1038-00004 · Calderwood & Harkness LLP · Correspondence

counter-proposed-avc-cover-letter.docx DOCUMENT M&A / Corporate

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CALDERWOOD & HARKNESS LLP Attorneys at Law

1201 Third Avenue, Suite 4400 Seattle, Washington 98101 Telephone: (206) 555-8200 Facsimile: (206) 555-8201 www.calderwoodharkness.com

Alan Ngo Partner Direct: (206) 555-8247 ango@calderwoodharkness.com

June 28, 2024

Meredith Calloway-Voss Lead Assistant Attorney General Consumer Protection Division Office of the Attorney General, State of Washington 800 Fifth Avenue, Suite 2000 Seattle, WA 98104

Jordan A. Kittridge Investigating Assistant Attorney General Consumer Protection Division Office of the Attorney General, State of Washington 800 Fifth Avenue, Suite 2000 Seattle, WA 98104

Re: In the Matter of Cascade Retail Holdings Inc. — Counter-Proposed Assurance of Voluntary Compliance Civil Investigative Demand issued March 26, 2024 C&H Matter No. 1038-00004

Dear Ms. Calloway-Voss and Mr. Kittridge:

Purpose and Context

This firm represents Cascade Retail Holdings Inc. ("Cascade" or "CRH") in connection with the consumer-protection inquiry initiated by the Consumer Protection Division of the Washington State Attorney General's Office concerning CRH's pricing-disclosure and reference-price advertising practices. We write on behalf of CRH to transmit the enclosed counter-proposed Assurance of Voluntary Compliance ("AVC"), which is presented in two forms: (1) a tracked-changes redline reflecting CRH's proposed revisions to the draft AVC provided by your office on June 12, 2024, and (2) a clean copy of the counter-proposed AVC incorporating those revisions.

At the outset, we wish to acknowledge the productive meet-and-confer session held on May 14, 2024, at which your office signaled its willingness to resolve this matter through an AVC rather than through formal enforcement proceedings. CRH appreciated the constructive tone of that discussion, and the counter-proposed AVC set forth herein is submitted in the same spirit of good-faith engagement and cooperation.

We also note that CRH has completed its full document production in response to the Civil Investigative Demand issued March 26, 2024. That production was accomplished through two rolling productions totaling approximately 21,100 documents — the first consisting of approximately 12,400 documents produced on April 23, 2024, and the second consisting of approximately 8,700 documents produced on May 31, 2024. CRH's timely and comprehensive productions, undertaken without the need for any motion-to-compel practice, underscore the company's cooperation and good faith throughout this inquiry, and we trust that the completeness of those productions has facilitated the Division's review.

Summary of CRH's Position

CRH takes its pricing-disclosure obligations under the Washington Consumer Protection Act, RCW 19.86 et seq., seriously and is committed to ensuring that its advertising practices — both in its brick-and-mortar retail locations and on its ecommerce platform — meet all applicable legal standards. CRH has a longstanding commitment to fair dealing with Washington State consumers, a commitment that predates this inquiry and that will continue irrespective of its outcome.

It is important to state clearly, however, that CRH neither admits nor denies any violation of RCW 19.86 or any regulation promulgated thereunder. The counter-proposed AVC includes an express no-admission-of-liability provision, and CRH considers this provision essential to any negotiated resolution of this matter. This position is consistent with the voluntary and cooperative nature of the AVC process and, as discussed further below, reflects customary practice in analogous resolutions in this jurisdiction and others.

Notwithstanding this reservation, CRH is prepared to undertake meaningful prospective compliance measures and to contribute to consumer remediation. The specific terms proposed by CRH are set forth in the enclosed counter-proposed AVC and are summarized below for the convenience of the Division.

Principal Revisions to the Draft AVC

CRH's counter-proposed AVC accepts the majority of the structural framework set forth in the Division's June 12, 2024 draft. CRH's proposed revisions are concentrated in the following areas, each of which is addressed in turn below.

