal Trade Commission (FTC) announced its final “Junk Fees Rule” (the “Final Rule” or “Rule”) to prevent certain practices related to pricing in the live-event ticketing and short-term lodging industries. The Final Rule requires businesses that offer a price for live-event tickets or short-term lodging to disclose the total price, inclusive of mandatory charges, and to do so more prominently than other pricing information. The Final Rule also prohibits businesses from misrepresenting fees or charges in any offer, display, or advertisement for live events and short-term lodging. Notably, the Final Rule does not prohibit any one type of fee, nor does it prohibit specific pricing practices, such as itemization of fees or dynamic pricing. Instead, the Rule focuses on ensuring that fees are clearly disclosed.
The FTC’s stated aim in passing the Final Rule is to curb perceived unfair and deceptive pricing practices in these two industries, specifically so-called “bait-and-switch” pricing that hides the total price of tickets and lodging by omitting mandatory fees and charges from advertised prices and misrepresenting the nature, purpose, amount, and refundability of fees or charges. The FTC pointed to evidence that these practices are prevalent in these two industries, where most transactions occur online. The FTC emphasizes that “truthful, timely, and transparent pricing” “is critical for consumers” and claims this rule will allow American consumers to make better-informed purchasing decisions in these instances.
The Rule was published in the Federal Register on January 10, 2025, and is slated to go into effect 120 days later, putting its effective date as May 10, 2025. It is possible, however, that the incoming Administration will seek to change the rule or delay its effective date.
FTC Rulemaking Leading to Final Rule
The Final Rule is the culmination of the rulemaking process that the FTC initiated in November 2022, when it announced an Advanced Notice of Proposed Rulemaking under Section 18 of the FTC Act, to address certain purportedly unfair or deceptive acts or practices involving fees. The FTC specifically sought public comment on the prevalence of certain practices related to what it labeled “junk fees” and the costs and benefits of a rule that would require upfront inclusion of mandatory fees whenever consumers are quoted a price. After posing a series of questions to solicit data and commentary, the FTC received more than 12,000 comments in 90 days.
One year later, the FTC published a Notice of Proposed Rulemaking, which proposed a rule that prohibited misrepresenting the total price of goods or services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees. The proposed rule was not industry-specific; rather, it would have applied broadly to businesses across the national economy. The FTC then received 60,000 more comments on its proposed rule, most of which were supportive. The FTC interpreted this feedback as confirmation of the prevalence of the types of fee-related practices the FTC sought to address. The FTC estimated that its proposed rule would save consumers up to 53 million hours per year of wasted time spent searching for the total price of live-event tickets and short-term lodging, equating to more than $11 billion over the next decade.
In March 2024, the Biden Administration launched an interagency initiative, co-chaired by the FTC and U.S. Department of Justice, called the “Strike Force on Unfair and Illegal Pricing.” The Strike Force seeks to combat unfair and illegal pricing and lower prices for all Americans. Shortly after the announcement of the Strike Force, the FTC held a public hearing on its proposed rule while it continued to consider comments, leading to the announcement of the Final Rule last month.
Final Rule
The Final Rule prohibits hidden fees and makes it an unfair and deceptive practice for “any Business to offer, display, or advertise any price” of live-event tickets or short-term lodging without clearly and conspicuously disclosing the total price. Under Section 5 of the FTC Act, a representation, omission, or practice is “deceptive” if it is likely to mislead consumers acting reasonably under the circumstances and is material to consumers; that is, it would likely affect the consumer’s conduct or decisions regarding a good or service. Price, for example, is a material term. A practice is considered “unfair” under Section 5 if it causes or is likely to cause substantial injury, the injury is not reasonably avoidable by consumers, and the injury is not outweighed by benefits to consumers or competition.
As an example, in the commentary to the rulemaking, the FTC says that bait-and-switch pricing, where the initial contact with a consumer shows a lower or partial price without including mandatory fees, violates the FTC Act even if the total price is later disclosed.
