Cybersecurity, Data Privacy and ESG Highlight Risk Trends for Retail and Consumer Markets

Norton Rose Fulbright has conducted his Annual Litigation Trends Survey for nearly two decades. The survey aims to get a sense of what is keeping in-house counsel up at night and what new worries they see on the horizon. The 2021 survey gathered responses from more than 250 general counsel and in-house litigation leaders from a variety of industries across the United States.

Within retail and consumer markets, familiarity seems to breed comfort rather than contempt, as respondents stated that labor and employment and commercial disputes comprise the majority of disputes they face, but generally pose the least concern. Conversely, they identified cybersecurity and data protection as the most concerning for them relative to the number of disputes they actually are facing. In absolute terms, respondents cited class actions and regulatory disputes and investigations to be the most concerning. They also noted that environmental, social and governance (ESG) issues are on the rise.


Cyber ​​Security and Data Privacy

Digging into the data, we see that the reason for the focus on cybersecurity and data privacy is not only the worry over financial exposure from disputes, but also the potential for brand damage and loss of data — whether customer and related data or intellectual property associated with their products and services (ie the “secret sauce”). Respondents also cited the added element of cyber risk across jurisdictions given the differing regulatory landscapes in the global marketplace. In response, we found that a majority of respondents are taking the following steps to mitigate risk:

  • Training employees, especially as to phishing and social engineering
  • Incorporating tools to regulate, restrict and monitor access
  • Reviewing, auditing and horizon scanning
  • Imposing standards on outside vendors, including review, audit and certification requirements and requiring vendors to upgrade security when needed

We expect a continued increase in risk for the retail and consumer markets sectors. More states and countries are following the California and EU approaches to regulating the collection of personal information, posing difficult multi-jurisdictional compliance challenges.

Class Actions

Retail and consumer markets respondents are focused on class actions regardless of the issues underlying them. Respondents cited the level of exposure and financial cost as the main risks, as well as brand damage. Product liability continues to lead the list of worries, although fear of cyber and ESG-related class actions is emerging.

We also see a steady stream of consumer class actions tied to product labeling and advertising, ranging from labeling required by regulation (eg California’s requirement for foods advertised as “no sugar added”) to product claims that plaintiffs argue make cosmetics and supplements “drugs” subject to additional FDA requirements. Brands also continue to see more typical class action claims, especially involving heavy metals and chemicals in a variety of products.

Regulations and Investigations

Perhaps not surprisingly, regulations and investigations pose the greatest concern overall for respondents because of the multiple impacts they can have on an organization, including:

  • Financial exposure
  • reputational risk
  • Limited options given the optics of litigating against the government
  • Time and resource intensive
  • Business disruption

New trend: ESG

Respondents identified ESG litigation as a new trend causing them heartburn, with 37% stating they feel more exposed to ESG disputes in 2021 compared to only 21% in 2020. A combination of company philosophy and strategy, customer demands and the burgeoning ESG regulatory landscape are driving the issue.

Concerns include climate neutrality and sustainability, as well as diversity, equity and inclusion (DEI). Respondents identified DEI as the largest non-legal factor impacting dispute trends and also called out false advertising class actions focused on companies’ ESG statements. Concerns also increased due to increased scrutiny of public ESG statements and product stewardship programs, as well as the potential sources of risk, including NGOs, domestic and foreign governments, consumers and a company’s own employees.

Looking Ahead

The feedback in Norton Rose Fulbright’s survey is consistent with what the firm is seeing each day in the disputes practice. These emerging issues in retail and consumer markets will continue to pose a significant challenge to the sector, forcing companies to decide the extent to which they are willing to absorb risk versus proactively committing time and resources.

Will Troutman is a partner in Norton Rose Fulbright‘s Los Angeles office and the US Head of Consumer Markets and US Lead for ESG and Human Rights. He concentrates his practice on product safety and compliance, market access for the US and California, environmental disputes and ESG.

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