Consumer & Retail Summit — Top Tips
McCarthy Tétrault recently held its 3rd annual Consumer & Retail Summit. Topics included protecting your brand reputation in the Internet age, compliance issues national retailers need to know about business in Québec, current issues in asset-based lending for retailers, the rise of consumer class actions, and hot topics in commercial leasing.
The summit offered an in depth review of these issues. The following are our top practical tips for 2013 arising from the summit.
Protecting Your Brand Reputation in the Internet Age
1) Invest resources in monitoring the web for what customers and others are saying about you. Your brand is not only what you say about you, but also what others think and say. Having a system that lets you identify problems early on will give you the opportunity to address complaints promptly and reduce the likelihood of negative attention and litigation.
2) Tell your story before someone else does. Consider thoughtful and proactive responses to early signs of trouble, such as negative product or customer service reviews; rumours; or inquiries from traditional or untraditional forms of "media." Coordinate your media and online strategy with legal advice; when dealing with bad news, consider the media and legal risks associated with a "no comment" statement and instead look for opportunities to reinforce your brand messaging.
3) Audit your insurance coverage for the perils of the Internet age. Are you covered if there is a litigation claim arising out of posts on your customer reviews forum? Are you covered for the time and liability associated with dealing with hacking, data theft, and other forms of cyberattacks?
4) Consider language compliance requirements. Consider the extent to which your commercial website and/or "bricks & mortar" retail stores are subject to Charter of the French Language requirements applicable to Québec consumers and employees.
6) Be extra careful when advertising child-related products. If your products are of interest to children, carefully assess whether your advertising is compliant with Québec prohibitions against advertising directed to children.
7) Monitor wind-up deficiencies. Monitor wind-up deficiencies on any defined benefit plans (primarily in Ontario and Alberta) as they may affect your ability to obtain financing.
8) Consider alternative agreements to give lenders more control of inventory in transit. If you aren’t getting borrowing base credit for goods in transit from Asia, consider whether it might be possible using a combination of freight forwarder letters and other direct agreements with shippers and suppliers that would give the lenders the control they need over the inventory in transit.
Consumer Class Actions
9) Know your legal obligations. These include federal and provincial statutory and regulatory obligations, common law duties, and contractual obligations with business partners. Consider conducting a case law search of competitors to see what kinds of claims you might also be exposed to.
10) Review your policies and procedures with the possibility of a class action in mind. Do they ensure compliance with your legal obligations? Are they reviewed, updated, effectively communicated and audited to ensure compliance on an ongoing basis? What impression would they leave if reviewed by a judge?
11) Review key commercial contracts. Is there an appropriate allocation of risk? Are there appropriate indemnities and limits of liability? Do they contain any necessary co-operation clauses (e.g., duty to provide prior notice of a product recall; duty to facilitate a product recall)?
12) Think about insurance. Where are your policies physically located? What is and is not covered? What do you have to do to preserve coverage in the event of a potential claim? Are your limits sufficient to protect the company? What about your directors and officers? Do you have an experienced broker that is knowledgeable and up to date about your business and operations?
13) Have a litigation readiness plan in place. Assemble your team before litigation arises. Consider retaining an expert in the industry or related areas to help guide and justify key decisions. Who is your go-to litigation counsel in the event of a litigation triggering event? Do you have appropriate document preservation protocols and procedures? Be careful with written communications/preservation of privilege.
14) Consider alternate compensation procedures. Alternate compensation such as product exchange and coupon programs may reduce litigation costs and may have positive implications for the company’s brand and goodwill.
15) Be specific about HST exclusion. When negotiating a lease surrender payment (either a penalty or an inducement), be sure to specify whether the payment should be exclusive or inclusive of HST. If you don’t, HST will be deemed to be included.
16) Carefully consider what is included and excluded in gross sales. Sales leakage is a real issue; it affects both tenant and landlord. It is in the interest of both parties to be thoughtful about the definition of gross sales and in particular what is included in the definition and what is excluded.
To discuss any of these issues or to arrange a tailored program for your organization, please contact any lawyer of our Consumer & Retail Group.