The Final Rule specifies that the “total price” is the “maximum total of all fees or charges a consumer must pay for any good(s) or service(s) and any mandatory Ancillary Good or Service” (any additional goods or services offered as part of the same transaction). Government charges, shipping charges, and fees for ancillary goods or services may be excluded under the rule.
The total price must be displayed more prominently than any other pricing information. If a final amount is displayed before the consumer completes the transaction, it must be disclosed as prominently as the total price.
The total price also must be displayed clearly and conspicuously, which means easily noticeable (“difficult to miss”) and easily understandable by ordinary customers. The clear-and-conspicuous requirement also covers audible communications. In addition to the total price, a business must display clearly and conspicuously the nature, purpose, and amount of any optional fee or charge that has been excluded from the total price, what the fee or charge is for, and the final amount of payment for the transaction.
The Final Rule goes beyond disclosure: It affirmatively prohibits misleading fees. Under the Final Rule, it is unlawful to misrepresent any fee or charge in an offer, display, or advertisement for live-event tickets and short-term lodging, including the nature, purpose, amount, or refundability of any fee or charge and what it is for.
State Laws and Regulations on Fees
The Final Rule does not preclude state laws that are more restrictive pertaining to unfair or deceptive fees or charges, except to the extent such laws or regulations are inconsistent with the Final Rule (and then only to the extent of the inconsistency). According to the FTC, a state law or regulation is not inconsistent with the Final Rule if the protection it affords is greater than the protection under the rule.
Numerous states have passed laws aiming to increase transparency in pricing and fees, including California, Colorado, Connecticut, Maryland, Minnesota, New York, and Tennessee. Further, some states have provisions that violations of Section 5 of the FTC Act also constitute deceptive practices under their state consumer protection statutes. The Final Rule thus augments the government scrutiny of fee-related practices and conduct that businesses may receive.
Takeaways and the Future of the Final Rule
Once the Final Rule becomes effective, when businesses advertise or display a price for live-event tickets or short-term lodging, they must display the total price — including any mandatory fees — and ensure any explanations for fees or charges are truthful and not misleading. Businesses have discretion to list optional fees. For businesses that have not previously been subject to state laws or regulations, the Final Rule will now apply to those businesses.
Despite the Final Rule’s narrow applicability to live-event tickets and short-term lodging, the FTC made clear it has not given up on other industries. The FTC emphasized it may address unfair and deceptive practices in other industries, as discussed in its Notice of Proposed Rulemaking, but will do so using its existing Section 5 authority.
The Final Rule was approved with a 4–1 vote, with Republican Commissioner Holyoak voting for the rule and incoming Republican FTC Chair Andrew Ferguson dissenting. Although the agency under new leadership could look to withdraw the Final Rule, under the Administrative Procedure Act, the FTC would need to publish a notice in the Federal Register explaining the reasons for the withdrawal, allow opportunity for comment, and consider those comments before repealing the Final Rule. Although incoming administrations in the past have imposed moratoriums on regulations under development, the Final Rule has been published in the Federal Register, and a moratorium likely would not impact the rule going into effect. The incoming administration, however, might choose to delay the effective date of the Final Rule. The Final Rule also falls within the window for review under the Congressional Review Act, creating another potential avenue for its repeal.
Separately, on January 14, 2025, the Consumer Financial Protection Bureau (CFPB) released a report titled “Strengthening State-Level Consumer Protections.” In the report, the CFPB encourages states to continue to go after “junk fees,” citing the FTC’s Final Rule and the FTC’s findings on the prevalence of certain practices. The CFPB provides proposed language for states to consider adding to their “state prohibitions on unfair, deceptive, and/or abusive acts or practices.” The CFPB’s recommended statutory language is industry-agnostic, meaning more states may look to adopt broad fee-related rules.
Like the FTC’s recent rule on non-compete agreements, the Final Rule may be subject to potential legal challenge, including by industry groups and trade associations. The landscape for disclosure of fees continues to evolve, and businesses should watch for developments at both the federal and state level.
