Briefing: July 14, 2023

More ERP, AI at the Senate & Creative Director Change-Ups

The French government is aiming to incentivize consumers to repair their existing garments and shoes instead of buying new ones. This comes by way of a new initiative that will see the government partner with “sewing workshops and shoemakers” to offer cash to consumers who seek out repairs – customers will be able to claim between €6 ($7) to €25 ($28) for clothing and footwear repairs, with the sum depending on the complexity of the repair. The rebate scheme – which was introduced by Secretary of State for Ecology Berangere Couillard – will be implemented in Oct. 2023 with the help of eco-organization Refashion and will consist of a fund into which the government will pay €154 million over 5 years.

“The goal is to support those who do the repairs,” Couillard said, referring to sewing workshops but also  brands that offer repair services. (Chanel, Hermès, and others come to mind here.) In addition to supporting the repair sector and creating new jobs, the initiative is focused on chipping away at the disposal that stems from the 3.3 billion items of clothing, footwear and household textiles that are put on the market in France each year.

The Bigger Picture: An early-mover on many ESG fronts, France became the first country to ban the destruction of unsold non-food products when it passed an anti-waste law back in 2020. The law endeavors to: (1) phase out single-use plastic packaging by 2040; (2) eliminate waste by encouraging reuse and supporting charitable organizations; (3) tackle planned obsolescence; (4) promote a better resource management system from the design stage to the recovery of materials; and (5) provide better and more transparent info. to consumers.

In a similar vein, France has long maintained an extended producer responsibility (“ERP”) law, called the Anti-Wastage & Circular Economy Law, that makes companies that “manufacture, handle, process, sell or import waste-generating products or the elements and materials used in their manufacture” responsible for waste management and end-of-life disposal. The materials covered by the consistently-expanding law include textiles and packaging, and as of Jan. 1, 2022, it extends to online platforms, thereby, bringing fashion entities – and retail more broadly – firmly into the fold.

NoteZalando and Etsy provide interesting looks at how companies are communicating ERP requirements to third-party seller partners.

Reflecting on the ERP scheme recently, the WSJ reported: “For more than a decade, France has had an EPR program that charges clothes sellers a fee to fund the management of its waste. In 2021, more than 6,000 member brands paid around €51 million (equivalent to $55 million) in fees, with the largest share going to sorting centers.” However, collection of textiles for recovery in France reached only 34% in 2021, “suggesting that more funding & infrastructure is needed.”

The U.S. View: The closest U.S. apparel ERP equivalent – CA bill SB707 – was withdrawn from a legislative hearing this week, following calls from industry organizations to allow for more time before the implementation in order to allow for stakeholders to monitor and learn from the implementation of the EU’s textile-specific ERP regulations (which I covered last week) and the plastic-specific ERP pilot that CA put in place last year.

A Few AI Updates

AI absolutely dominated the news again this week – with another hearing taking place before the Senate’s IP Subcommittee on Wednesday. It focused in large part on AI and IP, specifically, copyright and unsurprisingly, fair use. The other key point of interest was urging for a federal right of publicity statute. More about that here.

– AI & the FTC: The FTC has initiated an investigation into OpenAI, probing the ChatGPT developer to determine of it has run afoul of consumer protection laws by “putting personal reputations and data at risk.”

– AI & the AP: The Associated Press has reached a 2-year deal with OpenAI to share access to select news content & tech. “The deal marks one of the first official news-sharing agreements made between a major U.S. news company and an AI firm,” per Axios.

– AI & American Legislation: We’ve updated our running list of AI-related legislation, which you can find here.

– AI & China: Chinese regulators finalized first-of-their-kind rules focused on generative AI on Thursday. The new regulation – which follows from a draft released this spring – is expected to be implemented on Aug. 15.

A Couple Quick Hits on Fashion, Retail, Tech & the Law

>> Tod’s is out a creative director, adding to a swiftly growing list. The NYTimes’ Vanessa Friedman put the predicament well recently, writing“Most exits have their own specific triggers. But collectively they underscore the quickening churn among creative directors at fashion brands, as impatient executives press for starry sales growth on highly ambitious design and production timelines and to an evermore fickle consumer.”

>> Gucci released its annual Gucci Equilibrium Impact Report, stating that it has “reinforced our actions to further reduce our entire footprint while investing in the protection and restoration of nature, knowing that nature & climate are intrinsically interlinked. Together, we’re building on our legacy as an innovative, progressive, influential & modern luxury House, ever-evolving to meet our sustainability ambitions designed for the future.” A snippet …

In Litigation News …

– Tangle v. Aritzia: Tangle filed an amended complaint in its © infringement case against Aritzia to add a trade dress infringement claim.

– Hodes v. Stability AI: AI giant Stability AI has been hit with a new suit. Instead of focusing on its alleged misuse of data and/or © protected materials to train its models, in this case, co-founder Cyrus Hodes claims he was tricked into selling his 15% stake in the co. for $100 just months before the startup nabbed a $1B valuation.

– Coalition for Independent Technology Research v. Abbott: A new lawsuit challenges Texas’ ban on TikTok at public universities as violating the First Amendment.

In some deal-making news in fashion/retail, tech & web3 …

– Re-Fresh Global has raised €1.1M in a Pre-Seed round. The Berlin-based startup “brings sustainability innovation to manufacturing” with a patented biotech that “transforms textile waste into recycled raw materials.”

– Soccer star Cristiano Ronaldo has taken a minority stake in pre-owned luxury watch marketplace Chrono24 by way of his CR7 SA entity.

– An AI-related deal that stands out: Stylitics has acquired Barcelona-based Wide Eyes, one of the leading visual AI solutions for fashion and retail.

– RADAR has raised $30M in a Series A round. The NYC-based co. boasts an AI-powered inventory-tracking platform that combines RFID and computer vision tech.

– Web3 startups are still raising: Karta – a startup that provides metaverse-specific marketing services to brands and artists – has raised $1.1M.

– Giza has raised $3M in a Pre-Seed round to launch its AI platform for smart contracts and web3 protocols.