Key Legal Challenges for the Fashion and Retail Industry in 2026

Sustainability obligations are expanding through initiatives like extended producer responsibility programs and new PFAS restrictions. Labor, employment, and immigration matters continue to impact workforce dynamics. The retail sector faces financial stress from high debt loads, rising bankruptcy filings, and renewed enforcement of Proposition 65, complicating operations further.

Legal experts from ArentFox Schiff outline critical issues that will impact fashion and retail companies in 2026, focusing on cost, growth, and risk management.

**Tariffs**

The fashion industry is adapting to ongoing tariff changes and may encounter more Friday afternoon announcements. Companies are reevaluating supply chains due to intensified tariff-related activities. Recent legal developments, including a U.S. Supreme Court ruling on February 20 stating that former President Trump did not have authority under the International Emergency Economic Powers Act (IEEPA) to impose tariffs, left unresolved questions around tariff refunds.

Importers should proactively access import data, monitor liquidation dates, and file protests within the 180-day deadline to safeguard rights for possible refunds. Following the Supreme Court decision, new tariffs have arisen through Section 122, with a temporary global tariff of 10% imposed as of February 24. Additional tariffs may follow under Sections 232 and 301, which cover national security and labor issues, respectively.

**Artificial Intelligence (AI)**

AI is transforming the fashion and retail sectors, promising substantial cost savings and improved operational efficiencies. While opportunities abound—from automating tasks to forecasting demand—legal risks must be carefully managed. Brands need to address implications of AI-generated output, disclosure obligations, and data privacy considerations as they adopt AI technologies.

**E-Commerce**

E-commerce is increasingly merging digital and physical retail, with regulatory focus sharpening on advertising practices and pricing transparency. Growth will likely stem from integrating established sales channels rather than launching new ones. Companies are urged to ensure compliance with evolving regulations pertaining to social media and connected TV advertising, as platforms enhance enforcement against deceptive practices.

Concerns around undisclosed endorsements and opaque pricing are prompting states to enact laws requiring all-in pricing, elevating compliance risks in online commerce. Retailers must prepare for increased scrutiny over transparent pricing and disclosure obligations across varying platforms.

**Bankruptcy Trends**

The retail sector anticipates a rise in bankruptcy filings during 2026, with Chapter 11 filings up 76% from the previous year as of January. Prominent companies like Saks Global have already filed for bankruptcy. High debt loads and challenging economic conditions are expected to contribute to further financial distress.

**Sustainability Initiatives**

California has launched an extended producer responsibility program for textiles, shifting the recycling burden to producers starting this year. Non-compliance could lead to significant fines. Additionally, states are expanding restrictions on PFAS in textiles, necessitating urgent compliance preparations.

The fashion and retail industry is also poised for greater accountability under California’s climate disclosure laws, which will require substantial emission reporting from companies meeting certain revenue thresholds. Brands should begin collecting relevant data now to avoid hefty penalties in the future.