Amazon and Online Retailers Draw Proposition 65 Notices of Violation

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Conkle, Kremer & Engel attorney John Conkle was recently interviewed by chemical industry publication Chemical Watch in an article about the continued robust private enforcement of Proposition 65 against large retailers such as Amazon, Target, Walmart, CVS and Costco. John, a leading Prop 65 defense attorney who has counseled and defended companies throughout the supply chain, provided his expert insight in the article, which looked at the astronomical number of notices of violation being served on retailers by private enforcers.

In general, Proposition 65 enforcement has steadily risen over the years, reaching its peak in 2018 with 827 settlements and judgments totaling a record $35 million.

However, under the Proposition 65 regulations as amended last August, retailers are now legally responsible for compliance only under certain prescribed circumstances. In addition to having to provide Internet warnings for products sold online, a retailer is responsible for providing a warning if:
• the retailer is selling the product under its brand or trademark;
• the retailer knowingly introduced a listed chemical into the product or knowingly caused a listed chemical to be created in the product;
• the retailer covered, obscured or altered a warning label that was affixed to the product;
• the retailer received a notice and warning materials for the exposure but sold the product without posting or displaying the warning; or
• the retailer has actual knowledge of the potential exposure requiring the warning and there is no upstream entity that can be held liable for the violation. Actual knowledge means specific knowledge of the exposure received from any reliable source. If the source of this knowledge is a Prop 65 notice of violation, the retail seller is deemed to have actual knowledge five business days after receipt.

Despite the new regulations, retailers are continuing to be served with notices of violation. For example, while Amazon has received 1,027 notices of violation since the California Attorney General’s Office began keeping track in 2000, most of those notices were served in recent years: 255 in 2016, 404 in 2017, 180 in 2018 and 57 so far this year. Private enforcers often include retailers in their notices to apply settlement pressure on manufacturers, distributors and other entities upstream in the supply chain, who are often required to enter into indemnity agreements with their retailers. Retailers should continue to be vigilant about having adequate indemnity agreements in place, ensuring that the products they sell have been tested for compliance with Proposition 65 and if warnings are required, to provide the appropriate warnings.

Conkle, Kremer & Engel attorneys routinely assist clients in ensuring compliance with Proposition 65 and other regulations, and defend businesses against Proposition 65 when a notice of violation is received.

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2018 Proposition 65 Trends Show Increasing Risk to Business

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2018 turned out to be the most lucrative year ever for Proposition 65 attorneys and their clients, according to settlement data collected by the California Office of Attorney General (OAG). The famous “right-to-know” law has been on the books for more than 30 years, and requires businesses to provide warnings for exposures to any one of the more than 900 chemicals on the Proposition 65 list that are known to cause cancer, reproductive harm or birth defects – or face hefty civil penalty and attorneys’ fees demands from the OAG, a district attorney or, far more commonly, private enforcers who initiate their claims by sending Notices of Violation.

Reviewing the recent trends, the indications are that the private enforcer claimants are becoming more efficient at extracting as much as possible from the unfortunate businesses who receive Notices of Violation. Even though California’s Office of Environmental Health Hazard Assessment (OEHHA) is supposed to benefit from Proposition 65 recoveries, the chart below shows graphically that the vast majority of the money obtained by the claimants stays with the claimants – and most of it stays with the claimants’ attorneys. In 2018, less than 12% of the money obtained by private enforcers went to OEHHA, and more than 79% went to the claimants’ attorneys.

2014-2018 CKE Prop 65 Settlement Chart

The claimants’ increasing efficiency is shown clearly by the fact that, even though the number of Notices of Violation sent to businesses dropped by approximately 13% (2,710 in 2017 and just 2,364 in 2018), the number of settlements and judgments increased from 693 in 2017 to 834 in 2018. The average settlement shot up by 13%, from $38,395 in 2017 to $44,097 in 2018. This was buoyed in large part by a huge increase in the attorneys’ fees and costs collected by plaintiffs’ attorneys. In 2017, plaintiffs’ attorneys took in $20.2 million in attorneys’ fees and costs. In 2018, plaintiffs’ attorneys recovered $29.1 million in attorneys’ fees and costs.