1. Lookback Window

The Division's draft AVC proposed a 180-day lookback window for purposes of determining whether "compare-at," "original," or "was" reference prices displayed in CRH's retail locations or on cascaderetail.com reflect an actual, bona fide offering price at which the subject merchandise was offered for sale in the regular course of business. CRH proposes that this lookback window be revised to 120 days.

CRH recognizes the Division's legitimate interest in ensuring that reference prices are anchored to genuine, recent market pricing. However, a 180-day lookback window would encompass multiple seasonal merchandising cycles and, for many of the product categories at issue — including women's apparel, men's footwear, home textiles, small kitchen appliances, outdoor furniture, and consumer electronics accessories — would not meaningfully reflect the ordinary course of business. Merchandise in these categories is subject to rapid seasonal turnover, frequent promotional activity, and vendor-driven price adjustments that can render a reference price from six months prior functionally obsolete and misleading in its own right.

A 120-day lookback window provides robust consumer protection by ensuring that reference prices are anchored to pricing that is both recent and reflective of actual market conditions, while remaining operationally practicable across CRH's 187 retail locations in Washington, Oregon, Idaho, and Montana, as well as its ecommerce platform. CRH is confident that a 120-day standard, coupled with the compliance-monitoring mechanisms discussed below, will achieve the Division's consumer-protection objectives without imposing an unduly burdensome or commercially unreasonable compliance standard.

2. Consumer Restitution Fund

The Division's draft AVC proposed the establishment of a consumer restitution fund in the amount of $4,500,000 for the benefit of consumers who may have been affected by the pricing-disclosure practices at issue.

CRH proposes a consumer restitution fund in the amount of $2,850,000. CRH believes this amount appropriately reflects the scope of potentially affected transactions during the relevant period — October 15, 2023 through March 15, 2024 — based on CRH's own internal analysis of transaction data produced to the Division. In arriving at this figure, CRH has considered that, while reference-price displays may have been potentially overstated in certain instances during the relevant period, such displays did not necessarily cause cognizable consumer harm in every transaction. Many consumers made purchasing decisions based on factors other than reference-price comparisons, and CRH's actual selling prices remained competitive in the marketplace relative to comparable retailers. Not every transaction involving a reference-price display resulted in a consumer paying more than the consumer otherwise would have paid, and any restitution fund should be calibrated to the actual scope of potential consumer injury rather than to a theoretical maximum.

CRH further proposes that the restitution fund be administered over a 12-month period following execution of the AVC, during which affected consumers would receive refunds or, at the consumer's election, store credits in amounts to be determined through the claims-administration process outlined in the counter-proposed AVC. CRH is prepared to engage a qualified third-party claims administrator, subject to the Division's approval, to manage the fund and process consumer claims in a fair and efficient manner.

3. Civil Penalty

The Division's draft AVC proposed a civil penalty of $1,500,000 payable to the Washington Consumer Protection Account.

CRH proposes a civil penalty of $750,000. In proposing this reduction, CRH respectfully submits that the following factors weigh in favor of a lower penalty amount:

(a) CRH has cooperated fully and promptly throughout the Division's investigation, including by responding to the Civil Investigative Demand with two substantial rolling productions totaling approximately 21,100 documents, without the need for any motion-to-compel practice or judicial intervention.

(b) CRH voluntarily initiated internal pricing reviews promptly upon receipt of the Civil Investigative Demand, engaging both in-house resources and external consultants to assess its reference-price practices and to identify and address any deficiencies.

(c) CRH has no prior consumer-protection enforcement history in Washington State or, to CRH's knowledge, in any other jurisdiction. The absence of any prior enforcement actions reflects CRH's longstanding commitment to lawful and ethical business practices.

