Litigation Concerns for Food and Beverage Manufacturers
William Acevedo | Food Manufacturing
While the FDA monitors food products to ensure compliance with the Federal Food Drug & Cosmetic Act (Act), resource constraints limit the FDA's reach. Yet, ask any food company -- liability from food labeling is on the rise. Whether it's consumer driven or due to a more aggressive plaintiffs' bar, food products are under greater scrutiny. Private litigants are increasingly relying on state statutes and technical violations of FDA regulations to support claims for false advertising, unfair trade practices, consumer protection and fraud. Below are several areas of continuing concern.
Slack-fill is the difference between the actual capacity of a container and the volume of product contained therein. Unlawful slack fill is the non-functional empty space in a package resulting from reasons other than: (1) protection of the package contents, (2) operational necessities of manufacturing machinery, (3) unavoidable product settling, (4) a functional need for the packaging (e.g., to allow consumption of the product), (5) reusability of the container (like gift packaging), meant to be used again after product consumption, or (6) an inability to increase fill or reduce packaging size due to labeling requirements, to facilitate handling, to discourage pilfering, or to accommodate tamper-resistant devices.
Non-functional slack fill cases are increasing from both plaintiffs' lawyers, as well as district attorneys. For example, in Hendricks v. Starkist Co., a Northern District of California case, Starkist was accused of underfilling product below the federally mandated minimum average ounces per can. While Starkist disputed the allegations and the accuracy of plaintiff's test results, it ultimately agreed to pay $12 million to settle the lawsuit.
A settlement of this magnitude undoubtedly attracts the attention of an already active plaintiffs' bar, and manufacturers should anticipate -- and plan for -- a rise in slack fill claims The prudent food manufacturer should carefully review its packaging to ensure it falls within the six safe-harbor provisions noted above and proactively make changes if it does not.
Manufacturers continue to face liability over their use of the word "natural." The FDA previously deemed the term "natural" to mean that "nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in that food."
After years of insufficient regulatory guidance and numerous class-action lawsuits, the FDA has finally recognized the shortcomings of its approach. A formal definition for the term "natural" from the FDA is forthcoming. Even so, prudence dictates avoiding natural claims or, at the very least, ensuring that any assertion of "natural" is fully substantiated.
Standards of Identity
The FDA has adopted regulations establishing formal standards of identity for all types of food to protect consumers from misbranding and adulteration of food products. A well-publicized example of FDA monitoring in this area is the August 12, 2015 issuance of a warning letter to Hampton Creek Foods, Inc., regarding the labeling of its egg-free "Just Mayo" products. The FDA asserted the products were misbranded in that they failed to comply with the standard of identity for mayonnaise, which requires there be at least one egg yolk-containing ingredient in the product. Ultimately, Hampton Creek and the FDA compromised on some labeling changes.
Now, another standard of identity battle is brewing over the use of the term "milk." In December 2016, the National Milk Producers Federation, along with 34 members of Congress, wrote to the FDA asserting that plant-based, non-dairy beverages using the term "milk" on their labeling violates milk's standard of identity regulation and misleads consumers. Milk, according to federal regulation, is the "lacteal secretion, practically free from colostrum, obtained by the complete milking of one or more health cows." The letter demanded the FDA take action to gain compliance with this regulation.
The outcome of the milk battle remains to be seen. Prior lawsuits regarding alternative milks have been unsuccessful. In both Gitson v. Trader Joe's and Alex Ang & Kevin Avoy et al. v. WhiteWave Foods Company, Northern District of California judges rejected contentions that only cow's milk could be called "milk" or that consumers would be confused by the labeling of plant-based milk products.
Plant-based products are on the rise. As these products challenge established industry norms (and profits), pressure will increase for the FDA to enforce standards of identity, and if it does not, industry groups may test the reach of regulation through litigation.
New Labeling Format
Last May, the FDA published final rules regarding the new format for Nutrition Facts panels, which will be required on most packaged foods by July 2018. (However, manufacturers with less than $10 million in annual sales will have an additional year to comply.)
A big change to the Nutrition Facts label, and one that could lead to litigation for the ill-prepared, is the requirement to clearly state the amount of "added sugars." The disclosure of added sugars will require food manufacturers to carefully analyze their ingredients and appropriately account for both naturally occurring sugars, like fructose in fruit and lactose in dairy, and sugars (free, mono- and disaccharides) incorporated into foods through processing and added ingredients.
Additionally, product serving size changes will be part of the new label format. As servings must be based on amounts of foods and beverages that people actually eat, the FDA has determined that an increase in some serving sizes is required. For instance, for packages that are between one and two servings, such as a 20-ounce bottle of soda, the packaging must be labeled as one serving because people typically consume the entire bottle in one sitting. Products that are larger than a single serving, but that could be consumed in one or multiple sittings (e.g., a pint of ice cream), will need a "dual column" Nutrition Facts label indicating the amount of calories and nutrients on both a per serving and per package basis. Food manufacturers should carefully review their labels with experienced advisors now to determine whether their labels require formatting changes.
In 1986, California enacted the Safe Drinking Water and Toxic Enforcement Act, also known as "Prop 65." Under Prop 65, the State of California publishes a list of chemicals known to cause cancer or birth defects or other reproductive harm, which now numbers around 800 substances. Prop 65 has spawned hundreds of lawsuits, forced product reformulation and labeling warnings, and generated millions of dollars in settlements over the years. The California Attorney General's Office prepares annual reports of Proposition 65 settlements, which can be found at https://oag.ca.gov/prop65/annual-settlement-reports. Any company whose products are sold in California must know this law -- it continues to have teeth.
Despite these liability threats, the food industry is forecasted to grow at a steady rate. Accordingly, analyzing labeling concerns now is an essential long-term strategy for transforming risks to opportunities.
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