If Companies Cave on GMO Labeling, Supply-Chain Concerns Could Be the Next Mandatory Labeling Gambit

Ivory CoastCalifornia’s federal district courts, which are already overstocked with food-labeling class-action suits, are now being asked to impose new food-product disclosure mandates. Courts have thus far dismissed lawsuits seeking on-package statements regarding alleged concerns in companies’ overseas supply chains, such as forced labor. But don’t expect those losses to dampen corporate-disclosure activists’ resolve. Such suits are just one part in a larger campaign, following in the footsteps of the mandatory “GMO labeling” crusade, to require supply-chain information on product packaging.

Manufacturers of chocolate, pet food, and seafood have been targeted for their failure to disclose on their packaging the existence of forced labor and other possible human-rights violations in foreign countries from which they source their products or product ingredients. Such an omission, the class actions claim, violates California consumer-protection laws. One remedy the plaintiffs seek is disclosure of this supply-chain data on product labels and point-of-sale advertising.

None of these supply-chain labeling suits have made it past the motion-to-dismiss stage yet. In several cases, including Barber v. Nestlé USA, decided on December 9, 2015, defendants have successfully invoked a “safe harbor” doctrine to defeat claims under California’s Unfair Competition Law (UCL). The doctrine disallows UCL claims when the state legislature has permitted certain conduct or considered its regulation but declined to take action. A 2010 state law, the California Transparency in Supply Chain Act, requires businesses to disclose on their websites whether they pursue any of five specified steps to “eradicate slavery and human trafficking from [their] direct supply chain.” Barber and other decisions have reasoned that courts cannot impose more or different disclosure than the Supply Chain Act requires.

Courts in other cases, including most recently Dana v. The Hershey Company, did not reach the safe-harbor defense but instead evaluated whether the plaintiffs could state claims under the UCL and two other California laws, the Consumer Legal Remedies Act (CLRA) and the False Advertising Law (FAL). Magistrate Judge Joseph C. Spiro’s March 29, 2016 decision dismissed all of the plaintiff’s claims with prejudice. Judge Spiro acknowledged the gravity of the situation underlying the plaintiff’s complaint—the use of forced child labor in the Ivory Coast—but he concluded none of the applicable state laws empowered him to order on-package disclosures. He found no support for the claim that the defendants’ (Hershey and Nestlé USA) omission was “unfair” or “fraudulent” under the UCL or that an actionable misrepresentation had been made under the FAL. Finally, the CLRA limits disclosure to “issues of product safety, unless disclosure is necessary to counter an affirmative misrepresentation.” Because the defendants had made no misrepresentation, Judge Spiro rejected the CLRA claim.

Lawsuits like Barber and Dana are merely a small component of a larger campaign, something corporate-disclosure activists themselves acknowledge. One told Corporate Counsel that the suits are “significant but not essential,” and that they were “a nice gesture to bring awareness to the movement.” If that movement does not expect courts to impose supply-chain-related disclosures, its leaders no doubt have a strategy in place to compel such speech through legislation. Opposing food-industry advocates will argue that government cannot require on-package disclosures of information related solely to the method of production. Passage of state laws mandating “genetically-modified organisms” labeling on foods, however, provides activists with a potent counterargument.

Whether the grains or other ingredients used in a food product came from plants that had been conventionally bred or benefited from more-precise engineering techniques is a manufacturing-process matter. The federal Food & Drug Administration (FDA) plainly stated, in a response rejecting a petition for mandatory GMO labeling, that federal law “does not require disclosure of the method of production without regard to its effect on the product.” The process must result in a material change to the food’s characteristics, FDA further explained, and genetic engineering does not engender any material change. One’s belief about the propriety of genetic engineering is a normative or philosophical, not a scientific, question, FDA also noted.

But the very type of mandatory, process-related food labeling that FDA found objectionable is now state law in Vermont, and could become law in other states soon. The proliferation of such laws will further energize the supply-chain labeling movement, and inspire demands for innumerable additional disclosures that have nothing to do with nutritional value, the presence of allergens, or other product-related concerns.

A manufacturer’s employment practices, environmental record, executive compensation, or political contributions may all be legitimate, subjective concerns to some consumers, but an amorphous “right to know” such information cannot justify compelled disclosure of normative issues on a food label. If consumers wish to meticulously factor information unrelated to product safety or health into their purchasing decisions, they can find it, just as businesses that perceive a market benefit can make it available voluntarily. But businesses shouldn’t be forced to turn their products into messaging vehicles for ideological causes, and consumers who are shopping to feed themselves and their families shouldn’t have to pay for labeling mandates either.

Also published by Forbes.com on WLF’s contributor page.

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