The small circle of private enforcers making these claims remains an exclusive club. The claimants active in 2018 included: Alicia Chin; Amy Chamberlin; Anthony E. Held, Ph.D., P.E.; Anthony Ferreiro; APS&EE, LLC; As You Sow; CA Citizen Protection Group, LLC; Center for Advanced Public Awareness, Inc.; Center for Environmental Health; Consumer Advocacy Group, Inc.; Dennis Johnson; Donny Macias; Ecological Alliance, LLC; Ecological Rights Foundation; Ema Bell; Environmental Law Foundation; Environmental Research Center, Inc.; EnviroProtect, LLC; Erika McCartney; Evelyn Wimberley; Gabriel Espinosa; Hector Velarde; John Moore; Estate of Karen Charlene Calacin; Kim Embry; Kingpun Cheng; Laurence Vinocur; Maureen Parker; Michael DiPirro; Paul Wozniak; Peter Englander; Precila Balabbo; Russell Brimer; Safe Products for Californians, LLC; Sara Hammond; Shefa LMV Inc.; Susan Davia; The Chemical Toxin Working Group, Inc.; and Whitney R. Leeman, Ph.D.

Questions still remain as to the effects on the Proposition 65 industry of the OAG’s amended settlement guidelines that went into effect October 1, 2016, and the new clear and reasonable warning requirements that went into effect August 30, 2018. We posited some theories in our previous blog post on the issue, but it’s too early to tell the collective effects of these changes on the net Proposition 65 costs for businesses. One thing is for certain: The risks to businesses are increasing as Proposition 65 claimants are demanding more money than ever to resolve their claims. Absent any meaningful Proposition 65 reform, that trend will only continue. Unfortunately, Proposition 65 is notoriously difficult to reform because it requires a two-thirds majority approval of each house in the Legislature and any amendment must further the purposes of Proposition 65.

The best approach for businesses is to be proactive to try to meet the Proposition 65 challenges before they become very costly burdens. Aside from carefully reviewing your compliance, the most important factor in reducing costs of resolution is to act promptly when you receive a Notice of Violation to contact qualified counsel experienced in Proposition 65 issues. Conkle, Kremer & Engel keeps up to date on developments in Proposition 65 and provides expert guidance to clients to ensure compliance with Proposition 65 and other regulations.

2018 by the Numbers

  • 2,364: Notices of Violation Served
  • 834: Number of Settlements/Consent Judgments
  • 39: Number of Active Prop 65 Plaintiffs
  • $36.7 Million: Paid by Businesses to Resolve Claims
  • $29.1 Million: Attorneys’ Fees & Costs Collected by Plaintiffs’ Attorneys
  • $3.3 Million: Payments Collected by Plaintiffs
  • $4.3 Million: Payments to State Agency
  • $44,097: Average Settlement/Judgment Amount

2017 by the Numbers

  • 2,710: Notices of Violation Served
  • 693: Number of Settlements/Consent Judgments
  • 38: Number of Active Prop 65 Plaintiffs
  • $26.6 Million: Paid by Businesses to Resolve Claims
  • $20.2 Million: Attorneys’ Fees & Costs Collected by Plaintiffs’ Attorneys
  • $2.7 Million: Payments Collected by Plaintiffs
  • $3.7 Million: Payments to State Agency
  • $38,395: Average Settlement/Judgment Amount

This blog post was coauthored by Desiree Ho.

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Prop 65: PILPs and ASPs and Fees — Oh My!

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We previously blogged about Proposition 65 trends based on data about settlements and judgments collected and made public by the California Attorney General’s Office. One trend we noted was the downward shift in civil penalty offsets known as “payments in lieu of penalties” (PILPs) or “additional settlement payments” (ASPs), due to recent amendments to the Proposition 65 regulations to rein in such payments. We’ll refer to these offsets collectively as ASPs and look at how the amendments have affected the Proposition 65 “industry”.

By way of background, Proposition 65 generally allows claimants (termed private enforcers) to keep 25% of the civil penalties as well as recover their attorneys’ fees and costs in enforcement actions. The state’s regulating agency, the Office of Environmental Health Hazard Assessment (OEHHA) retains the other 75% of the civil penalties. While Proposition 65 authorizes penalties of up to $2,500 “per day for each violation,” the reality is that civil penalties make up a very small portion of an overall settlement or judgment: The vast majority of the payment is earmarked as attorneys’ fees and costs paid to the claimant’s lawyers.