(d) The reference-price practices at issue, while potentially falling short of applicable standards in certain instances, did not reflect an intentional scheme to deceive or defraud consumers. Rather, the issues identified by the Division appear to have arisen from deficiencies in CRH's automated pricing systems and certain vendor-supplied data inputs, which CRH has already begun to address.

CRH proposes that the civil penalty be payable within 30 days of execution of the AVC.

4. AG Investigative Costs Reimbursement

CRH accepts the Division's proposed reimbursement of $185,000 in investigative costs incurred by the Attorney General's Office in connection with this matter. Payment of this amount would be made within 30 days of execution of the AVC.

5. Total Financial Commitment

Under CRH's counter-proposed terms, the total financial commitment would be $3,785,000, consisting of:

CRH submits that this aggregate amount represents a substantial and meaningful financial commitment that reflects the seriousness with which CRH approaches this matter and its commitment to making affected consumers whole, while also appropriately accounting for the mitigating factors described above.

6. No Admission of Liability

As noted above, CRH's counter-proposed AVC includes an express provision stating that CRH neither admits nor denies any violation of RCW 19.86 or any regulation promulgated thereunder. This provision further states that CRH's agreement to enter into the AVC and to undertake the obligations set forth therein shall not be construed as an admission of wrongdoing, fault, or liability for any purpose, including in any subsequent civil, administrative, or regulatory proceeding.

This no-admission provision is consistent with customary practice in AVC resolutions in Washington State and in comparable consent-order and assurance-of-discontinuance proceedings in other jurisdictions. It reflects the cooperative and voluntary nature of the resolution process and, in CRH's view, is an appropriate and expected term in a matter that is being resolved without contested litigation.

7. Independent Compliance Monitoring

CRH accepts the Division's proposal for an independent compliance review and proposes Ridgepoint Compliance Solutions Inc. ("Ridgepoint") as the independent compliance reviewer. Ridgepoint's engagement would be led by Harold Sung, Engagement Partner. Ridgepoint is located at 700 Stewart Street, Suite 1500, Seattle, WA 98101.

CRH proposes a 24-month monitoring period commencing on the date of AVC execution. During this period, Ridgepoint would conduct quarterly audits of CRH's reference-price practices across all retail locations and on cascaderetail.com. These audits would include, without limitation, review of the algorithmic reference-price model developed by Praxton Analytics LLC, which CRH has engaged to redesign and improve its automated pricing systems in light of the issues identified through this inquiry. Ridgepoint's audits would assess whether CRH's reference-price displays comply with the substantive terms of the AVC and with applicable provisions of the Washington Consumer Protection Act, and would report findings and any recommended corrective actions to both CRH and the Division.

Ridgepoint's qualifications, including its experience with retail pricing-compliance engagements and the independence of its principals from CRH and its affiliates, are available for the Division's review upon request. CRH is prepared to provide a detailed description of Ridgepoint's qualifications and engagement history, as well as a conflict-of-interest disclosure, at the Division's earliest convenience.

8. Compliance Reporting Frequency

The Division's draft AVC proposed quarterly compliance reports to the Consumer Protection Division.

CRH proposes semi-annual compliance reporting, with the first report due six months following AVC execution and subsequent reports due at six-month intervals thereafter for the duration of the monitoring period. Each report would address CRH's compliance with the AVC's substantive terms, summarize the results of Ridgepoint's most recent quarterly audits, identify any instances of non-compliance or potential non-compliance and the corrective actions taken in response, and describe any changes to CRH's pricing-disclosure policies and procedures implemented during the reporting period.

CRH submits that semi-annual reporting provides sufficient oversight to ensure meaningful accountability while reducing administrative burden on both CRH and the Division. Importantly, the quarterly audits conducted by Ridgepoint would provide an additional and independent layer of review between CRH's formal reporting periods. To the extent the Division has concerns about the adequacy of semi-annual reporting, CRH is prepared to discuss supplemental reporting mechanisms or interim notification requirements for material compliance events.

