Proposition 37:  New Requirements for Labeling Food in California
by Stephen Meyer, Dale Stern & Greg Broderick1

This Fall, California voters will vote on whether to approve Proposition 37, the “The California Right to Know Genetically Engineered Food Act.” Proposition 37 is wide-ranging and requires action at all levels of the food industry selling certain products into California. This article does not offer opinions on the merits of Proposition 37, but attempts to raise and answer compliance questions for producers, packers, processors, grocery manufacturers, distributors, and retailers.2

If it passes, Proposition 37 will impose labeling and advertising requirements for (1) “genetically engineered foods,” and (2) foods promoted as “natural.” The law focuses on retail sales, and provides that “any food offered for retail sale in California is misbranded if it is or may have been entirely or partially produced with genetic engineering and that fact is not disclosed.”

The main thrust of the law is to require food with genetically engineered ingredients to be conspicuously labeled. But Proposition 37 also imposes severe penalties on retailers who sell food that is either “genetically engineered” or “processed” if the label, retail signs, or advertising materials state or imply that the food is “natural,” “naturally made,” “naturally grown,” “all natural,” or any similar words that would have any “tendency to mislead any consumer.” The definition of “processed food” is extremely broad, covering food that is dehydrated, cooked, or even frozen. Under this expansive definition, it appears that only raw agricultural products grown from non-genetically modified materials may be labeled or promoted as natural.3

This provision creates significant problems for retailers who sell products with the words “nature” or “natural” in the title, such as Nature Valley Granola Bars and Dannon All Natural Yogurt. Manufacturers of such products will face the difficult choice of ceasing sales into California or re-branding their product line for California sale. And because Proposition 37 bars the use of the term “natural” or “words of similar import” from advertising or promotional materials and not just the label, other manufacturers and distributors will have to carefully review their materials to make sure they do not run afoul of Proposition 37’s mandate.

Proposition 37 does include a set of specific exemptions that will protect some products, including alcohol, restaurant sales, medical food, and certified organic food products. But another exemption will likely complicate business for retailers, suppliers, and manufacturers. That exemption covers “raw agricultural commodities or food derived therefrom” so long as it “has been grown, raised or produced without the knowing and intentional use of genetically engineered seed or food.” To meet this exemption, the retailer must obtain a written sworn statement from its supplier that the product has not been knowingly or intentionally genetically engineered and has been segregated from food that may have been genetically engineered.

This sworn statement exemption will set in motion a series of certifications and indemnity agreements that will stretch from the grocery stores all the way back down the chain of production to the nursery or seed company, and will require a sworn statement from the farmer, the trucker, the packer, the processor, the wholesaler/distributor, and finally the retailer. While this Proposition is directed at the retailer, this exemption will mean that everyone in the food supply chain will be responsible for compliance.

Also, everyone in the supply chain will need to completely segregate and carefully document the separation of production, supply, packing, processing, and manufacturing of non-labeled food from labeled food. Until 2019, processed foods must either be 99.5% free of genetically engineered ingredients or labeled as genetically engineered. After 2019, 100% purity is required. Without a completely separate production and supply chain, the risk of accidental cross-contamination is too high. Zero percent is a standard that even the most modern facilities cannot guarantee.

Proposition 37 also contains an exemption for “food that an independent organization has determined has not been knowingly and intentionally produced from or commingled with genetically engineered seed or genetically engineered food, provided that such determination has been made pursuant to a sampling and testing procedure approved in regulations adopted by the department.”4 The timeframes to put third party organizations in place with approved sampling and testing procedures is quite short given the July 1, 2014 implementation date.

Fortunately, Proposition 37 permits regulation and legislative amendments, although only to “further the purpose” of the law. Within this limit, the Department of Public Health may adopt “any regulations that it determines are necessary for the enforcement and interpretation” of Proposition 37, although it may not “create new exemptions.” No Proposition is without uncertainty and ambiguity, and Proposition 37 is no exception. Without clear regulations, there will be many disagreements over what this law requires.

Clarity is particularly important in light of Proposition 37’s enforcement provisions, which allow private citizens to sue for violations without proving any specific damage. Proposition 37 also provides for attorneys’ fees and automatic damages equal to the retail price of the product. That is, a plaintiff who never intended to purchase a product and never intended to buy a product can nevertheless obtain an injunction against a mislabeled product, and recover investigation costs, attorneys’ fees, and automatic damages for each product “offered for sale.”5

If Proposition 37 does pass those who may be impacted would be well served to become involved in the regulatory process immediately. There will likely be constitutional challenges to Proposition 37 if it passes, but the reality of the timeframes for the adoption of regulations is that even a July 1, 2014 implementation date will be hard to meet.

 

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1 Stephen Meyer and Dale Stern are the co-chairs of Downey Brand’s Food & Agricultural Practice, and each brings 25 years of legal experience in agricultural and business litigation matters. Greg Broderick, also a partner in the Food & Agriculture Practice, has a decade of experience in environmental, property, and agricultural litigation.

2 A more in depth analysis of the proposition can be found at Proposition 37: The Challenges Faced by the Food Supply Chain by Stephen Meyer, Dale Stern & Greg Broderick.

3 “Processed food” means any food other than a raw agricultural commodity and includes any food produced from a raw agricultural commodity that has been subject to processing such as canning, smoking, pressing, cooking, freezing, dehydration, fermentation or milling. Those who sell hulled raw almonds, sun-dried raisins, or olive oil may be surprised to learn that they can no longer market their products as natural.

4 The sampling plan must be “consistent with principles recommended by internationally recognized sources such as the International Standards Organization (ISO) and the Grain and Feed Trade Association (GAFTA),” and must be “consistent with the most recent ‘Guidelines on Performance Criteria and Validation of Methods for Detection, Identification and Quantification of Specific DNA Sequences and Specific Proteins in Foods,’ (CAC/GL 74 (2010)) published by the Codex Alimentarius Commission,” among other requirements.

5 For example, regulations or legislation may prove useful in clarifying whether a consumer's potential damages include the purchase price of one offending item, the total price of all offending items in one store, or the total price of all offending items sold by a chain in all of its stores.  Setting the "automatic" damages above the price of items actually purchased by the consumer creates the potential for a great deal of unintended consequences and costly mischief.

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