In the past, Proposition 65 private enforcers have often demanded additional payments that were treated as offsets to civil penalties. In other words, whatever the appropriate amount of civil penalties, they would carve out a portion of it as ASPs, because the claimants could keep the ASP portion entirely or direct it to a related entity – in addition to retaining their 25% share of the civil penalties. OEHHA does not receive any part of an ASP.

The practice became concerning enough that the Attorney General’s Office amended the regulations, effective October 1, 2016, to impose additional requirements for ASPs. According to the Final Statement of Reasons for the rulemaking, the amendments were intended, among other things, to “ensure that [OEHHA] receives the civil penalty funds specified in Proposition 65, so that it has adequate resources for Proposition 65 implementation activities” and to “limit the ability of private plaintiffs to divert the statutorily mandated penalty to themselves or to third parties, in the form of [ASPs].”

The regulations as amended also reflect the Attorney General’s position that ASPs should not be included in any settlement that is not subject to judicial approval and ongoing judicial oversight. The effect has been that, since 2017, only one private settlement agreement has included ASPs. Several others were reported in 2017 and 2019, but a review of the settlement agreements showed that the private enforcer in those cases erroneously reported its 25% portion of the civil penalties as ASPs.

While this can be seen as a bright spot, it may have the unintended consequence of lowering the incentive for certain private enforcers to settle early and privately, increasing costs to businesses who receive a Proposition 65 “notice of violation” – the official precursor to legal action. Indeed, since the amendments, we have continued to see a high number of court judgments contain ASP provisions, since those are still allowed under the amended regulations but subject to additional scrutiny by the Attorney General. In 2017, 90 of the 345 court judgments called for payment of ASPs (totaling $1,421,660) and in 2018, 109 of the 366 court judgments included ASPs (totaling $1,915,083). While not all plaintiffs are as aggressive about collecting ASPs, some NGO plaintiffs (such as As You Sow, Center for Advanced Public Awareness, Center for Environmental Health, Consumer Advocacy Group, Ecological Rights Foundation and Environmental Research Center) still show a strong preference for ASPs in resolving their claims. It is possible that OEHHA’s move to restrict ASPs results in more lawsuits and fewer pre-litigation settlements, but may not ultimately reduce ASPs as much as anticipated.

More problematically, the amendments seem to have had the unintended effect of driving up the civil penalties and attorneys’ fees and costs. The amended regulations provide that ASPs should not exceed the 75% share of the civil penalty paid to OEHHA. Previously, ASPs in both private settlements and judgments often exceeded the total civil penalties. The regulations now effectively place a cap on the amount of ASPs: ASPs that exceed 75% of the civil penalties may cause the Attorney General to file an opposition. So to maximize their own recovery private enforcers are now settling for what seems to be high civil penalties and ASPs that are a hair below 75% of that amount. Legally, that is a very doubtful practice – since ASPs are an offset to civil penalties, a defendant should pay the same total amount based on statutory factors, regardless of whether any part of the payment is earmarked as an ASP or if all of it is treated as a civil penalty.

One of the most stunning observations of the trends in Proposition 65 recoveries is that the attorneys’ fee portion of Proposition 65 settlements has increased every year. As we will discuss further in a later blog post, in 2018 the total amount of attorneys’ fees and costs collected by Proposition 65 plaintiffs shattered all records. Attorneys’ fees made up 79% of all Proposition 65 recoveries in 2018 – up from 76% in 2017. The claimants’ attorneys collected an astonishing $29,117,784 – an increase of nearly $9 million over 2017. It is not a big leap to infer that there is a connection between this and the changed regulations reducing claimants’ ability to rely on ASPs – claimants may be increasing the attorneys’ fees portion of their recovery to make up for perceived “losses” in ASPs.

What do the amended regulations and the settlement trends mean for businesses defending against Proposition 65 claims? For one, settling early and privately in an out-of-court settlement is a recommended strategy. ASPs should not be part of such early agreements. This means anyone receiving a notice of violation should act promptly to obtain qualified legal counsel, because private enforcers can sue in court after giving 60 days’ notice. Certain defense strategies can be utilized to try to force an out-of-court settlement for a non-cooperating private enforcer, or at least make a court judgment less appealing to the claimant. Businesses should also take steps to minimize civil penalties and thereby ASPs by taking immediate corrective action as well as ensure that their legal counsel put together a defense that supports a minimal civil penalty recovery under the law.