9. Stipulated Penalties for Breach

CRH accepts the stipulated penalty of $10,000 per day for any material breach of the AVC terms. CRH's counter-proposed AVC, however, inserts a 30-day cure period following written notice of an alleged breach before stipulated penalties begin to accrue. Under this provision, the Division would provide written notice to CRH specifying the nature of the alleged breach, and CRH would have 30 calendar days from receipt of such notice to cure the breach or to demonstrate that no breach has occurred. Stipulated penalties would begin to accrue only upon the expiration of the 30-day cure period, provided the breach remains uncured.

This cure provision is a standard mechanism in consent agreements and AVCs and is intended to encourage prompt remediation of any compliance deficiency rather than punitive escalation. CRH is confident that this provision, far from undermining the enforceability of the AVC, will promote the Division's goal of ensuring ongoing, sustained compliance.

CRH's Commitment to Resolution

CRH values its relationship with Washington State consumers and is committed to transparent, accurate, and fair pricing disclosures. The company recognizes the importance of the Division's consumer-protection mission and shares its interest in ensuring that consumers can rely on the pricing information presented in CRH's retail locations and on its ecommerce platform.

CRH has already taken preliminary internal steps, under the guidance of its Chief Compliance Officer, Terence Ashford, and its Vice President of Marketing & Pricing Strategy, Raymond Soo, to review and revise its pricing-disclosure practices pending finalization of the AVC. These steps include the engagement of Praxton Analytics LLC to redesign CRH's algorithmic reference-price model, the implementation of enhanced internal audit protocols for reference-price displays, and the development of updated training materials for CRH's merchandising and marketing personnel. CRH intends to continue these efforts irrespective of the specific terms ultimately agreed upon in the AVC, as they reflect CRH's independent commitment to best practices in pricing transparency.

CRH is prepared to move expeditiously to finalize the AVC and to commence the compliance-monitoring period as promptly as practicable following execution.

Proposed Next Steps

We respectfully request the opportunity for a follow-up call or meeting at the Division's earliest convenience to discuss the revisions proposed herein, address any remaining open issues, and work toward prompt finalization of the AVC. I am available, along with Patrick Gallagher, the lead associate on this matter, for a call during the week of July 1, 2024, or at such other time as may be convenient for Ms. Calloway-Voss and Mr. Kittridge. We are also prepared to accommodate an in-person meeting at the Division's offices should that be preferred.

CRH is hopeful that the parties can reach agreement in principle on the terms of the AVC in the near term, and we are committed to devoting the resources necessary to bring this matter to a prompt and satisfactory resolution for all parties.

Enclosures

The following documents are enclosed with this letter:

Enclosure 1: Counter-Proposed Assurance of Voluntary Compliance — Redline Version, reflecting CRH's proposed revisions to the AG's draft dated June 12, 2024 (tracked changes in Microsoft Word format).

Enclosure 2: Counter-Proposed Assurance of Voluntary Compliance — Clean Copy, incorporating all of CRH's proposed revisions.

We appreciate the professionalism and courtesy that your office has extended throughout this inquiry, and we look forward to continuing to work with you toward a resolution that appropriately serves the interests of Washington State consumers and reflects CRH's commitment to responsible business practices.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Alan Ngo Partner

Direct: (206) 555-8247

Email: ango@calderwoodharkness.com

cc:

Diana Prescott-Levy, General Counsel Cascade Retail Holdings Inc. 4500 Overlake Boulevard, Suite 800 Bellevue, WA 98004

Terence Ashford, Chief Compliance Officer Cascade Retail Holdings Inc.