A Wait Until the Deal Closes: The Antitrust Agencies Send a Strong Message About the Dangers of Gun-Jumping
One of the most common questions clients have after a merger or acquisition has been signed is, “When can we start on combining the operations and doing business?” And one of the most challenging pieces of counseling is to help a client understand the antitrust compliance principle that until a deal closes, the parties must compete as separate and independent entities. While merging companies may plan the integration of their operations, they may not actually integrate their operations or otherwise coordinate their competitive behavior before the transaction has closed without risking a “gun jumping” violation.
Gun-jumping violations can be triggered under two laws: (1) §1 of the Sherman Act, which prohibits agreements in restraint of trade (such as price fixing and market allocation); and (2) the Hart-Scott-Rodino Act (HSR Act), which requires parties to certain transactions to submit a premerger notification form and observe the necessary waiting period(s) prior to closing their transaction and the transfer of beneficial ownership.
While there have been a number of gun-jumping enforcement actions over the years, the Federal Trade Commission (FTC) and the Antitrust Division of Department of Justice (DOJ) (collectively, the “Antitrust Agencies”) made it clear recently that these types of violations will be scrutinized and penalized. The Antitrust Agencies imposed a record $5.6 million civil penalty on three crude oil suppliers for engaging in gun-jumping in violation of the HSR Act.1
According to the complaint, XCL Resources Holdings, LLC (XCL) and Verdun Oil Company II LLC (Verdun) filed an HSR for their $1.4 billion acquisition of EP Energy LLC (EP).2 However, prior to the expiration of the HSR waiting period, XCL and Verdun assumed control of a number of EP’s key operations including but not limited to managing EP’s customers and coordinating pricing strategies. These and other actions effectively transferred beneficial ownership to the buyers before the deal closed, in violation of the HSR Act.
The enforcement action is the largest civil penalty ever imposed for a gun-jumping violation in history. Moreover, the Antitrust Agencies imposed a number of antitrust compliance and monitoring obligations on the buyers.
[1]https://www.ftc.gov/news-events/news/press-releases/2025/01/oil-companies-pay-record-ftc-gun-jumping-fine-antitrust-law-violation and https://www.justice.gov/opa/pr/oil-companies-pay-record-civil-penalty-violating-antitrust-pre-transaction-notification
[2]https://www.ftc.gov/system/files/ftc_gov/pdf/complaintforcivilpenaltiesandequitablereliefforviolationsofthehartscottrodinoact.pdf
China To Revise Registration Requirements for Foreign Food Facilities
On January 3, 2025, the Chinese General Administration of Customs (GAC) published a draft amendment to the Regulations on Registration and Administration of Overseas Manufacturers of Imported Food (“Registration Regulations,” known as GAC Decree 248)[1] for public comments, due by February 19, 2025. China also notified the World Trade Organization (WTO) of the draft through G/SPS/N/CHN/1324.[2]
In 2021, China issued GAC Decree 248 in 2021, which requires that all overseas food manufacturers exporting food products to China to register with GAC.[3] After three years of implementation, GAC has identified areas for refinement and optimization of the framework, aiming to address practical challenges and enhance the efficiency of the registration process for overseas manufacturers.
Notably, the draft newly introduces a regulatory pathway for overseas facility registration, namely, system recognition, which allows the competent authorities of the manufacturing facility’s home country (region) to obtain recognition from GAC.[4]
Under this new pathway, the competent authorities of recognized countries (regions) may submit a list of recommended manufacturers to GAC. Upon receiving these recommendations, GAC will register the listed enterprises and assign them official registration numbers. It appears that manufacturers may not be required to submit individual applications directly to GAC; however, enterprises from recognized countries may need to coordinate with their competent authorities to ensure their information (e.g., enterprise name, facility address, and contact details) is included in the list submitted to GAC.
This proposed approach represents a significant shift from the current framework under GAC Decree 248, which regulates imported food products based on their risk level and establishes two registration pathways, one for “specified foods” (e.g., milk, meat, aquatic products (typically known as high-risk foods)) and another for “others” (e.g., confectionary and solid beverage). More details concerning GAC Decree 248 can be found in our newsletter: Breaking News: China Imposes New Registration Requirements for All Foreign Food Companies. The draft, however, proposes a classification system at the national level, focusing on whether the competent authorities of the manufacturing facility’s home country (region) can obtain recognition from GAC. Therefore, it is likely that the competent authorities at home countries may have to undertake a higher level of responsibility to supervise the companies exporting foods to China.