Conkle, Kremer & Engel attorneys are experienced at helping clients defend against Proposition 65 claims, resolving them cost-effectively and efficiently, as well as implementing proactive strategies to avoid Proposition 65 and other regulatory issues.

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Prop 65 Settlements Predominantly Benefit Claimants’ Lawyers

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Over the last several years, the  California Attorney General’s Office (OAG) has released annual reports of Proposition 65 settlements through 2017.  These reports make one thing clear – Proposition 65 continues to be a lucrative source for private Proposition 65 claimants and their lawyers, as the total settlement payments continues to rise through the years.

In the past, we noted that private Proposition 65 claimants and their lawyers collected at total of $17 million in settlement payments (comprised of civil penalties, “PILPs” or “Payments in Lieu of Penalties” [also known as “Additional Settlement Payments”] and attorneys’ fees and costs) in 2013, and $20 million in 2012. The trend since then has been upward on all fronts, with one notable recent qualification regarding PILPs.

Proposition 65 contemplates that private claimants will share any civil penalties collected, with 75 percent going to the California Office of Environmental Health Hazard Assessment (OEHHA) and 25% being kept by the private claimants.  However, Prop 65 claimants are allowed an alternative remedy of PILPs, in which the claimants can pocket 100% of the PILPs and share nothing with OEHHA. All private claimants needed to do is establish that the PILP payments will go to fund some kind of activities with a nexus to the basis for the litigation, and show how those funds would be spent.  Until recently, this was not a big obstacle for Prop 65 claimants. As can be seen from the OAG reports, many Prop 65 claimants are special-purpose entities that contend their own business of pursuing Prop 65 claims serves the environmental interests they are trying to protect through pursuit of more Prop 65 claims.  As a result, these entities could pocket the PILP money to self-fund their own activities to make more Prop 65 claims. Being able to keep all of the PILP money, rather than the alternative of having to give 75% of civil penalties to OEHHA, undoubtedly made PILPs very attractive to Prop 65 claimants. Perhaps the only bright spot in the chart below is the significant reduction (by more than 50%) in PILP recoveries, which followed an amended regulation that went into effect on October 1, 2016 to tighten requirements for PILP settlements. We’ll develop more on this amendment and its effects in a future blog post.

Finally, but clearly most significantly in terms of dollars spent on settlements of Prop 65 claims, private claimants’ lawyers are entitled to recover reasonable attorneys’ fees and costs. As seen in OAG reports, and displayed graphically below, this attorney fee recovery constitutes by far the largest portion of Prop 65 settlements.

2014-2017 Summary of Proposition 65 Resolutions (Updated from OAG Data as of 3/25/2019)
2014-2017 Summary of Proposition 65 Resolutions
(Updated from OAG Data as of 3/25/2019)

Since 2012, total settlement payments have increased substantially, reaching their high-water mark in 2016 but not declining very much in 2017 (2018 figures have not yet been fully released by OAG). Between 2014 and 2017, Prop 65 settlement payments totaled well over $25 million per year.  Overall, the settlement payments are comprised of attorney fee recoveries to claimants’ lawyers, PILP recoveries to claimants, and a smaller number of civil penalties that are shared 25% with claimants and 75% with OEHHA. In sum, every dollar shown in the chart below, other than the OEHHA portion shown in red, has gone to either the Prop 65 claimants or the claimants’ lawyers:

When viewed graphically, it becomes all the more evident that the vast majority of Prop 65 settlements benefit claimants and their lawyers, not OEHHA or any other government agency charged with protecting the public. Questions must arise whether this was really the intent of Proposition 65, however beneficent was its purpose.

2016 was the biggest year for Prop 65 private claimants, according to data released by the California Attorney General’s Office.  In 2016, private claimants settled 760 cases, suing smaller businesses and larger entities like K-Mart, Michaels, Williams-Sonoma, and Twinings.  The settlements for that year totaled over $30 million.

Of the $30 million collected in settlement payments in 2016, attorneys’ fees made up more than $21.5 million, or 71.5% of all private settlements.  In addition, while civil penalties amounted to just over $5 million, or 18% of all private settlements, private claimants can take 25% of any civil penalty assessed as a “bounty.”  In 2016, the civil penalties retained by claimants represented a sum of $1,361,500, or 4.51% of all private settlements.  PILP money made up 10.42% of all private settlements.  That means approximately $3.1 million landed in the hands of private claimants and their attorneys, in addition to the attorneys’ fees and civil penalty bounties they received.