Patrick Gallagher, Associate Calderwood & Harkness LLP

Simone Laroche, Associate Calderwood & Harkness LLP

Component	Amount
Consumer Restitution Fund	$2,850,000
Civil Penalty	$750,000
AG Investigative Costs Reimbursement	$185,000
Total	$3,785,000

CALDERWOOD & HARKNESS LLP Attorneys at Law
1201 Third Avenue, Suite 4400 Seattle, Washington 98101 Telephone: (206) 555-8200 Facsimile: (206) 555-8201 www.calderwoodharkness.com
Alan Ngo Partner Direct: (206) 555-8247 ango@calderwoodharkness.com
June 28, 2024
Meredith Calloway-Voss Lead Assistant Attorney General Consumer Protection Division Office of the Attorney General, State of Washington 800 Fifth Avenue, Suite 2000 Seattle, WA 98104
Jordan A. Kittridge Investigating Assistant Attorney General Consumer Protection Division Office of the Attorney General, State of Washington 800 Fifth Avenue, Suite 2000 Seattle, WA 98104
Re: In the Matter of Cascade Retail Holdings Inc. — Counter-Proposed Assurance of Voluntary Compliance Civil Investigative Demand issued March 26, 2024 C&H Matter No. 1038-00004
Dear Ms. Calloway-Voss and Mr. Kittridge:
Purpose and Context
This firm represents Cascade Retail Holdings Inc. ("Cascade" or "CRH") in connection with the consumer-protection inquiry initiated by the Consumer Protection Division of the Washington State Attorney General's Office concerning CRH's pricing-disclosure and reference-price advertising practices. We write on behalf of CRH to transmit the enclosed counter-proposed Assurance of Voluntary Compliance ("AVC"), which is presented in two forms: (1) a tracked-changes redline reflecting CRH's proposed revisions to the draft AVC provided by your office on June 12, 2024, and (2) a clean copy of the counter-proposed AVC incorporating those revisions.
At the outset, we wish to acknowledge the productive meet-and-confer session held on May 14, 2024, at which your office signaled its willingness to resolve this matter through an AVC rather than through formal enforcement proceedings. CRH appreciated the constructive tone of that discussion, and the counter-proposed AVC set forth herein is submitted in the same spirit of good-faith engagement and cooperation.
We also note that CRH has completed its full document production in response to the Civil Investigative Demand issued March 26, 2024. That production was accomplished through two rolling productions totaling approximately 21,100 documents — the first consisting of approximately 12,400 documents produced on April 23, 2024, and the second consisting of approximately 8,700 documents produced on May 31, 2024. CRH's timely and comprehensive productions, undertaken without the need for any motion-to-compel practice, underscore the company's cooperation and good faith throughout this inquiry, and we trust that the completeness of those productions has facilitated the Division's review.
Summary of CRH's Position
CRH takes its pricing-disclosure obligations under the Washington Consumer Protection Act, RCW 19.86 et seq., seriously and is committed to ensuring that its advertising practices — both in its brick-and-mortar retail locations and on its ecommerce platform — meet all applicable legal standards. CRH has a longstanding commitment to fair dealing with Washington State consumers, a commitment that predates this inquiry and that will continue irrespective of its outcome.
It is important to state clearly, however, that CRH neither admits nor denies any violation of RCW 19.86 or any regulation promulgated thereunder. The counter-proposed AVC includes an express no-admission-of-liability provision, and CRH considers this provision essential to any negotiated resolution of this matter. This position is consistent with the voluntary and cooperative nature of the AVC process and, as discussed further below, reflects customary practice in analogous resolutions in this jurisdiction and others.
Notwithstanding this reservation, CRH is prepared to undertake meaningful prospective compliance measures and to contribute to consumer remediation. The specific terms proposed by CRH are set forth in the enclosed counter-proposed AVC and are summarized below for the convenience of the Division.
Principal Revisions to the Draft AVC
CRH's counter-proposed AVC accepts the majority of the structural framework set forth in the Division's June 12, 2024 draft. CRH's proposed revisions are concentrated in the following areas, each of which is addressed in turn below.
1. Lookback Window