On the other hand, the draft also specifies dossier requirements for enterprises whose competent authorities are not recognized by GAC. These enterprises must apply for registration with GAC by themselves or through an agent. We note that the dossier requirements differ based on the category of food involved. Specifically, manufacturers of the specified foods under Catalogue of Foods that Require Official Recommendation Registration Letters (“Catalogue”) will need to provide official inspection reports and recommendation letters issued by their competent authority.
The draft further proposes to update the Catalogue, listing 11 categories of high-risk foods subject to government-recommended registration, along with their corresponding risk assessments. Compared with GAC Decree 248, 8 types of food may no longer be subject to the current recommended registration requirements, covering health foods (including dietary supplements), special dietary foods, unroasted coffee beans and cocoa beans, edible fats and oils, etc. For example, previously, health food manufacturers were required to undergo a government-recommended registration process, [5] which often involved lengthy procedures. Under the proposed revisions, health food manufacturers will be able to process facility registrations by themselves, which will greatly simplify the process, leading to faster market entry and reduced compliance costs. Per GAC’s announcement, the Catalogue will be subject to dynamic adjustments. This flexible approach empowers the authority to adapt quickly to evolving dynamics within the food industry and shifts in the regulatory landscape.
In addition, the draft removes the requirements for overseas manufacturers to reapply for registration in certain scenarios, such as changes to the legal representative or changes to the registration number granted by the country (region). Instead, it specifies that reapplying for registration is necessary when such changes have a significant impact on the enterprise’s sanitation management and control for food safety – for example, in the event of a production site relocation.
Importantly, GAC removes the provision that mandates overseas producers to file their renewal applications three to six months before the registration expires. It also clarifies specific food categories that are exempt from facility registration, including food sent by mail or express delivery, cross-border e-commerce retail items, food carried by travelers, as well as samples, etc. It is worth noting that food additive manufacturers exporting products to China are excluded from the facility registration requirement under Decree No. 248; this remains the same in the draft.
Overall, the proposed changes underscore China’s ongoing efforts to strengthen food safety oversight while simplifying administrative procedures for the registration of overseas manufacturers of imported foods. However, there are certain remaining issues that may require further clarification. For instance, it is unclear how the new system recognition mechanism will integrate with the existing framework under GAC Decree 248. One key question is whether companies that have already registered with GAC still need to coordinate with their competent authorities to be included in the list provided to GAC. Such ambiguity could create challenges for businesses navigating the transition between the current and proposed systems.
[1] http://www.customs.gov.cn/customs/302452/302329/zjz/6297231/index.html; Non-official English translation prepared by United States Department of Agriculture (USDA) is available at: https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Amended%20Overseas%20Food%20Producer%20Registration%20Regulation%20Notified_Beijing_China%20-%20People%27s%20Republic%20of_CH2025-0005.pdf
[2] https://eping.wto.org/en/Search/Index?countryIds=C156%2CC764%2CC704%2CC458%2CC360%2CC608%2CC410%2CC392%2CC702%2CC158&viewData=G%2FSPS%2FN%2FCHN%2F1324; All comments should be submitted before March 11, 2025.
[3] https://www.gov.cn/gongbao/content/2021/content_5616161.htm
[4] Such recognition is granted under specific conditions, including (1) accepting and passing the inspection of the food safety management system of the country (region) by GAC; (2) signing a food safety cooperation agreement with GAC; (3) signing a mutual recognition agreement of Authorized Economic Operator (AEO) with GAC; and (4) signing other cooperation agreements or joint statements with Chinese government departments that include food safety cooperation content.
[5] Please note that the term “registration” mentioned in this context pertains solely to overseas facility registration under GAC Decree 248 and does not refer to the “blue hat” registration required for health foods in China.
