The new amendments seek to clarify the division of responsibility for providing warnings among upstream entities, intermediaries, and retailers.
On April 1, 2020, new amendments to the implementation regulations of California’s Safe Drinking Water and Toxic Enforcement Act of 1986 (Prop 65 Regulations) will go into effect, addressing the responsibility to provide warnings within the chain of commerce for products containing chemicals listed by the state as potentially causing cancer and/or reproductive harm. Specifically, the amendments to the Prop 65 Regulations serve to clarify when retail sellers are responsible for providing Prop 65 warnings.
Building on the 2016 Regulations
These new amendments follow the California Office of Environmental Health Hazard Assessment’s 2016 Regulations, which update the content of Prop 65 product warning labels, among other substantive changes. (For an overview of the 2016 Regulations, which took effect in 2018, see Latham & Watkins’ four-part How to Prepare for California’s Updated Prop 65 Regulations blog series.)
Generally, the 2016 Regulations require businesses to provide consumers with more information about Prop 65–listed chemicals in consumer products, and impose additional responsibility on upstream entities, such as manufacturers, distributors, packagers, importers, producers, and suppliers (Upstream Entities), shifting the primary burden away from retailers. Under the 2016 Regulations, unless a retailer takes action concerning a product which causes it to require a Prop 65 warning, Upstream Entities are responsible for Prop 65 compliance. This includes physical product sales as well as internet and catalog sales. Upstream Entities may comply with Prop 65 by applying a warning label to the product or by issuing a written notice containing the warning directly to the authorized agent for a retail seller.
Upstream Entities that decide to place warning labels directly on products are responsible for the label’s presentation, which must be “prominently displayed” relative to other consumer information. To comply with Prop 65, the safe harbor language in the 2016 Regulations — which is automatically deemed clear and reasonable — may be used. Alternatively, the 2016 Regulations permit the Upstream Entity to provide other equivalent warning language, though this may not be the most protective approach.
2020 Amendments Clarify Responsibility to Warn
Under existing law, Upstream Entities are permitted to comply with Prop 65’s warning requirement by either including a warning on the product label or providing written notice to the authorized agent of a retail seller that would then be responsible for providing the product warning. However, the 2016 Regulations left some uncertainty among intermediate parties in the chain of commerce as to whether providing a written notice to the next downstream entity satisfied their warning obligation under Prop 65. Under the 2020 Amendments, Upstream Entities electing to comply with Prop 65 by sending written notice to a retail seller may do so by providing written notice to the authorized agent of the retail seller or the authorized agent of the business where the Upstream Entity is selling or transferring the product. Confirmation of receipt of the written notice can now be received electronically or in writing, and must be renewed annually during the period in which the product is sold in California by the retail seller. If a business has not designated an authorized agent, the notice may be served on the legal agent for service of process for the business.
Key Takeaways and Next Steps
Upstream Entities and retailers should be aware of their respective responsibilities when the 2020 Regulations take effect on April 1, and should update their Prop 65 compliance strategy accordingly. Previously, Upstream Entities that opted to comply with Prop 65 via written notice had to provide notice directly to the retail seller, which often proved challenging when the product traveled through multiple streams of commerce, and the entity that would ultimately be selling the product to consumers was unclear. The 2020 Amendments make it easier for Upstream Entities to comply with the warning requirement by allowing them to provide notice to an intermediate entity that takes possession of the product directly from the Upstream Entity. In essence, the 2020 Amendments provide clarity and certainty for manufacturers and distributors that may not know where their products will ultimately be sold. However, retail sellers should update their terms and conditions with suppliers to ensure that any written notices provided upstream are ultimately provided to the retailer. Doing so may help insulate such businesses from the costs associated with Prop 65 notices of violation and litigation.