USA Law and Practice Contributed by: Michael G. Congiu and Gillian Gilbert, Littler
false or misleading representations about its products – especially regarding ethical sourcing – and that consumers were harmed as a result of relying on those representations. Key Elements of a Consumer Protection Claim False or misleading representations • Misstatements About Ethical Sourcing: Com - panies may claim their products are ethically sourced, produced under fair labour condi - tions, or environmentally sustainable, when in fact they are not. • Omissions of Material Facts: Failing to dis - close known or likely human rights violations in the supply chain may constitute a decep - tive practice under consumer protection laws. “Greenwashing” and “Ethics Washing” : Overstating a company’s commitment to social responsibility or sustainability without substantive action can mislead consumers and form the basis of liability. Knowledge or reckless disregard • Failure to Conduct Due Diligence: Compa - nies are expected to investigate their supply chains for human rights risks. A lack of audits, supplier assessments, or other due diligence measures may indicate reckless disregard. • Awareness of Violations: If a company is aware of forced labour or other abuses and fails to act – or continues to source from problematic suppliers – it may be held liable. • Supplier Misconduct and Corporate Control: A company may be responsible for its suppli - ers’ actions, particularly if it exercises signifi - cant control or influence over them. Causation and consumer harm • Demonstrating Harm: Plaintiffs must show that they relied on the company’s representa - tions and that this reliance caused them harm
– such as economic loss, reputational dam - age, or the purchase of goods they would not have otherwise bought. • Establishing Causation: There must be a clear link between the company’s deceptive con - duct and the consumer’s injury. 3.2 Director and Officer Liability Even when a corporation is held liable for a legal violation, its corporate officers and directors may also be subject to personal liability for their indi - vidual involvement in the unlawful conduct. The determination of liability for directors and officers depends on the specific legal claims asserted against both the corporation and the individuals. Generally, to establish personal liability, it must be shown that the director or officer had knowl - edge of the alleged violation and/or directed, participated in, or benefitted from the miscon - duct. For example, under the Trafficking Victims Pro - tection Act (TVPA), directors and officers may be held criminally liable if they: • knowingly benefit from a violation of the Act; or • act with reckless disregard of the fact that the company is engaged in conduct that violates the TVPA. This framework underscores the importance of executive oversight and accountability in corpo - rate compliance with human rights obligations. 3.3 Parent Company Liability A parent company may generally be held both criminally and civilly liable for the actions of its subsidiary, particularly where the parent exer - cises excessive control and fails to maintain the subsidiary’s separate legal identity.
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