A few firms did particularly well that year.  In 2016, The Chanler Group brought in 242 settlements for over $7.4 million.  83% of this figure, or over $6 million, was paid out in the form of attorneys’ fees and costs.  Brodsky & Smith brought in 99 settlements for nearly $2.5 million.  90% of the nearly $2.5 million, or $2.2 million, in settlement payments went to the lawyers as attorneys fees and costs.

Some claimant representatives obtained settlements that were not quite as disproportionately in favor of attorneys’ fees and costs.  For example, the Center for Environmental Health brought in 93 settlements in 2016, for a total of $4 million, broken down as follows: 11% as non-contingent civil penalties, 16% as PILP payments, and 74% as attorneys’ fees and costs.  Similarly, the Consumer Advocacy Group brought in approximately $4 million across 71 settlements, recovering 11% as non-contingent civil penalties, 14% as PILP payments, and 75% as attorneys’ fees and costs.

The Environmental Research Center brought in 55 settlements for nearly $5 million, and the breakdown of payments was split more evenly: 36% as civil penalties, 31% as PILP payments, and 33% as attorneys’ fees and costs.

In 2017, private claimants continued to pursue Prop 65 claims, settling or obtaining judgments in 693 cases.  The recoveries totaled more than $26 million. As can be readily seen in the chart above, although the total claimants’ recoveries were somewhat lower, they were on par with 2015 recoveries. Further, attorneys fees were proportionately even higher in 2017 than in preceding years, and the reduction was primarily in the PILP recoveries. Attorneys’ fees made up more than $20 million, or 76% of all private settlements, and civil penalties retained by claimants represented an additional $1,431,496 or 5.4% of all Prop 65 recoveries.

If these trends continue, total Prop 65 settlement payouts will continue to rise, imposing the “unnecessary burdens for businesses” that “are cause for public concern,” as the OAG noted in 2014. Conkle, Kremer & Engel routinely represents businesses against Prop 65 claims and lawsuits brought by private claimants, and works with businesses to develop compliance strategies to minimize the risk that they will be future targets of Prop 65 claimants.

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New Law Requires Professional Cosmetics Labels to List Ingredients

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Professional cosmetics sold in California must have full ingredient labeling in the same manner as consumer cosmetics, if the products are manufactured after July 1, 2020.  The California legislature unanimously approved AB 2775, introduced by Assembly Member Ash Kalra.  The bill was signed into law by Governor Brown on September 14, 2018 and enacted as new Section 110371 to the Health and Safety Code.

There are over 312,000 professional cosmetologists who are licensed to provide nail and hair services, most often in salons.  The legislature found that “[i]nformation on the ingredients in professional salon products is essential to ensuring that workers and owners can make safer product choices and take steps to protect themselves and their customers against harmful exposures.”

The new law will establish that professional cosmetics must have a label affixed on the container that satisfies all of the labeling requirements for any other cosmetic pursuant to the federal Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 301, et seq.), and the federal Fair Packaging and Labeling Act (15 U.S.C. Sec. 1451, et seq.).  In other words, professional cosmetics must have the same ingredient labeling as consumer cosmetics.

The law already defines the term “cosmetic” as “any article, or its components, intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to, the human body, or any part of the human body, for cleansing, beautifying, promoting attractiveness, or altering the appearance.”  (Health and Safety Code Section 109900)  The newly-enacted law introduces a new definition of “professional cosmetic,” meaning a cosmetic “that is intended or marketed to be used only by a professional on account of a specific ingredient, increased concentration of an ingredient, or other quality that requires safe handling, or is otherwise used by a professional.”  In turn, “professional” is defined for this purpose as “a person that has been granted a license by the State Board of Barbering and Cosmetology to practice in the field of cosmetology, nail care, barbering, or esthetics.”

There is arguably some ambiguity in that the new statute could be read to define a “professional cosmetic” in a circular manner as including a cosmetic that “is … used by a professional.”  Such an ambiguity is not likely a concern in this particular Act.  This is because the effect of this new law is just to require the same type of ingredient labeling for both consumer and professional cosmetics, so it should not matter whether a licensed professional uses a resalable consumer or professional cosmetic for purposes of compliance with this law.  However, if in the future the same definition of “professional” is incorporated into other enactments (much like “the definition of cosmetics” was incorporated here from a different statute), the circular definition may become more problematic.

