On April 5, 2017, members of Husch Blackwell’s Food & Agribusiness industry team hosted a complimentary seminar in Milwaukee, WI spotlighting finance and investment trends in the food and agribusiness industry. More than 75 professionals attended the seminar, representing ag processing, food distribution, wholesale baking companies and industry-focused lenders and investors. The morning started off with Jim Ash, Husch Blackwell’s Food & Agribusiness industry team leader, moderating a panel focused on industry trends. Check out the post-event wrap-up to find out who contributed to the panel discussion, what was debated and what consumer trends to expect in the near future.
Are you familiar with California’s Egg Rule? In 2008, Proposition 2 of the Egg Rule was approved by voters which banned the sale of eggs in California unless hens had a minimum amount of space in which to lay their eggs. A couple of years after the Rule approval, legislature enacted a statute applying Proposition 2 to all eggs sold in the State of California, regardless of where they were laid. The State of Missouri took issue with this statute because about one third of the eggs laid in Missouri are sold in California. Last week, Mark Arnold (Partner in our Food and Agribusiness team) details why Missouri is challenging the California Egg Rule. Visit our Food and Ag Law Insights blog to read the full article.
This blogger was recently interviewed for a great story in DTN/Progressive Farmer regarding changes to the USDA’s organic programs. You can read the article here. No doubt, transitioning land to organic will remain a hot topic as the conventional ag markets continue to be challenging for operators!
The required three-year transition to convert a conventional field to organic can be a deterrent for some would-be organic farmers. Those 36 long, long months often put the farmer in the worst of both worlds: the land must be managed organically, but the crop must be marketed as conventional.
The higher cost of organic products might lead consumers to reach for the cheaper conventional version, even if they would prefer to buy organic. We don’t have to know all of the reasons why organic products are more expensive than their conventional counterparts; basic economics tells us that demand far exceeds supply.
Considering the two sides of the organic market mentioned above, and that the mission of the USDA’s Agricultural Marketing Service (AMS) is to create marketing opportunities for agricultural products and ensure the quality and availability of wholesome food, it’s not surprising that the USDA is rolling out a formalized transitional organic option, called the National Certified Transitional Program (NCTP). The first step is for certifying agencies get accredited to be able to offer the new, standardized transitional certification. According to AMS’s January 11 news release,
Recognizing that “certifying agents have interpreted the requirements for calculating the percent of organic ingredients differently,” the USDA recently published its draft guidance “Calculating the Percentage of Organic Ingredients in Multi-Ingredient Products (NOP 5037).” This draft guidance seeks to clarify section 205.302 of the organic regulations, which has apparently been inconsistently applied by certifiers.
Some things to note from a first read of the draft guidance:
- The draft guidance clarifies that, in the case of a multi-ingredient product, a “100% organic” final product is only possible if ALL of the multi-ingredient ingredients (I guess you can call them “sub ingredients”) are confirmed to be 100% organic.
- Keep in mind that: AN ORGANIC LABELING CATEGORY IS NOT THE SAME AS PERCENTAGE OF ORGANIC INGREDIENTS (except, of course, in the “100% organic” labeling category) and the “Organic” labeling category is only guaranteed as 95% organic content.
- So, when determining percentage of organic of product to be certified, you must account for exact organic content in each multi-ingredient ingredient used in the final product.
- If you cannot account for the exact organic content, you must default to the 95% or 70% labeling category for multi-ingredient ingredients.
A three-judge panel returned mixed-news on Friday, September 30, for sellers of food labeled as “natural.” A putative class action lawsuit against Dole Packaged Foods for deceptively labeling their fruit containing synthetic citric and ascorbic acid as “All Natural Fruit” had been dismissed in favor of Dole on summary judgment by the United States District Court for the Northern District of California. The District Court had also decertified the class action.
On appeal, a panel of the Ninth Circuit determined that a jury could find that a reasonable consumer would see Dole’s description as misleading. This was based on the plaintiff’s testimony that he was deceived; an informal policy of the FDA defining “natural” to mean nothing artificial or synthetic had been included; and FDA warning letters previously sent to various food sellers for describing food as “natural” while containing synthetic citric acid. Accordingly, the panel found it was error for the District Court to grant summary judgment to Dole.
However, the panel affirmed the District Court’s decertification of the class action. The correct measure of damages in this circumstance would be the “price premium” of the labels, that is, the additional price paid in misunderstanding the fruit to contain no artificial or synthetic ingredients. Yet, the plaintiff presented no evidence as to how this premium could be calculated with proof in common to a class of consumers. Presumably, individualized evidence would have to be presented to demonstrate how much reliance a consumer placed on the “natural” labeling, and what this description would be worth to them. The plaintiff’s individual claim may proceed, but only pursuit of injunctive relief would be allowed on behalf of a class of consumers.
This reversal by a Federal Circuit Court adds to the pileup of differing views in the “all natural” labeling space, which is sure to continue until the FDA and USDA provide certainty.
