MoFo’s State + Local Government Enforcement Newsletter

Morrison Foerster’s State and Local Government Task Force is pleased to provide our bimonthly newsletter summarizing some of the most important and interesting developments from State Attorneys General across the country and local government agencies and legislative bodies, with links to primary resources. This month’s topics include the following:

• Bipartisan coalition of State Attorneys General back call for U.S. Surgeon General’s warning label on social media platforms
• State Attorneys General support FDA’s regulatory power in fight regarding marketing of e-cigarettes
• Ohio and Kansas Attorneys General seek stay of EPA Air Quality Rule from U.S. Supreme Court
• New York Attorney General issues warning to businesses regarding website tracking technology
• California enacts AI transparency law

1. Bipartisan coalition of State Attorneys General back call for U.S. Surgeon General’s warning label on social media platforms

A bipartisan group of 42 Attorneys General[1] urged Congress to introduce warning labels on social media platforms. The letter, sent to the Speaker of the House and Senate Majority Leader, supported the recent call from U.S. Surgeon General Dr. Vivak Gunty for a Surgeon General’s warning label on social media platforms. Dr. Gunty first proposed that Congress require warning labels on social media platforms, as it does with cigarettes and alcohol, in June of this year. As such a label would require Congressional approval, the coalition of Attorneys General are urging Congress to heed the Surgeon General’s call and “mandate a surgeon general’s warning on algorithm-driven social media platforms” in order to “help abate [the] growing [mental health crisis] and protect future generations of Americans.”

The 42 Attorneys General also called on Congress to consider additional efforts to regulate how social media platforms engage with children and teens. The coalition argued that more must be done to warn children and parents of risks associated with social media use: “A warning would not only highlight the inherent risks that social media platforms presently pose for young people, but also complement other efforts to spur attention, research, and investment into the oversight of social media platforms.”

This bipartisan effort echoes the push from lawmakers across the country to protect children online. For example, New York enacted the Stop Addictive Feeds Exploitation (SAFE) for Kids Act, which requires social media companies to restrict “addictive” feeds for users under the age of 18. California recently passed its own law that prevents social media platforms from knowingly providing addictive feeds to children without parental consent.

As other states are expected to enact similar laws aimed at regulating social media, social media firms and technology companies more broadly should consider whether to implement features that support online safety and privacy, especially for users under 18 years of age.

2. State Attorneys General support FDA’s regulatory power in fight regarding marketing of e-cigarettes

A coalition of State Attorneys General have urged the U.S. Supreme Court to uphold the Food and Drug Administration’s (FDA) denials of applications to market flavored e-cigarettes. The Supreme Court is set to review the FDA’s ability to regulate e-cigarettes in FDA v. Wages and White Lion Investments.[2] Currently, under the Tobacco Control Act (TCA), the FDA has broad powers to regulate nicotine and tobacco products, but not expressly e-cigarettes, and the TCA requires companies to demonstrate that the marketing of a nicotine or tobacco product is appropriate for the “protection of public health.” Although the TCA does not specifically reference e-cigarette products, the FDA has denied numerous applications to market flavored e-cigarettes, prompting legal challenges from various e-cigarette makers.

The Solicitor General successfully sought review from the Supreme Court on behalf of the FDA after the Fifth Circuit en banc reversed a 2022 decision by a Fifth Circuit panel holding that the FDA was owed deference as the agency entrusted by Congress to be the scientific expert.[3] The en banc court found that the FDA’s denials of marketing applications for flavored e-cigarettes were “arbitrary and capricious” because “[t]he agency did not give manufacturers fair notice of the rules; the agency did not acknowledge or explain its change in position; the agency ignored reasonable and serious reliance interests that manufacturers had in the pre-MDO guidance; and the agency tried to cover up its mistakes with post hoc justifications at oral argument.”[4]

The Attorneys General[5] submitted an amicus brief to the U.S. Supreme Court in support of the FDA and argued that the FDA’s enforcement and regulatory power was critical to “prevent[ing] flavored e-cigarettes from entering interstate commerce.” The Attorneys General stated that while various states have enacted laws to restrict the sale of flavored e-cigarettes, “state action alone is insufficient to combat an epidemic that transcends state borders.”  Once these products enter interstate commerce, the Attorneys General argued, “widespread distribution to minors becomes inevitable.” Additionally, the Attorneys General claimed that flavored e-cigarettes are preferred by young users and the products pose serious health risks to children.