The new law was enacted with widespread industry support, including the Personal Care Products Council, the Professional Beauty Association, California Chamber of Commerce, and Unilever.  Many manufacturers have already listed product ingredients on their professional cosmetic lines in a manner consistent with that required for retail cosmetics, and so may already be in compliance.  But manufacturers should review their professional cosmetic product labeling well ahead of the July 1, 2020 effective date in order to determine whether they comply.  Further, manufacturers should be aware that there is no specific “professional cosmetic” exception to other warning label requirements, such as Proposition 65, which requires warnings if use of a product on a consumer in California would result in significant exposure to identified chemicals that are known to cause cancer, birth defects or other reproductive harm.

Manufacturers are well-advised to seek qualified counsel to review their circumstances before committing to potentially costly label changes, to be sure they comply with all legal requirements.  Conkle, Kremer & Engel attorneys stay up to date on important regulatory developments affecting their clients in the professional salon products industry, and are ready to help clients apply navigate the changing regulatory landscape in California and elsewhere.

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Cosmoprof North America Features Challenging CBD, Natural and Organic Product Lines

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On July 29 and 30, 2018, Conkle, Kremer & Engel continued its annual firm attendance at Cosmoprof North America in Las Vegas, visiting with longtime and new clients and observing new brands and trends in the personal care industry.  This year’s edition of Cosmoprof had over 36,000 attendees with a record-breaking 1,278 exhibitors from 45 countries.  CK&E attorneys attend to connect with clients and others in the cosmetics, personal care, packaging, labeling and professional beauty markets, to help clients secure distribution agreements, and to learn about the newest industry innovations and issues.

This year, trends included substantial expansion of the mens’ care and beard care sector, along with CBD-infused cosmetics and hair care products and natural and organic hair regrowth formulas.  Organic products sold in California must meet strict requirements, and Products with “natural” claims can present special challenges and risks, as CK&E has addressed in previous blog posts, such as “What are Natural Products Anyway?”  A new twist has been recent growth (no pun) in “hair regrowth” products labeled as “natural” or “organic” .  Those classes of products face special issues in addition to whether they can fairly be called “natural” or “organic,” in that hair regrowth claims can at times run afoul of federal prohibitions on products that make drug-like claims without FDA approval, as well as federal and state labeling and advertising regulations.  Finally, a new class of beauty and hair care products are based on Cannabidiol (CBD) content, taking advantage of increased acceptance of cannabis-based products.  Yet CBD products continue to pose their own special issues, which will be the subject of an upcoming www.conklelaw.com blog post.  CK&E is well-versed in counseling clients on all such issues, from brand protection, vendor and distribution issues to the latest CBD, natural and organic product concerns.

Lastly, foremost on the minds of many manufacturers and distributors who sell in California were the new requirements for Proposition 65, the well-known California law requiring “Prop 65” warnings for products which contain chemicals known to cause cancer or reproductive harm.  New warning label requirements go into effect on August 30, 2018, which CK&E has already summarized on its blog.  CK&E is actively advising manufacturers about the most efficient and effective ways to address the changes and avoid the risks of inadvertent violations.

CK&E’s attorneys continue to pride themselves on keeping abreast of developments in the personal care market, along with assisting clients of all sizes with growth and protection of their brands and interests.  CK&E is an active member of the Professional Beauty Association, the Personal Care Products Council, and other important industry trade organizations.

 

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It’s Time: New Prop 65 Warnings are Required August 30, 2018

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In November 2017, we advised readers of Conkle, Kremer & Engel’s blog that products sold in California would become subject to new Proposition 65 warning requirements beginning August 30, 2018.  The new “Clear and Reasonable Warning Regulations” from California Office of Health Hazard Assessment (OEHHA) significantly changed warning requirements for affected products that are manufactured on or after August 30, 2018.  Among other changes, the new regulations affect the safe-harbor warning requirements that govern the language, text, and format of such warnings, and also impose downstream warning mandates through retail, online and catalog sales channels. Generally, some of the major changes that companies selling consumer products should be aware of include:

