False advertising suits over "natural" claims continue to cost advertisers millions, with Seventh Generation reaching a $4.5 million deal over claims for its cleaning products.

A trio of consumers alleged that despite labeling terms including "natural," "non-toxic," and "hypoallergenic," the company's laundry detergent and dish liquid contained synthetic preservatives such as methylisothiazolinone and benzisothiazolinone.

After years of litigation and a round of mediation, the parties reached a settlement agreement. Pursuant to the plaintiffs' unopposed motion in support of preliminary approval of the deal, Seventh Generation will pay $4.5 million to establish a settlement fund. Class members—defined as all purchasers of the products nationwide dating back to November 14, 2008, and estimated to be in the "thousands"—who have proof of purchase would receive a full refund on their purchases while those without can get 50 percent of what they paid for up to ten products.

The fund will also pay for $5,000 awards for the three representative plaintiffs, all costs of notice and claims administration, and attorney's fees of up to 33 percent of the $4.5 million. Any remaining funds shall be given to the Center for Science in the Public Interest and the National Consumer Law Center.

In addition, Seventh Generation agreed to remove claims of "all natural" and "100% natural" from its labels and clarify advertising claims about nontoxic and hypoallergenic properties. Specifically, if the products contain challenged synthetic preservatives, the company will feature a disclosure on its website that "hypoallergenic," "non-toxic," or similar statements do not mean that the product will not cause any allergic reaction or irritation in any person, and that a small percentage of individuals may have some form of reaction or irritation to the preservatives.

Further, any product label using the word "natural" will contain a biobased seal or content disclosure that lists the percentage of biobased other ingredients on product labels and provide ingredient information (including origin, such as plant-derived or synthetic) and function on Seventh Generation's website. The defendants must also abide by industry or regulatory labeling standards where applicable.

The settlement "provides excellent relief" to class members, the plaintiffs wrote.

In a statement, the company said it elected to settle to avoid the costs of litigation but stands behind its product labels. "In an industry where there are loose regulations and many corporations are concerned with protecting trade secrets more than public health, we think there is much to cause consumer concern," a spokeswoman for the company said. "But we assure you that you should never doubt the integrity and efficacy of Seventh Generation products or the claims on our packaging."

To read the plaintiffs' unopposed motion in support of preliminary approval of settlement in Rapoport-Hecht v. Seventh Generation, click here.

Why it matters: "Natural" claims continue to be risky labeling choices for advertisers. Seventh Generation is only the latest company to reach a multimillion-dollar settlement in a consumer class action challenging such claims, following on the heels of others including Tom's of Maine, which agreed to pay $4.5 million for claims related to its personal care products and Naked Juice, which poured out $9 million for its "All Natural" and "Non-GMO" labeling.