Navigating Tariff Threats Under the Trump Administration, Challenges Ahead for the EV and Battery Supply Chain
As President-elect Donald Trump prepares to assume office on January 20, numerous tariff proposals have already been put forward that could significantly impact the electric vehicle (EV) and battery supply chain industry. Differentiating between the potential for immediate tariff actions and those requiring more time to implement is critical for companies that are in preparation of such actions.
In general, the imposition of new duties or tariffs typically requires congressional oversight and findings from relevant government agencies, a process that can extend over several months. This includes mechanisms such as the Section 301 tariffs on imports of China-origin products, where tariffs on EVs, battery parts, and critical minerals were recently increased, along with future increases on semiconductors, natural graphite, and permanent magnets that are scheduled for action. Expanding these existing actions would take time for the administration to implement.
However, President-elect Trump may seek to expedite tariff impositions through alternative legal avenues such as the International Emergency Economic Powers Act (IEEPA). While unprecedented, these actions would align with the upcoming administration’s proposals, including potential duty increases on imports from Mexico and Canada, where reports suggest implementation as early as the President-elect’s first day in office.
Such measures could significantly impact the EV supply chain and related industries, necessitating close monitoring of these developments during 2025.
What to Watch in 2025 and Beyond
1. Tariff Increases and Trade Policies: The Trump Administration’s trade policies are expected to focus on increasing tariffs, particularly on imports from China. The continuation or expansion of Section 301 tariffs on EVs, battery parts, and critical minerals could raise costs and disrupt supply chains. The administration may expedite tariff impositions through legal avenues like the IEEPA, potentially impacting imports from a host of US trading partners. Close monitoring of policy developments is the first step. Understanding their transactional impact can mitigate tariff exposure and corporate uncertainty.
2. Global Competitiveness and Supply Chain Dependencies: The administration’s protectionist stance may bolster domestic production but could also increase manufacturing costs and limit vehicle choices. The emphasis on “decoupling” from China suggests a continuation of aggressive tariff strategies, particularly on critical minerals essential for EV batteries. Industry stakeholders seeking to explore a diversified supply chains will need strategic advice prior to launching new production sites or supply partners.
3. USMCA: The United States-Mexico-Canada Agreement (USMCA) is scheduled for a trilateral review and renegotiation during 2026. Key provisions in the pact are particularly important for the EV supply chain into the United States. Some of President-elect Trump’s tariff proposals on Mexico and Canada could be tactics for leverage in the lead-up to these negotiations and provide opportunities for the Trump Administration to negotiate Free Trade Agreements (FTAs) with other countries, potentially affecting the EV and battery supply chain. Industry leaders should take stock of their current use of the USMCA tariff preference opportunities and what potential changes in the minutiae of trade rules could mean for both suppliers and customers. While 2026 is the year of USMCA talks, 2025 will be the year of industry consultations by Ottawa, Washington, and Mexico City.
4. FTAs and Trade Negotiations: The Trump Administration may prioritize renegotiating existing FTAs and pursuing new agreements with countries that align to the administration’s goals for domestic EV and battery production. The direction of such potential FTA developments will likely be impacted by the upcoming USMCA renegotiations. The US-Japan Trade Agreement could also serve as a framework for limited bilateral FTAs with new partners. FTA’s bring tariff preferences but they also require a sophisticated understanding of country-of-origin rules and other trade calculations that are far from intuitive. Stakeholders may wish to seek our advice on particular FTAs with key US trade partners to be best prepared to understand company-specific implications and to work with Washington during the negotiation stages.
5. Legal and Political Challenges in Trade Policy: While the president has some authority to influence trade agreements, unilateral withdrawal from FTAs could face legal and political challenges from Congress. The administration may use national security exceptions to modify duty-free provisions, but such actions would require careful justification. The potential for uncertainty and long-term risk exposure is high for companies involved in the EV manufacturing industry.
New U.S. Sanctions Targeting Russia’s Energy Sector
On Jan. 10, 2025, the U.S. Department of Treasury announced several new types of sanctions that will affect U.S. and global service providers to the Russian energy sector.
