As in 2025, the first few months of 2026 have seen fashion and retail companies operating in an environment where legal developments increasingly shape day-to-day business decisions, and the same is expected to continue throughout the rest of the year. Tariffs, trade enforcement, and supply‑chain pressures remain a persistent operational reality, even as brands continue to invest heavily in AI, digital commerce, and new consumer‑engagement tools. Simultaneously, regulators and plaintiffs’ attorneys are paying closer attention to e-commerce practices, advertising disclosures, social media and music use, chatbots, and data privacy.
Sustainability obligations are expanding through extended producer responsibility programs, per- and polyfluoroalkyl substance (PFAS restrictions, and climate‑related disclosure laws, while labor, employment, and immigration issues continue to affect workforce planning and mobility. Financial stress across the retail sector, evolving private equity activity, increased bankruptcy filings, and renewed Proposition 65 enforcement add further complexity.
Part I of this Top Legal Issues alert from attorneys at ArentFox Schiff highlights the issues most likely to affect cost, growth, and risk allocation for fashion and retail companies in 2026 – and the areas where leadership teams should be paying close attention …
1: Year(s) of the Tariff – Navigating Tariffs in 2026
Fashion brands and retailers are now well-versed in the frequent Friday afternoon tariff announcements, Truth Social posts, and shifting tariff rates. Tariff related activity accelerated significantly in the past year, forcing both US and multinational companies to reconsider their supply chains and duty mitigation strategies. In 2026, fashion brands and retailers should expect tariffs to continue to shape the Administration’s policy decisions.
> IEEPA Litigation
On February 20, the US Supreme Court held that President Trump did not have authority to impose tariffs under the International Emergency Economic Powers Act (“IEEPA”) to impose tariffs. However, the Supreme Court’s decision to invalidate all the IEEPA tariffs was just step one because it did not address the issue of tariff refunds.
While the ultimate refund mechanism remains unclear we are hopeful that Judge Eaton’s order in the Atmus Filtration case at the Court of International Trade, covering all importers of “not finally liquidated entries” will actually result in the simple refund process through the Automated Commercial Environment that U.S. Customs and Border Protection is developing. Nonetheless, there is still much uncertainty, including whether the refund issue will be appealed. Thus, importers should act now to preserve their rights to possible refunds by accessing their import data, proactively monitoring liquidation dates, and filing protests prior to the 180-day deadline. We will provide updates as more information regarding refunds becomes available.
Importers should also be aware that their customers may seek recovery of any pass-through tariffs paid. Within a week of the Supreme Court decision, customers had already begun to file lawsuits. We expect that suppliers that shared in the tariff burden will also seek recovery. Importers need to review contractual terms to assess possible refund obligations and evaluate whether terms should be adjusted for future purchases.
> Tariffs Aren’t Leaving
Despite the Supreme Court decision, tariffs are the “new normal.” The federal government has quickly pivoted to new authorities such as Section 122, Section 232, and Section 301 to impose new “replacement” tariffs.
>> Section 122. As of February 24, the Administration imposed temporary global tariffs of 10% pursuant to Section 122 of the Trade Act of 1974, allowing imposition of tariffs up to 15% for 150 days unless extension is approved by Congress. This regime includes exemptions for United States-Mexico-Canada (“USMCA”) eligible goods and certain Dominican Republic-Central America- United States Free Trade Agreement eligible textiles.
>> Section 232: Section 232 national security tariffs have also been imposed on several commodities, including steel and aluminum articles and their derivatives, which can include some fashion and retail products.
>> Section 301: US Trade Representative announced two Section 301 investigations on most US trading partners: (1) Covering 16 economies relating to structural excess capacity and production in manufacturing sectors and (2) 60 economies related to their failure to impose or enforce forced labor bans. The China Section 301 tariffs that remain in effect from the first Trump Administration are a reminder of the long-lasting impacts of tariff policies.
In parallel, brands utilizing the USMCA should be aware that the first joint review of the trade agreement will be this year with rules of origin and possible elimination of cross-the board tariff exemptions squarely in scope.
> Operational Pressures Intensifying
The Supreme Court’s IEEPA decision will likely set the tone for the year, while active use of Sections 122, 301, and 232 will continue to increase costs across various sectors. Companies that pair legal awareness with operational execution will be better positioned to protect margins and maintain continuity in their supply chains.
Fashion brands and retailers should align budgets to the range of outcomes the Supreme Court decision has produced, including potential refunds, the tax and transfer pricing implications from those refunds, and exposure to replacement tariffs under other authorities. Teams may also be assessing sourcing, classification, and origin determinations that drive tariff treatment under the new tariff authorities.