The Division's draft AVC proposed a 180-day lookback window for purposes of determining whether "compare-at," "original," or "was" reference prices displayed in CRH's retail locations or on cascaderetail.com reflect an actual, bona fide offering price at which the subject merchandise was offered for sale in the regular course of business. CRH proposes that this lookback window be revised to 120 days.
CRH recognizes the Division's legitimate interest in ensuring that reference prices are anchored to genuine, recent market pricing. However, a 180-day lookback window would encompass multiple seasonal merchandising cycles and, for many of the product categories at issue — including women's apparel, men's footwear, home textiles, small kitchen appliances, outdoor furniture, and consumer electronics accessories — would not meaningfully reflect the ordinary course of business. Merchandise in these categories is subject to rapid seasonal turnover, frequent promotional activity, and vendor-driven price adjustments that can render a reference price from six months prior functionally obsolete and misleading in its own right.
A 120-day lookback window provides robust consumer protection by ensuring that reference prices are anchored to pricing that is both recent and reflective of actual market conditions, while remaining operationally practicable across CRH's 187 retail locations in Washington, Oregon, Idaho, and Montana, as well as its ecommerce platform. CRH is confident that a 120-day standard, coupled with the compliance-monitoring mechanisms discussed below, will achieve the Division's consumer-protection objectives without imposing an unduly burdensome or commercially unreasonable compliance standard.
2. Consumer Restitution Fund
The Division's draft AVC proposed the establishment of a consumer restitution fund in the amount of $4,500,000 for the benefit of consumers who may have been affected by the pricing-disclosure practices at issue.
CRH proposes a consumer restitution fund in the amount of $2,850,000. CRH believes this amount appropriately reflects the scope of potentially affected transactions during the relevant period — October 15, 2023 through March 15, 2024 — based on CRH's own internal analysis of transaction data produced to the Division. In arriving at this figure, CRH has considered that, while reference-price displays may have been potentially overstated in certain instances during the relevant period, such displays did not necessarily cause cognizable consumer harm in every transaction. Many consumers made purchasing decisions based on factors other than reference-price comparisons, and CRH's actual selling prices remained competitive in the marketplace relative to comparable retailers. Not every transaction involving a reference-price display resulted in a consumer paying more than the consumer otherwise would have paid, and any restitution fund should be calibrated to the actual scope of potential consumer injury rather than to a theoretical maximum.
CRH further proposes that the restitution fund be administered over a 12-month period following execution of the AVC, during which affected consumers would receive refunds or, at the consumer's election, store credits in amounts to be determined through the claims-administration process outlined in the counter-proposed AVC. CRH is prepared to engage a qualified third-party claims administrator, subject to the Division's approval, to manage the fund and process consumer claims in a fair and efficient manner.
3. Civil Penalty
The Division's draft AVC proposed a civil penalty of $1,500,000 payable to the Washington Consumer Protection Account.
CRH proposes a civil penalty of $750,000. In proposing this reduction, CRH respectfully submits that the following factors weigh in favor of a lower penalty amount:
(a) CRH has cooperated fully and promptly throughout the Division's investigation, including by responding to the Civil Investigative Demand with two substantial rolling productions totaling approximately 21,100 documents, without the need for any motion-to-compel practice or judicial intervention.
(b) CRH voluntarily initiated internal pricing reviews promptly upon receipt of the Civil Investigative Demand, engaging both in-house resources and external consultants to assess its reference-price practices and to identify and address any deficiencies.
(c) CRH has no prior consumer-protection enforcement history in Washington State or, to CRH's knowledge, in any other jurisdiction. The absence of any prior enforcement actions reflects CRH's longstanding commitment to lawful and ethical business practices.