  • The “warning symbol” :  A graphic “warning symbol” is now required on consumer products, other than food products. The “warning symbol” must be printed in a size no smaller than the height of the bolded word “WARNING,” and should be in black and yellow, but can be in black and white if the sign, label, or shelf tag for the product is not printed using the color yellow. The entire warning must be in a type size no smaller than the largest type size used for other “consumer information” on the product, and in no case should be smaller than 6-point type.
  • Listing of a specific chemical:  Warnings must now specifically identify at least one listed ingredient chemical for each toxicological endpoint (cancer and reproductive toxicology) and include a link to OEHHA’s new website P65Warnings.ca.gov. Certain special categories of products, such as food and alcoholic beverages, have a specialized URL that must be used instead.
  • New warning language:  Warning language must now warn of an exposure to a chemical or chemicals from the product, rather than just warn that the product contains the chemical or chemical. For example, “ WARNING: This product can expose you to diethanolamine, which is known to the State of California to cause cancer. For more information go to www.P65Warnings.ca.gov.”
  • Internet and catalog requirements:  For internet sales, warnings must be provided with a clearly marked hyperlink on the product display page, or otherwise prominently displayed to the purchaser before completion of the transaction. It will not be sufficient if the product sold on the internet bears the required label, but the internet point of purchase listing does not. For catalog sales, a warning must be provided in a manner that clearly associates it with the item being purchased.
  • Short-form warnings:  The regulations allow the use of certain abbreviated “short-form” warnings, which may omit the identity of any specific chemical, only if the warning is printed on the immediate container, box or wrapper of the consumer product or is affixed to the product.  For example, “ WARNING: Cancer – www.P65Warnings.ca.gov.”  If a short-form warning is used on the product, the same short-form warning may be used for internet and catalog sales.

The regulations seek to minimize the burden on retail sellers of consumer products, but there are some obligations affecting resellers. Manufacturers, producers, distributors, and other upstream businesses comply with warning requirements if they affix a clear and reasonable warning to the product, or provide written notice and warning materials to an authorized agent of a retailer, among other requirements.  Retailers who receive products with a Proposition 65 warning on the label, or who receive proper notice that a warning is required, are responsible for placement and maintenance of internet warnings for those products before selling to consumers in California.  Retailers should only be liable for Proposition 65 violations under limited circumstances, such as if they cover, obscure, or alter a product’s warning label, or if they receive notice and warning materials but fail to display a warning, including catalog and internet warnings preceding consumer sales into California.

The particular requirements for each specific product can vary, so manufacturers and resellers are well-advised to seek qualified counsel to review their circumstances before committing to potentially costly label and website changes that may not comply with the new requirements.  Conkle, Kremer & Engel attorneys stay up to date on important regulatory developments affecting their clients in the manufacturing and resale industries, and are ready to help clients navigate the changing regulatory landscape in California and elsewhere.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

October 2018 Update

H. Kim Sim of CK&E was interviewed and quoted extensively in ChemicalWatch about the difficulties manufacturers face in implementing the “very confusing and very complex” requirements of the new warning label requirements of Prop 65.  For example, as Kim said, “The requirement that manufacturers name at least one substance for which they are providing warning has proven particularly challenging. Determining which one to include ‘can be tricky for companies to decide’, she said. ‘Is one more scary to the public than another?'”

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The Conkle Firm Presentation at 2018 PCPC Legal & Regulatory Conference

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On May 9, 2018 Conkle, Kremer & Engel attorney John A. Conkle presented on “The State of the States” panel at the 2018 Personal Care Products Council’s Legal & Regulatory Conference.  The panel focused on the increasingly strong role of state legislatures and state regulatory bodies in addressing issues of importance to the personal care products and cosmetics industries.  The panel featured lively discussion of issues arising from the evolving patchwork of laws and regulations among numerous states, including California’s infamous Proposition 65, slack fill laws, and labeling and ingredient disclosure regulations, ingredient phase-out requirements and outright bans, volatile organic compound limitations to protect air quality, and animal testing regulations.  The discussion included the importance of preservation and presentation of evidence to support manufacturers’ positions, including testimony in depositions and at trial.

The panel’s presentation is available here for review.  Contact John Conkle to discuss the latest issues affecting the state of the personal care products and cosmetics industries.

 

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The Conkle Firm to Present at 2018 PCPC Legal & Regulatory Conference

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Conkle, Kremer & Engel attorney John A. Conkle will be on the panel opening the 2018 Personal Care Products Council’s Legal & Regulatory Conference.  The panel will present “The State of the States,” which will focus on the increasingly strong interest of state legislatures and state regulatory bodies in addressing issues of importance to the personal care products and cosmetics industries.