On June 22, 2016, the Organic Consumers Association (“OCA”) filed suit against Post Foods LLC and Post Holdings (“Post”) in Washington, D.C. The complaint seeks injunctive relief and economic damages. At the center of OCA’s allegations are Post’s claims that its Shredded Wheat products are “100% Natural Whole Grain Wheat” and a “Natural Source of Fiber” in advertisements and product labels.
Such claims, according to OCA’s complaint, are deceptive and misleading because the Shredded Wheat products contain glyphosate, which is an herbicide. OCA alleges that “Post is attempting to capture the growing market of consumers who are aware of the health risks and environmental damage caused by chemical-laden foods . . . Post knows that consumers demand—and are willing to pay for –foods that are natural and whole, and that omit chemicals.”
This case now joins the new and increasingly complex natural claims cases in which the “unnatural” chemical at issue is found in the product at a level significantly below the Environmental Protection Agency’s legally permitted threshold. Here, the glyphosate level is 0.18 parts per million, while the EPA’s threshold is 30 parts per million. OCA’s argument, however, is that reasonable consumers would not expect such a chemical to be present at any level in products that make “100% natural claims.” Still, it remains up to the court to determine whether such a level of glyphosate is significant for these purposes.
On August 12, 2016, Post filed a notice of removal to remove the action to federal court in the District of Columbia. Natural claims litigation is continuing to grow, and all developments in cases like this, which involve well-known products, have the potential impact the food advertising and labeling world. Stay tuned.
One of the most common questions we get asked is “How can I use the organic seal to market my certified-organic products without running afoul of the organic regulations?” Until today, that question didn’t have a clear-cut answer, but thanks to a new Fact Sheet published by the USDA, we now have more informed answers for our clients on this front.
In a nutshell, like so many things in this arena, any marketing materials should be submitted to the operation’s accredited certifying agency for review and approval. In addition, the Fact Sheet reiterates the touchstone inquiry for operations and certifiers: Is the seal is being “used to misrepresent nonorganically produced products as organic.” If you can’t answer that question with a no, you may be in violation of the regulations.
While we’d like to see even more guidance in this area, this is a good start and hopefully a sign of more to come!
Quaker Oats has become the newest target in the wave of class action litigation against food manufacturers. A lawsuit currently seeking class certification has been filed on behalf of consumers in New York and California for the company’s claim that its oatmeal is 100% natural.
According to the allegations of the complaint, an independent lab in California tested Quaker’s Quick 1-Minute oatmeal and found glyphosate, a common pesticide, in the product. Because of the glyphosate, the lawsuit alleges that Quaker’s 100% natural claim is false and misleading. The test was performed only on the Quick 1-Minute product, but the suit also includes claims relating to Old-Fashioned Oats and Steel Cut Oats.
Quaker Oats responded in a statement that it does not add glyphosate to the grains during the milling process but that farmers may use it on certain grains before harvest. It further stated it cleanses the oats it receives. Significantly, the testing revealed glyphosate at a level of 1.18 parts per million in the product, which is about 4 percent of the level the EPA permits in cereal grains.
The plaintiffs’ lawyers, who funded the testing, argued that “[t]he issue is that Quaker advertises these products as 100 percent natural, and glyphosate in any amount is not natural.”
The suit asks for refunds for consumers who have purchased the products and that Quaker either disclose the glyphosate content or remove it.
This approach marks a shift in consumer class action litigation, as plaintiffs’ counsel are now testing products in preparation for litigation. No doubt such testing will continue to expand, to other pesticides and substances, but certainly to other products. Time will tell whether the federal district courts adjudicating the lawsuit will find the EPA regulations compelling, but the unique issues in this case are sure to harvest much interest as the litigation unfolds.
My colleague in the Food & Agribusiness group posted yesterday on Husch Blackwell’s Food & Agribusiness blog regarding genetically modified salmon and potential setbacks in Food Court. I thought it was of equal interest to this blog’s readers. Enjoy!
By: Mike Annis
Over the past few years, there has been a virtual onslaught of lawsuits directed to the food and beverage industry, principally relating to claims that certain marketing efforts of food and beverage producers falsely advertise their products and encourage consumers to purchase them based upon fraudulent representations. Likely due to California’s expansive consumer protection statutes and perceived “green” nature, the U.S. District Court for the Northern District of California has become the venue of choice for many of these lawsuits and, as a result, has been dubbed by some as the “Food Court.”
Recently, the Food Court received another complaint directed to a human food product. Rather than a labeling or false advertising claim, this suit contends that the U.S. Food and Drug Administration’s (FDA) recent approval of a genetically modified (GM) animal intended for human consumption was unsound and further challenges the FDA’s authority to even approve genetically modified animals used for food. At issue is a GM salmon offered by AquaBounty Technologies, Inc, which claims its now-FDA approved salmon grow twice as fast as wild versions of Atlantic salmon while consuming 25% less feed in the process. In November, the FDA approved AquaBounty’s GM salmon finding the product “safe for human consumption” and equally nutritious as non-genetically engineered Atlantic salmon. The AquaBounty salmon is the first GM animal cleared for human consumption in the United States. Continue Reading Will Genetically Modified Salmon Be Served a Setback in the Food Court? Consumer Groups Seek to Stall Release of GM Fish