(d) The reference-price practices at issue, while potentially falling short of applicable standards in certain instances, did not reflect an intentional scheme to deceive or defraud consumers. Rather, the issues identified by the Division appear to have arisen from deficiencies in CRH's automated pricing systems and certain vendor-supplied data inputs, which CRH has already begun to address.
CRH proposes that the civil penalty be payable within 30 days of execution of the AVC.
4. AG Investigative Costs Reimbursement
CRH accepts the Division's proposed reimbursement of $185,000 in investigative costs incurred by the Attorney General's Office in connection with this matter. Payment of this amount would be made within 30 days of execution of the AVC.
5. Total Financial Commitment
Under CRH's counter-proposed terms, the total financial commitment would be $3,785,000, consisting of:
CRH submits that this aggregate amount represents a substantial and meaningful financial commitment that reflects the seriousness with which CRH approaches this matter and its commitment to making affected consumers whole, while also appropriately accounting for the mitigating factors described above.
6. No Admission of Liability
As noted above, CRH's counter-proposed AVC includes an express provision stating that CRH neither admits nor denies any violation of RCW 19.86 or any regulation promulgated thereunder. This provision further states that CRH's agreement to enter into the AVC and to undertake the obligations set forth therein shall not be construed as an admission of wrongdoing, fault, or liability for any purpose, including in any subsequent civil, administrative, or regulatory proceeding.
This no-admission provision is consistent with customary practice in AVC resolutions in Washington State and in comparable consent-order and assurance-of-discontinuance proceedings in other jurisdictions. It reflects the cooperative and voluntary nature of the resolution process and, in CRH's view, is an appropriate and expected term in a matter that is being resolved without contested litigation.
7. Independent Compliance Monitoring
CRH accepts the Division's proposal for an independent compliance review and proposes Ridgepoint Compliance Solutions Inc. ("Ridgepoint") as the independent compliance reviewer. Ridgepoint's engagement would be led by Harold Sung, Engagement Partner. Ridgepoint is located at 700 Stewart Street, Suite 1500, Seattle, WA 98101.
CRH proposes a 24-month monitoring period commencing on the date of AVC execution. During this period, Ridgepoint would conduct quarterly audits of CRH's reference-price practices across all retail locations and on cascaderetail.com. These audits would include, without limitation, review of the algorithmic reference-price model developed by Praxton Analytics LLC, which CRH has engaged to redesign and improve its automated pricing systems in light of the issues identified through this inquiry. Ridgepoint's audits would assess whether CRH's reference-price displays comply with the substantive terms of the AVC and with applicable provisions of the Washington Consumer Protection Act, and would report findings and any recommended corrective actions to both CRH and the Division.
Ridgepoint's qualifications, including its experience with retail pricing-compliance engagements and the independence of its principals from CRH and its affiliates, are available for the Division's review upon request. CRH is prepared to provide a detailed description of Ridgepoint's qualifications and engagement history, as well as a conflict-of-interest disclosure, at the Division's earliest convenience.
8. Compliance Reporting Frequency
The Division's draft AVC proposed quarterly compliance reports to the Consumer Protection Division.
CRH proposes semi-annual compliance reporting, with the first report due six months following AVC execution and subsequent reports due at six-month intervals thereafter for the duration of the monitoring period. Each report would address CRH's compliance with the AVC's substantive terms, summarize the results of Ridgepoint's most recent quarterly audits, identify any instances of non-compliance or potential non-compliance and the corrective actions taken in response, and describe any changes to CRH's pricing-disclosure policies and procedures implemented during the reporting period.
CRH submits that semi-annual reporting provides sufficient oversight to ensure meaningful accountability while reducing administrative burden on both CRH and the Division. Importantly, the quarterly audits conducted by Ridgepoint would provide an additional and independent layer of review between CRH's formal reporting periods. To the extent the Division has concerns about the adequacy of semi-annual reporting, CRH is prepared to discuss supplemental reporting mechanisms or interim notification requirements for material compliance events.
