Briefing: May 26, 2023

Extended Producer Responsibility, Gap v. Kanye, adidas v. Kanye & More

Extended producer responsibility (“ERP”) – the practice of requiring producers and/or brand owners to assume the costs of ultimately collecting, treating & recycling the products that they sell – is increasingly being touted as a way to address mounting waste. Not a novel concept, ERP has been adopted across countries & industries, traditionally with a focus on things like electronics, paint, mattresses & batteries. Now, it is beginning to find its way into fashion.

The EU, for one, is making headlines, as it is actively planning an ERP policy that extends to textiles, with its Committee on the Environment issuing a report last month in connection with the EU Strategy for Sustainable and Circular Textiles. The Committee paid a fair amount of attention in its report to ERP, arguing that “textile producers should [be responsible] for the textiles they make available on the market for the first time w/in the territory of a Member State.” One of the earliest-movers on this front, France established a legal framework for managing textile waste through EPR back in 2017. As for more recent examples of how countries and U.S. states are approaching EPR regulation/legislation, here are a few …

Sweden – Legislators introduced an EPR scheme for textiles in Jan. 2022, which is being implemented in phases over the next several years.

Netherlands – Lawmakers approved a garments and home textiles-focused EPR law that is expected to come into effect in July 2023.

New York – Members of the New York State Senate introduced a bill this month that would establish ERP for textiles. (You can find the text of that bill here.)

California – In Feb., California Senator Josh Newman introduced a bill (SB 707) to create a statewide collection & recycling program for textiles. (You can find the text of that bill here.)

The push to adopt ERP is noteworthy given that studies have shown that “these laws are effective at increasing recycling rates and, depending on their design, can create incentives for more benign and reusable inputs,” Berkshire Partners Advisory Director (and former Timberland COO) Ken Pucker recently wrote for SSIR. He noted that consideration should be given to “higher EPR charges on mixed-materials garments to increase the percentage of recyclable clothing,” and state that “mandated digitization of garments’ provenance would also improve EPR efficacy and recycling uptake.”

Who is Ready? The broadening efforts to adopt EPR rules is also noteworthy, as most companies are not ready – or even actively preparing – for the impacts. Some companies are investing in recycling infrastructure as they prepare for textile-specific EPR requirements in Europe, according to the WSJ, but more broadly, PMMI Business Intelligence revealed in a recent report that most companies are not. “Despite the impact EPR legislation has & will have on companies, 37% of the executive participants in the PMMI survey said their companies were looking at the impact of EPR legislation on their [businesses], compared with 63% who said no.” The PMMI survey focused primarily on packaging but it, nonetheless, provides insight into where companies are at generally when it comes to EPR.

THE TAKEAWAY: Looking ahead, should companies in the fashion/apparel/retail space want to take steps to prepare for impending legislation both in the EU and stateside (and they probably should), experts suggest that the adoption of a product passport/digital ID system would be a good initial effort.

Some Litigation Updates …

– Gap v. Kanye: A double-header. Gap is being sued for allegedly breach its contract with Art City Center, the owner of a building in Los Angeles that was leased to Gap as a storefront for Kanye’s collection, by making “unapproved alterations” to the space. In response, Gap is suing Yeezy Supply & Ye, who it claims are actually responsible for the changes.

– In the Matter of adidas AG: In a separate suit, a New York federal court nullified a freeze on $75M in funds in Yeezy accounts (that was put in place late last year) to prevent them from being moved while it & Ye are engaged in arbitration over the fallout of their terminated deal.

–  Yuga v. Ryder Ripps: There has been a flurry of pretrial activity in this case, namely motions in limine filed by Ripps’ counsel. Here’s one that is focused on excluding “Inflammatory Material.”

– Harper v. O’NealShaq is being sued for allegedly selling unregistered securities by way of his “Astrals” NFT project.

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

– Permira will acquire a majority stake in Gruppo Florence in a deal that reportedly values the hub of Italian luxury clothing & leather goods manufacturers at more than $1.1B.

– London-based sneaker resale platform Laced has raised $12M in a Series A round.

– New Delhi-based Hit the Mark, which owns kidswear brand Hopscotch, has raised $20M in a Series E round led by Amazon.

– Web3-centric investments are still happening … Sort – which is the provider of a platform that simplifies Web3 app development – has raised $3.5M.

– ESG platforms – like Novisto and Waterplan – are among the key players raising funds at the moment amid regulatory/legislative pushes for ESG reporting. See those rounds here.

– Our AI tracker is up to date to include new funding, such as a round for Genetica, an AI-powered cannabis retail platform.

– We have a brand new tracker that looks at funding/deals involving Legal TechYou can find that here.