The first of these sanctions will prohibit U.S. persons, including U.S. persons located abroad, from providing petroleum services to any person located in Russia. The Treasury Department’s Office of Foreign Assets Control (OFAC) plans to issue regulations defining “petroleum services,” but they are likely to include services related to exploration, drilling, well completion, production, refining, processing, storage, maintenance, transportation, purchase, acquisition, testing, inspection, transfer, sale, trade, distribution, or marketing of crude oil and petroleum products.
These sanctions will enter into effect on Feb. 27, 2025, so U.S. persons have a limited time to wind down affected transactions.
In addition, the U.S. Secretary of the Treasury issued a determination under Executive Order 14024 that authorizes imposing economic sanctions on any person – whether U.S. or non-U.S. – that is subsequently determined to be operating in the Russian energy sector. OFAC plans to define the “energy sector of the Russian Federation economy” to encompass not just petroleum products, but also natural gas, biofuels, coal, nuclear and other renewable energy.
This determination has broad extraterritorial implications, because it exposes non-U.S. entities to potential sanctions. As a preview, OFAC simultaneously used the determination to impose sanctions on Russia’s major oil companies, Gazprom Neft and Surgutneftegas. However, the determination could be used to impose sanctions on entities from any country that operate in the Russian energy sector.
“The United States is taking sweeping action against Russia’s key source of revenue for funding its brutal and illegal war against Ukraine . . . With today’s actions, we are ratcheting up the sanctions risk associated with Russia’s oil trade, including shipping and financial facilitation in support of Russia’s oil exports.”
home.treasury.gov/…
What Happens Next When a Company Declines to Follow an NAD Decision? Off to the FTC it Goes
We have written here about the work of the NAD, the National Advertising Division of BBB National Programs. The NAD offers independent self-regulation and dispute resolution services for members of the national advertising community. NAD examines advertising to determine whether the evidence provided by the advertiser fully supports the advertising claims at issue in an NAD review. NAD’s findings and recommendations are detailed in a final written decision and outlined in an accompanying press release.
Participation in NAD proceedings is voluntary, and advertiser compliance with an NAD decision is generally quite high. If the NAD finds against an advertiser, the company is given the opportunity to confirm whether it intends to comply with the decision or to appeal it. If the advertiser refuses to comply, NAD will refer the matter to the appropriate regulatory agency, most often the Federal Trade Commission. Such referrals are announced by the NAD in its press release reporting the decision.
Two recent matters out of NAD highlight the jeopardy a company can find itself in when it refuses to comply with a NAD decision. The first involves a challenge against Larose Industries LLC, operating under the names Roseart and Cra-Z-Art. Larose claimed its pencils were “Proudly Made in USA,” displaying its products alongside American-themed imagery in ads. According to the challenger, Larose’s pencils are made from components sourced from China and involve foreign manufacturing and assembly. Larose refused to participate in the NAD proceedings; accordingly, the NAD referred the matter to the FTC for review and potential enforcement action. The NAD also indicated in its press release that it would notify the platforms with whom NAD has a reporting relationship to assess compliance with platform standards. The second case involves Relish Labs LLC, doing business as Home Chef, which has been before the NAD on several occasions. This round, the NAD investigated Home Chef for its “#1 in Customer Satisfaction” claims. Home Chef declined to make the changes NAD requested, prompting NAD to refer the matter to the FTC. And as in the Larose decision, NAD also indicated it would notify the various platforms of its decision.
The FTC has been a vocal supporter of the NAD process, prioritizing referrals it receives. When an NAD case is referred to the FTC, the FTC will first encourage the advertiser to go back to the NAD to participate in the self-regulatory process. At that point, many companies agree that reengaging with the NAD makes more sense than facing FTC scrutiny. If the company declines, FTC staff will undertake a more substantive review, applying its own applicable legal standards. In some instances, this review leads to formal law enforcement action; in others, the FTC may exercise its discretion (based on resources and priorities) not to open an investigation. In any event, once the FTC’s review is completed, the agency publicizes on its website the resolution of all referrals received from the NAD.