The Supreme Court’s ruling in this FDA case is expected to have far-reaching consequences, including clarifying the FDA’s authority under the TCA in the wake of the Court’s decision eliminating Chevron deference[6] in Loper Bright Enterprises v. Raimondo.[7] It is possible that the decision could limit the FDA’s ability to regulate tobacco products, especially e-cigarettes and other products. As the FDA’s power to regulate e-cigarettes hangs in the balance, State Attorneys General are likely to continue to prioritize enforcement actions against flavored e-cigarettes.

3. Ohio and Kansas Attorneys General seek stay of EPA Air Quality Rule from U.S. Supreme Court

On August 21, 2024, Ohio Attorney General Dave Yost and Kansas Attorney General Kris Kobach submitted an emergency application to the U.S. Supreme Court to stay the Environmental Protection Agency’s (EPA) Air Quality Final Rule. Earlier this year, a coalition of 24 Republican Attorneys General[8]filed a petition for judicial review with the U.S. Court of Appeals for the D.C. Circuit, challenging the EPA’s “Reconsideration of the National Ambient Air Quality Standards for Particulate Matter” final rule. In July, the D.C. Circuit allowed the rule to take effect while pending review.[9] The final rule requires, among other things, states and power plants to comply with certain regulations targeting air pollution, which includes a reduction in the annual particulate matter standard and updates to the EPA’s air quality index.

Attorneys General Yost and Kobach claim that the final rule forces states to comply with “unrealistic” and “unlawful” regulations. They also argue that the D.C. Circuit’s decision to allow the final rule to take effect pending appeal is causing irreparable harm to the states and their industries in the form of compliance costs on power plants, likely plant closures and grid instability, and reducing “states’ sovereignty by eliminating their authority to consider certain factors in the planning process.” They further argue that the final rule exceeds the EPA’s statutory authority under the Clean Air Act and is arbitrary and capricious, among other allegations.

On October 16, 2024, the Supreme Court denied the request for a stay.[10] As is typical in such orders, the Court did not issue a majority opinion. But Justice Kavanaugh, writing for himself and Justice Gorsuch, found that, while the applicants had shown a strong likelihood of success on the merits, the applicants were unlikely to suffer irreparable harm before the Court of Appeals decides the merits. However the D.C. Circuit rules, it is likely that the non-prevailing party will seek certiorari at the Supreme Court. Moreover, given the implications this case has on the EPA’s statutory authority, the ruling will likely test the boundaries created by the overruling of Chevron deference, as noted above.

4. New York Attorney General issues warning to businesses regarding website tracking technology

The Office of the New York State Attorney General (NYAG) issued an advisory warning to businesses that website tracking technology may violate New York consumer protection laws.  Certain technology, such as cookies, helps websites recognize a visitor from one webpage to the next and is used for analytics, marketing, and fraud detection. According to the NYAG, these technologies also can infringe on consumer privacy. The NYAG cited its investigation that identified more than a dozen popular websites with allegedly broken privacy controls in that visitors to these websites who attempted to disable tracking technologies continued to be tracked. The NYAG also noted that it believed the privacy controls and disclosures of certain websites to be confusing and misleading. According to the NYAG, such misleading or confusing website disclaimers and privacy actions may violate New York’s consumer protection laws.

The NYAG stated that its investigation revealed the following mistakes that companies often make with tracking technologies:

• Uncategorized or miscategorized tags and cookies: If a tag is miscategorized, or not categorized at all, it will not respond to the tool’s controls. This often means the tag remains active, regardless of a website visitor’s privacy selections. Uncategorized tags were the leading cause of broken privacy controls.
• Misconfigured tools: Several websites had consent-management tools that were not properly passing opt-out signals to the tag-management tool. As a result, when website visitors then disabled marketing cookies using the sites’ privacy controls, the tag-management tools still allowed marketing tags to fire.
• Hardcoded tags: On some websites, several tags had never been configured to work with the sites’ privacy controls. The consent-management tool was therefore unable to control hardcoded tags and they would fire every time certain webpages loaded.
• Tag privacy settings: Privacy tags were enabled only in states with comprehensive privacy laws that regulate online tracking, such as California, Connecticut, and Colorado.  In other states, such as New York, tag providers may not stop collecting and using visitors’ data when website operators have enabled these features.
• Incomplete understanding of tag data collection and use: Before deploying a new tag, a business should understand what data the tag collects and how the data may be used or shared.
• Cookieless tracking: Regardless of the tracking technologies used, businesses need to ensure that they do not mislead consumers about privacy and opt-out choice.