9. Stipulated Penalties for Breach
CRH accepts the stipulated penalty of $10,000 per day for any material breach of the AVC terms. CRH's counter-proposed AVC, however, inserts a 30-day cure period following written notice of an alleged breach before stipulated penalties begin to accrue. Under this provision, the Division would provide written notice to CRH specifying the nature of the alleged breach, and CRH would have 30 calendar days from receipt of such notice to cure the breach or to demonstrate that no breach has occurred. Stipulated penalties would begin to accrue only upon the expiration of the 30-day cure period, provided the breach remains uncured.
This cure provision is a standard mechanism in consent agreements and AVCs and is intended to encourage prompt remediation of any compliance deficiency rather than punitive escalation. CRH is confident that this provision, far from undermining the enforceability of the AVC, will promote the Division's goal of ensuring ongoing, sustained compliance.
CRH's Commitment to Resolution
CRH values its relationship with Washington State consumers and is committed to transparent, accurate, and fair pricing disclosures. The company recognizes the importance of the Division's consumer-protection mission and shares its interest in ensuring that consumers can rely on the pricing information presented in CRH's retail locations and on its ecommerce platform.
CRH has already taken preliminary internal steps, under the guidance of its Chief Compliance Officer, Terence Ashford, and its Vice President of Marketing & Pricing Strategy, Raymond Soo, to review and revise its pricing-disclosure practices pending finalization of the AVC. These steps include the engagement of Praxton Analytics LLC to redesign CRH's algorithmic reference-price model, the implementation of enhanced internal audit protocols for reference-price displays, and the development of updated training materials for CRH's merchandising and marketing personnel. CRH intends to continue these efforts irrespective of the specific terms ultimately agreed upon in the AVC, as they reflect CRH's independent commitment to best practices in pricing transparency.
CRH is prepared to move expeditiously to finalize the AVC and to commence the compliance-monitoring period as promptly as practicable following execution.
Proposed Next Steps
We respectfully request the opportunity for a follow-up call or meeting at the Division's earliest convenience to discuss the revisions proposed herein, address any remaining open issues, and work toward prompt finalization of the AVC. I am available, along with Patrick Gallagher, the lead associate on this matter, for a call during the week of July 1, 2024, or at such other time as may be convenient for Ms. Calloway-Voss and Mr. Kittridge. We are also prepared to accommodate an in-person meeting at the Division's offices should that be preferred.
CRH is hopeful that the parties can reach agreement in principle on the terms of the AVC in the near term, and we are committed to devoting the resources necessary to bring this matter to a prompt and satisfactory resolution for all parties.
Enclosures
The following documents are enclosed with this letter:
Enclosure 1: Counter-Proposed Assurance of Voluntary Compliance — Redline Version, reflecting CRH's proposed revisions to the AG's draft dated June 12, 2024 (tracked changes in Microsoft Word format).
Enclosure 2: Counter-Proposed Assurance of Voluntary Compliance — Clean Copy, incorporating all of CRH's proposed revisions.
We appreciate the professionalism and courtesy that your office has extended throughout this inquiry, and we look forward to continuing to work with you toward a resolution that appropriately serves the interests of Washington State consumers and reflects CRH's commitment to responsible business practices.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Alan Ngo Partner
Direct: (206) 555-8247
Email: ango@calderwoodharkness.com
cc:
Diana Prescott-Levy, General Counsel Cascade Retail Holdings Inc. 4500 Overlake Boulevard, Suite 800 Bellevue, WA 98004
Terence Ashford, Chief Compliance Officer Cascade Retail Holdings Inc.
Patrick Gallagher, Associate Calderwood & Harkness LLP
Simone Laroche, Associate Calderwood & Harkness LLP
Component | Amount
Consumer Restitution Fund | $2,850,000
Civil Penalty | $750,000
AG Investigative Costs Reimbursement | $185,000
Total | $3,785,000

CALDERWOOD & HARKNESS LLP Attorneys at Law

CALDERWOOD & HARKNESS LLP

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