A decision to decline to follow NAD’s recommendations is highly specific to each company under investigation and is rarely made lightly. Businesses that do so can expect additional attention from, and engagement with, the FTC as the agency considers how to proceed.
Annual Adjustment of HSR Thresholds Comes at a Time of Uncertainty
There is a lot of uncertainty in the Hart-Scott-Rodino Act (HSR) world. The new rules on what must be included in an HSR filing have been issued and are due to take effect on February 10, 2025, but that could be derailed or delayed. Either the new administration could issue a freeze on federal regulations that have not yet gone into effect, or implementation could be delayed by a recently filed lawsuit alleging that the new rules exceed the statutory authority of the Federal Trade Commission (FTC).
But one bit of certainty in this uncertain landscape is the new HSR thresholds that are released every year around this time.
The HSR requires that transactions over a certain value be reported at least 30 days prior to closing to the FTC and U.S. Department of Justice Antitrust Division (DOJ) (collectively, the “Agencies”). The FTC adjusts the HSR reporting thresholds annually based on the change in gross national product. In 2025, the new threshold to keep in mind for transactions is $126.4 million (which is up from $119.5 million in 2024). There are additional considerations when acquiring or selling voting securities, non-corporate interests in a business (such as interests in an LLC or partnership) or assets valued over $126.4 million.
When determining whether an HSR filing is necessary, the following questions must be considered:
What is the Value of the Transaction and the Size of the Parties?
The HSR rules are complex, and whether the size-of-the-transaction threshold is met depends on a number of details such as the transaction’s structure and whether any HSR exemptions apply. Additionally, one important preliminary question is, if the transaction exceeds the $126.4 million threshold, are the parties large enough to warrant further assessment of HSR filing? If the transaction is valued at or above $124.6 million but less than $505.8 million, then the size of the parties must be considered. If one party to the deal (and all of that party’s parents, affiliates and subsidiaries) has sales or assets over $252.9 million, and if the other party has sales or assets over $25.3 million, then the transaction might be reportable, and the HSR filing analysis should continue. All non-exempt transactions valued over $505.8 million are reportable, regardless of the size of the parties.
Do Any Exemptions Apply?
The HSR rules contain several exemptions that can reduce the transaction value or eliminate the obligation to make a filing altogether. For example, the HSR rules do not apply to certain acquisitions of non-U.S. entities or assets, acquisitions made solely for the purpose of investment or certain real estate acquisitions.
How Much Will it Cost for an HSR Filing?
The HSR filing fees remain relatively unchanged from last year, except for some minor increases for larger transactions:
What Will the FTC or DOJ Do After the Filing is Made?
During the 30-day waiting period, the parties cannot close the transaction, which allows the Agencies to review whether the transaction could adversely impact competition in the market for any particular product or service. One potential change under the new administration is the return of early termination of the waiting period for deals that have no significant antitrust issues. For deals with competitive overlaps, and in light of the Merger Guidelines issued in 2023, if the parties compete in the same market or industry and/or the deal will add to a portfolio of assets in the same market or industry, it is critical that antitrust counsel be engaged early in the process to determine how the transaction might affect competition and the likelihood that the Agencies may oppose or challenge the transaction.
Finally, ignoring the HSR threshold can lead to reputational and financial harm. Failure to submit a required HSR filing can draw penalties of $51,744 for each day of noncompliance.
FTC Proposes Changes to Business Opportunity Rule to Deter Deceptive Earnings Claims – Republican Commissioners Dissent
On January 13, 2025, the Federal Trade Commission announced that it is seeking comment on proposed changes to the Business Opportunity Rule and a proposed new Earnings Claim Rule. According to the FTC, the two, taken together, “would strengthen the agency’s tools to curb deceptive earnings claims in industries where they are pervasive: multi-level marketing (MLM) programs and money-making opportunities.”
The proposed changes to the FTC’s Business Opportunity Rule and the new Earnings Claim Rule would permit the FTC to seek stronger relief – including money back for consumers and civil penalties – from covered companies making deceptive claims.