The NYAG identified several processes businesses can use to prevent problems when deploying tracking technologies. These include (1) designating a qualified individual to be responsible for implementing and managing tracking technologies, (2) investigating a new tag or tool before deploying tracking technologies and identifying the types of data that will be collected, (3) configuring and categorizing new tags or tools appropriately, (4) testing tags and tools on a regular basis and when changes are made, and (5) reviewing tracking technologies on a regular basis to ensure tags and tools are properly configured.

Given that most websites are widely available, including to New York consumers, businesses should ensure that they take sufficient steps to prevent issues when deploying tracking technologies by paying particular attention to the NYAG’s recommendations. The NYAG’s investigation is also significant in that it demonstrates continued interest in ensuring consumer privacy, especially in the technology space.

5. California enacts AI transparency law

On September 19, 2024, California adopted SB 942, entitled the California AI Transparency Act (“the Act”), which is one of several AI developments in California. The Act aims to help the public identify AI-generated content and allow consumers to determine whether content was created or altered using generative artificial intelligence. The Act primarily applies to a “Covered Provider,” which is “a person that creates, codes, or otherwise produces a generative artificial intelligence system that has over 1,000,000 monthly visitors or users and is publicly accessible within [California].”

SB 942 imposes three main requirements on Covered Providers:

• The Covered Provider must offer a free, publicly available generative AI content detection tool that allows users to assess whether content was created or altered by the Covered Provider’s AI system.
• The Covered Provider must give users the option to include: (i) a non-hidden disclosure for any AI-generated content; and (ii) a hidden disclosure for any user-generated AI content.
• The Covered Provider must contractually require any third-party licensees of the Covered Provider’s generative AI system to maintain the second requirement’s disclosure capabilities.

The California Attorney General and city and county attorneys in California can enforce this law against Covered Providers through civil actions that include fines of up to $5,000 per daily violation and attorneys’ fees and costs. The California Attorney General and city and county attorneys in California can also bring civil actions against third-party licensees for injunctive relief and attorneys’ fees and costs if the licensee continues to use a generative AI system after a Covered Provider revokes it.

With this law, California joins other states, such as Colorado and Utah, in enacting AI transparency laws. As the digital landscape evolves, we can expect states will continue to enact laws empowering their Attorneys General to investigate and address perceived ethical concerns concerning AI and protect consumers from any misuse of digital content.

[1] The letter was signed by the Attorneys General of California, Colorado, Kentucky, Mississippi, New Jersey, Oregon, Tennessee, Alabama, American Samoa, Arkansas, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, the U.S. Virgin Islands, Utah, Vermont, Virginia, Washington, Wisconsin, and Wyoming.

[2] No. 23-1038.

[3] Wages and White Lion Investments, L.L.C. v. Food & Drug Administration, 90 F.4th 357 (5th Cir. 2024), cert. granted, 144 S. Ct. 2714 (2024).

[4] Id. at 388.

[5] The amicus brief was filed by the Attorneys General for Arizona, California, Colorado, Connecticut, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington.

[6] Read more on the Supreme Court’s decision to strike down the Chevron deference here: Supreme Court Strikes Down Chevron Deference, Changing the Landscape of Agency Rulemaking.

[7] 144 S. Ct. 2244, 2273 (2024).

[8] The lawsuit was filed by the Attorneys General for Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Utah, West Virginia, and Wyoming.

[9] West Virginia, et al. v. Environmental Protection Agency, et al., No. 24-1120 (D.C. Cir. July 19, 2024).

[10] West Virginia, et al. v. Environmental Protection Agency, et al., 604 U. S. ____ (2024).