The recent deluge of “all natural” class actions, about which we wrote in a previous post, continues to plague food and beverage manufacturers south of the border, in part due to the United States Food and Drug Administration’s lack of guidance on the definition of “natural”. New cases continue to be filed daily, and despite the fact that few (if any) of these cases have proceeded to trial, plaintiffs continue to obtain significant settlements from companies, who have also had to incur expenses relating to re-branding and labelling products to remove the impugned references to the product’s natural qualities.
For example, in addition to paying $5 million into a settlement fund, Kellogg’s recently agreed to remove “All Natural” from its Kashi product labels as part of a class action settlement. Kashi, which manufactures cereal and granola products, was alleged to have improperly included ingredients like pyridoxine hydrochloride, calcium pantothenate and soy oil processed using hexane in products labeled as “All Natural”. As part of the settlement, California residents are entitled to claim $0.50 for every Kashi product bought between 2007 and 2014, up to a maximum of $25 with no proof of purchase. The settlement, which was struck between the parties following mediation sessions late last year, was preliminarily approved by the Southern California District Court on May 27, 2014. A motion to obtain final approval of the settlement will be heard on September 2, 2014.
Know Your Ingredients and Your Suppliers
Absent a regulatory definition of “natural”, courts in the United States are now being asked to weigh in on questions that would ordinarily be subject to regulatory guidance, such as whether products containing additives that cannot be found in nature but which are derived from natural processes can still be labelled and marketed as a natural product. A nation-wide “all natural” class action was certified in the Northern District of California on May 30, 2014 in relation to fruit products manufactured by Dole containing citric acid (Vitamin C) and ascorbic acid, which are used extensively as food additives. The claim alleges that these additives preclude the usage of the term “all natural”. Dole, on the other hand, contends that its “all natural” label is not misleading because the additives, which were obtained from Dole’s suppliers, were derived from natural fermentation processes.
The Dole case illustrates the importance of a company having a thorough knowledge of the ingredients comprising its product, including granular details such as the method by which additives and flavourings are manufactured by suppliers. This information can assist a company’s legal and marketing teams in crafting labels that accurately reflect the product’s ingredients, and is an effective strategy to mitigate a company’s exposure to product labelling class actions.
Almost “All Natural” May Not Be Good Enough
Even trace amounts of non-natural products can expose a company to liability. A class action filed against the makers of Celestial Seasonings tea alleges that the teas, which are marketed as “100% natural”, contain fungicides and insecticides. In a recent motion brought by Celestial to dismiss the class action, the court rejected Celestial’s argument that the “100% natural” label was mere puffery upon which a reasonable consumer would not rely, and that traces of pesticides are not inconsistent with the product labelling, given that the product is not being sold as an organic product. These arguments will undoubtedly be raised again if the class action proceeds to a hearing on the merits.
What This Means for Canadian Manufacturers
To date, the same volume of food products marketing class actions has not been observed in Canada. In part this is due to this distinct regulatory environment, where many ingredient and health claims are specifically prescribed by legislation (or, in the case of claims regarding GMOs, regulatory guidelines). Nevertheless, companies operating in Canada are well advised not to take a “wait and see” approach. Rather, they should carefully examine their labelling to ensure that it:
- complies with all applicable statutory and regulatory requirements; and
- is consistent with an objective interpretation of the claims on the label (i.e., would an ordinary person perceive that “100% natural” means that a product is free of pesticides?); and
- is consistent with the product’s ingredients, nutritional value and methods of manufacture.