“Phony claims about likely earnings lure people looking for honest income into spending thousands, even tens of thousands, of dollars on multi-level marketing, business coaching and other schemes,” said FTC lawyer Sam Levine, Director of the Bureau of Consumer Protection. “The proposed rules would help the FTC deter illegal conduct with civil penalties and put money back in consumers’ pockets. We look forward to getting public comment.”
The FTC is seeking comment from the public on three proposals: two Notices of Proposed Rulemaking (NPRM) and one Advance Notice of Proposed Rulemaking (ANPRM).
What is the FTC Notice of Proposed Rulemaking on Business Opportunity Rule?
The proposal would expand the Business Opportunity Rule to cover money-making opportunities, such as business coaching and investment opportunities, which are marketed to assist consumers in building a business or otherwise earning income. According to the FTC, “such operations proliferate, using deceptive tactics—and in particular, deceptive earnings claims—to take consumers’ money. They cause significant financial and other harm to consumers.”
The NPRM define “business coaching opportunities” broadly to include any program, plan, or product that is represented to train or teach a person how to establish or operate a business.” The FTC is also considering whether to use the term “coaching opportunity” instead of “business coaching opportunity.”
Pursuant to the proposed amendments, sellers of these types of opportunities would be, among other things, prohibited from making material misrepresentations, including about earnings. Sellers also would be required to have written substantiation to back up any earnings claims and make that substantiation available to consumers if they request it – in the language they used to make the earnings claim.
What is the FTC Notice of Proposed Rulemaking on Rule Covering Deceptive Earnings Claims in the MLM Industry?
The proposal would create a new rule that would address false or misleading earnings claims in the MLM industry. “Deceptive earnings claims are a widespread problem in this industry, and they have caused significant financial and other harm to consumers,” according to the FTC.
Like the Business Opportunity Rule, the new rule, if adopted, would prohibit MLM sellers from making deceptive earnings and related claims. Similarly, the proposal would require MLM sellers to have written substantiation to back up any earnings claims and make that substantiation available to consumers if they request it – in the language they used to make the earnings claim.
Advance Notice of Proposed Rulemaking on Additional Components of the Proposed Earnings Claim Rule
In addition to the NPRMs, the FTC is issuing an ANPRM in connection with the proposed Earnings Claim Rule, seeking comment from the public on the need for additional rule requirements addressing deceptive earnings claims and related conduct.
These include:
whether to require MLMs to provide earnings data to potential recruits and current MLM participants or to post such data on their websites;
whether all MLM earnings claims should be accompanied by clear and conspicuous information about the earnings MLM participants can generally expect;
whether there should be a waiting period before a recruit pays any money to the MLM or otherwise joins the MLM;
whether to prohibit misrepresentations relating to expenses, benefits, or the compensation plan; and
whether to prohibit MLMs from using non-disparagement or other “gag” clauses to prohibit participants from communicating truthful negative information to the Commission, potential recruits, or others.
The public comment period for all three proposals will last 60 days from when they are published in the Federal Register.
Republican FTC Commissioners Dissent
The Commission votes to approve the issuance of the proposals in the Federal Register were 3-2. Commissioner Ferguson issued a dissenting statement joined by Commissioner Holyoak, voting against all three proposals.
The dissent asks whether the proposed rules “are lawful, and whether they are prudent and sound policy choice … decisions that belong to the incoming Trump Administration.” It will be interesting to see whether President Trump instructs the Office of the Federal Register not to publish any pending rules, particularly those that seek to advance novel liability theories.
Takeaway: The FTC maintains an aggressive investigation and enforcement program relating to companies that lure in entrepreneurs, investors or participants with promises of significant earnings, and then fail to deliver. The proposed rulemakings are aimed at strengthening the agency’s tools to curb deceptive earnings claims in industries where reports indicate they are pervasive: money-making opportunities and MLM programs. The announcement involves three proposals that work together, a NPRM proposing amendments to the FTC’s Business Opportunity Rule to cover “money-making opportunities,” an NPRM proposing a new rule addressing deceptive earnings claims in the MLM industry, and an ANPR asking whether the FTC should propose additional rule requirements that would apply to the MLM industry.