Authors: Lucas Rock, Angela Santos, Yusra Siddique
2: AI in 2026
AI is rapidly reshaping fashion and retail, delivering measurable cost savings and operational efficiencies from the inception of the design process through the consumer retail experience, and everything in between. Analysts project billions of dollars in total savings and opportunity potential for brands and retailers through targeted AI adoption. These opportunities, however, must be carefully balanced against legal risk.
The most immediate gains come from automating or accelerating routine tasks, improving decision quality with predictive analytics, and enabling new, lower‑cost consumer engagement:
> Design Process: AI drives cost savings in the design processing through trend prediction and concept generation that compresses research cycles and accelerates time‑to‑market.
> Advertising & Marketing: When advertising new designs, AI avatars allow brands to significantly reduce spend on traditional campaigns and streamline content creation. Additionally, personalized marketing can help increase return, and product placement in agentic shopping experiences can guide consumers from discovery to checkout.
> Retail & Operations: AI can automate, support, and speed routine tasks, lowering workforce‑related costs. For example, AI‑driven assistants can provide around‑the‑clock customer service. AI can also forecast demand and improve inventory management to reduce under‑ and over‑production, optimize allocation and merchandising, and support restocking.
Across the fashion and retail industry, AI-related cost savings present growth opportunities for brands but must be implemented with a robust legal and compliance framework in mind, including the following considerations:
> AI-Generated Output: Human review and oversight are critical to prevent reliance on “hallucinations” in product descriptions, sizing guidance, or customer service, as well as ensure that output does not inadvertently incorporate third‑party intellectual property or a public figure’s likeness. Use of AI models and influencers triggers right of publicity considerations, making written consent essential for any commercial use of a digital replica.
> Disclosure: Disclosure obligations should be evaluated under truth‑in‑advertising rules, state laws, and platform terms when AI avatars interact with consumers or appear in ads.
> Data & Privacy: Personalization features and virtual try‑ons may involve consumer data, including biometric identifiers. Implement data‑minimization practices, appropriate security safeguards, clear privacy notices, and consent mechanisms consistent with applicable laws.
> Vendor Due Diligence: Vendor selection and contracting should address training‑data provenance, permissible commercial uses, security requirements, and indemnities for intellectual property claims.
With disciplined governance and a robust compliance framework, brands can capture AI’s cost-savings potential while mitigating legal exposure.
Author: Natasha Weis
3: E‑Commerce
E‑commerce in 2026 is poised to further blur the lines between digital and physical retail, and how enforcement and platform regulations shape the way brands sell. We expect regulators to continue focusing on deceptive tactics, undisclosed endorsements, opaque pricing, and import compliance. Based on current signals, we anticipate that growth will be driven less by launching “new” channels and more by integrating and governing the channels that already work, particularly marketplaces, social and live commerce (including TikTok Shop), retail media tied to connected TV (CTV), and stores that double as fulfillment and experience hubs.
While exact outcomes will vary by segment, companies should plan for an omnichannel year in which discovery, checkout, and fulfillment are distributed across a wider set of surfaces than ever before and ensure disclosures and pricing are compliant across those surfaces. Additionally, changing import regulations will require companies to shift strategies to avoid potential operational cost increases and delays.
> Social Media and CTV
We expect commerce to meet consumers where they already spend time, with several shifts gaining momentum and distinct legal considerations:
>> Social Media: TikTok Shop appears set to move from novelty to necessity, and we expect platforms to enforce built‑in “paid partnership”/commercial content offerings in short video and live shopping more aggressively. Brands should also anticipate platform‑level penalties for deceptive reviews and undisclosed endorsements in 2026. For example, TikTok has announced in-app enforcement of disclosure obligations for US-based accounts. If commercial content is not properly disclosed or if live content includes misleading pricing claims, TikTok may block the content from reaching the “For You” page.
To ensure regulatory compliance, fashion and retail brands should treat creator content like formal advertising: assume that the Federal Trade Commission’s (“FTC”) Endorsement Guides require clear, simple, and unavoidable disclosures of any material connection; live streams require repeated, audible/on‑screen disclosures and avoidance of exaggerated promises or misleading price comparisons; and platform disclosure tools are helpful, but may not be sufficient on their own.
Consider requiring FTC‑compliant influencer agreements, compliance with platform‑specific obligations, creator training and attestations, pre‑approved scripts/claim substantiation, and monitoring and takedown rights for all creator content.
>> Connected TV: CTV advertising lets retail brands serve TV-like ads via streaming apps on smart TVs and devices, offering digital-style targeting, interactivity, and measurable outcomes across the e‑commerce journey.
Legally, the same truth‑in‑advertising rules apply: ads must be truthful, not misleading, and substantiated, and necessary disclosures must be clear and conspicuous in the viewing context, including on connected screens and related digital touch points. Because CTV relies on data to target and attribute outcomes, retailers should build programs that comply with applicable privacy laws that account for evolving consumer consent. Brands marketing to families should also account for children’s protections, such as the Children’s Online Privacy Protection Rule and, in linear/broadcast placements, separate children’s content rules and commercial limits enforced by the Federal Communications Commission. Brands utilizing CTV should plan for robust claim substantiation, consistent disclosures, privacy controls, and outcome measurement across platforms.
>> Price Transparency and “Junk Fee” Enforcement: Retailers face growing scrutiny over price transparency and so‑called “junk fees,” or mandatory charges that aren’t clearly disclosed up front. Regulators say such fees mislead shoppers and distort competition. Many states are enacting broad “all‑in” pricing laws, such as California’s SB 478, which requires advertised prices to include all mandatory fees (with limited exceptions like taxes and reasonable shipping), and prohibits drip pricing and percent add‑ons revealed only at checkout.
We anticipate heightened enforcement on pricing transparency in the e-commerce space, especially for online checkout and live/creator commerce (where fees and surcharges often appear late). Further, while the FTC’s Rule on Unfair or Deceptive Fees applies only to businesses offering or advertising live-event tickets and short-term lodgings, companies offering tickets to branded events should be aware of the Rule’s “all-in” price obligations. The emerging enforcement patchwork related to price transparency means rules and exemptions vary by state, and penalties and private litigation exposure can be substantial.
Retail brands should ensure the first shown price equals the total required price, treating any unavoidable processing or handling charges as part of that total and avoid bait‑and‑switch or misleading “was/now” discounts.
> Physical Retail’s Response to E-Commerce Trends
Physical retail remains critical, but its role will continue to evolve from pure selling to a blend of experience, service, and fulfillment, with a greater emphasis on compliant in‑store endorsements and transparent pricing. Shoppers increasingly expect stores to feel connected to their online journey, to deliver fast and flexible pickup/returns, and to host engaging reasons to visit, while regulators continue to scrutinize how brands disclose endorsements and substantiate claims.
In practice, this means rethinking store layouts, training associates and creators on disclosure rules, and aligning pricing and promotions across channels so customers see fair, consistent value wherever they shop.
Physical locations are becoming logistics and service hubs in a unified commerce model. Expect broader use of “Buy Online Pick Up in Store” and “Buy Online Return in Store” models, ship‑from‑store, and micro‑fulfillment as consumer’s same‑day expectations rise. Retailers that re‑allocate back‑of‑house space to faster picking and returns intake should be better positioned on delivery speed and reverse‑logistics cost. The result is better delivery performance and more efficient inventory management across channels.
Traffic trends suggest consumers will reward stores that provide reasons to visit beyond inventory, such as events, brand storytelling, creator collaborations, and tech‑enabled try‑ons. Expect more showrooms, pop‑ups, and “store‑within‑a‑store” concepts that encourage discovery and content creation, but ensure in‑store creators and hosts follow the same endorsement‑disclosure and claim‑substantiation rules that apply online to maintain regulatory compliance.
Brands inviting influencers or creators to host events or recommend products in‑store should comply with the same endorsement‑disclosure and claim‑substantiation rules that apply on social media. Retailers should standardize on clear, prominent disclosures for in‑store creator activations and ensure associates understand when a statement is an “endorsement” that requires substantiation and disclosure.
> Cross‑Border E‑Commerce and Section 321 De Minimis
We anticipate continued changes to the US de minimis regime that will affect direct‑to‑consumer imports in 2026, following the 2025 suspension of duty-free treatment for low-value shipments and tighter data expectations. Agencies have proposed rules requiring more granular data disclosure (including HTSUS‑10 codes) and limiting eligibility for goods covered by certain tariff actions (Section 201/232/301) from de minimis eligibility, while recent executive actions have limited or suspended de minimis treatment for some origins.
Operationally, brands using cross-border dropship or marketplace models should plan for more Type 01/11 entries and duties on small value shipments, as well as potential carrier/postal surcharges and documentation requirements. Further, marketplace platforms are tightening rules around cross-border fulfillment and clear “ships-from” disclosures, raising landed costs and extending timelines for small-parcel fashion categories. Adjustments like staging inventory in the United States and building accurate landed-cost calculations into checkout can mitigate margins and customer-experience impacts.
Retailers should anticipate sustained enforcement and data-collection pressure, plus lingering operational friction or delays to comply with shifting regulatory and platform requirements. Teams should align on customs compliance, logistics, and e-commerce functions to keep product launches and promotions on track.
Authors: Emily Caylor, Alexis Mozeleski
4: Bankruptcy
Financial distress and bankruptcy in the retail sector are projected to see elevated activity in 2026. As of January 2026, chapter 11 filings are 76% above numbers from January 2025 across all sectors. Among those early filings are three large retailers, Saks Global (Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman); Francesca’s; and Eddie Bauer.
Looking ahead, we see continued risk to retailers arising from high debt loads (including pressure from high interest payment related to upcoming debt maturities); continued economic pressures and strain related to the K-shaped economy and its impact on consumer discretionary spending; and ongoing impact on the uncertainty related to tariffs. Expect to see more bankruptcy filings for retailers on the horizon, as Saks’ filing and other market trends put increasing pressure on vendors and suppliers within the industry.
Store closures will affect commercial landlords leading to large vacancies but creating opportunity in repurposing of vacant retail space. Consumers trying to enter the luxury market will find themselves priced out and looking for resale platforms.
5: Sustainability
> Extended Producer Responsibility
California became the first state in the nation to establish an extended producer responsibility program specifically for textiles, apparel, footwear, and accessories. This landmark legislation shifts the cost and burden of textile recycling from consumers and municipalities to producers. Key milestones for 2026: CalRecycle must approve a Producer Responsibility Organization (PRO) by March 1, and producers must join the approved PRO by July 1.
Producers that fail to comply may face penalties of up to $10,000 per day or $50,000 per day for intentional or knowing violations. Retailers and distributors should also note that once the program takes effect, they may not sell products from non-compliant producers. Companies should begin gathering data about covered products now, prepare for joining the approved PRO later this year, and monitor New York, where similar state legislation (Senate Bill S3217) has been introduced.
> PFAS Restrictions Continue to Expand
PFAS face increasing restrictions that directly impact apparel and textile products. Here is what to expect in 2026:
>> State Product Sales Restrictions: As of January 1, 2025, California and New York banned the sale of apparel with intentionally added PFAS. California’s law applies to all “textile articles” containing regulated PFAS or total organic fluorine above 100 ppm (dropping to 50 ppm by 2027). Outdoor apparel for “severe wet conditions” is temporarily exempt through January 1, 2028, but must carry disclosure labels. Additional states are implementing or expanding PFAS bans in 2026, including Connecticut, Maine, Vermont, and Colorado.
>> EPA’s Proposed TSCA Reporting Rule Amendments: In November 2025, the US Environmental Protection Agency (EPA) proposed significant changes to the Toxic Substances Control Act (TSCA) Section 8(a)(7) PFAS reporting rule. The proposal would add exemptions for: PFAS in imported articles; PFAS manufactured in mixtures or products at concentrations below 0.1%; and certain byproducts, impurities, and research and development chemicals.
The submission period for most manufacturers is currently set to begin April 13, and close October 13. Small businesses reporting only on imported PFAS-containing articles have until April 13, 2027. Companies should track developments and ready data for reporting, as the final rule is expected in mid-2026.
> California Climate Disclosure Laws (SB 253 and SB 261)
California’s climate disclosure laws will continue to have significant implications for large companies in the fashion and retail sector.
>> SB 253 (Climate Corporate Data Accountability Act) applies to US companies with over $1 billion in annual revenue that do business in California. Companies must report Scope 1 and 2 greenhouse gas emissions by August 10, with Scope 3 reporting beginning in 2027. Limited assurance is not required for the first 2026 reporting cycle, but subsequent years of reporting will require limited assurance on Scope 1 and 2 emissions, escalating to reasonable assurance by 2030. Penalties may reach $500,000 per year for non-compliance, though California Air Resources Board (“CARB”) has stated it will not impose penalties in 2026 for good-faith compliance efforts.
>> SB 261 (Climate-Related Financial Risk Act) applies to US companies with over $500 million in annual revenue that do business in California. Companies must publish biennial climate-related financial risk reports aligned with the Task Force on Climate-Related Financial Disclosures or equivalent frameworks. While the statutory deadline was January 1, 2026, the Ninth Circuit issued an injunction on November 18, 2025, temporarily pausing enforcement pending an appeal. CARB has confirmed it will not enforce the January 1deadline and will provide an alternate date after the appeal is resolved. Penalties under SB 261 may reach $50,000 per year.
Companies should begin collecting emissions data now and conduct gap assessments for climate risk reporting. Even with uncertainty around SB 261’s timeline, preparation is key, as a new compliance deadline will likely be set if the injunction is lifted.
Authors: Alex Garel-Frantzen, Lynn Fiorentino