States have come to recognize that, with the U.S. Congress largely gridlocked and federal regulatory agencies in a deregulation mood, the path is open for the states to regulate consumer industries in manners that they deem fit.  The result is a continuously evolving patchwork of laws and regulations that can be difficult for industry participants to navigate.

Issues to be discussed at the May 9, 2018 panel presentation include California’s infamous Proposition 65, slack fill laws, and labeling and ingredient disclosure regulations that include even public databases disclosing products’ ingredients found by state governments to be detrimental.  Further, state regulations can include ingredient phase-out requirements and outright bans, volatile organic compound limitations to protect air quality, and even animal testing regulations that can affect industry participants’ ability to compete in international trade.

A lively discussion is inevitable given the rich and topical subject matter and the vital industry interests affected.  The rest of the Legal and Regulatory Conference program should be just as engaging, covering topics such as employment law, cannabis (THC, CBD, marijuana extracts and hemp) in cosmetics and personal care products.  The many other topics to be covered in the three-day conference in Savannah, Georgia can be found in the conference program.

 

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CK&E Attorneys Lobby California Legislature with PCPC

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On March 20, 2018 Conkle, Kremer & Engel attorneys Eric S. Engel and Aleen Tomassian helped the Personal Care Products Council fulfill part of its mission by organizing and executing an effective lobbying day to advance the legislative interests of the industry.  Led by PCPC Senior Vice President Government Affairs Mike Thompson and PCPC Director of Government Affairs Karin Ross, a group of personal care product industry members, lobbyists and advisors heard presentations by pivotal regulatory agencies and then met with key legislators and their staffs to address issues of importance to the industry.

PCPC Chief Scientist Alex Kowcz seminar to Calif Legislative Staff

The PCPC held a luncheon at which it presented its first Legislator of the Year Awards to congresspersons who have been the most effective in advancing the important interests of both business and consumers in relation to personal care products.  Legislative staff also received an educational presentation from PCPC’s new Chief Scientist, Alex Kowcz, to help bring to Legislators the most current scientific information about issues affecting personal care products.  After a long day of meetings, participants unwound and connected at an informal reception for legislators, the governor’s office and administration officials at Ella, a popular restaurant near the State Capitol.

 

Eric S. Engel and Aleen Tomassian at PCPC Calif Lobby Day Reception

Some of the highlights of the 2018 PCPC California Lobby Day included a presentation by Meredith Williams, Deputy Director of Department of Toxic Substances Control (DTSC), and Rick Brausch, Chief of DTSC’s Policy and Program Support Division, Hazardous Waste Management.  The mission of the DTSC is the Safer Consumer Products (SCP) program, directed toward advancing the design, development and use of products that are chemically safer for people and the environment.  The aim is to reduce toxic chemicals in consumer products and create new business opportunities in green chemistry.

Dr. Williams advised the PCPC group that DTSC’s SCP program intends to focus over the next three years on nail salon products, particularly to assure a safe working environment for salon employees as well as customers, such as by assuring adequate ventilation and safety equipment.  Dr. Williams also noted that Volatile Organic Compounds (VOCs) are not only within the ambit of California’s Air Resources Board (ARB) as to their effect on the environment, but they are also within the scope of DTSC’s authority when regulation of VOCs can meaningfully enhance protection of human health.

On February 8, 2018, DTSC released a draft 2018-2020 Priority Product Work Plan for public review, in which “Beauty, Personal Care and Hygiene Products” are identified as targets for possible regulation.  Of some concern to PCPC, the Priority Product Work Plan includes DTSC’s interest in broad classifications of chemicals without defining exactly which chemicals in what formulations are of concern.  For example, DTSC’s Priority Product Work Plan identifies oxybenzone, BPA, DEA, formaldehyde, phthalates, parabens, triclosan, titanium dioxide, tolulene and VOCs as classes chemicals being considered for possible regulation, but there are a great many specific chemicals, formulations and uses within such classes, and not all of them are likely to be of concern to DTSC.  PCPC expressed its concern that broad classifications can cause confusion among manufacturers and consumers, and unnecessarily inhibit product development and sales.  For example, oxybenzone (aka Benophenone-3) is one of just 16 chemicals approved by the US Food and Drug Administration (FDA) as safe and effective for use as an ultraviolet (UV) filter to achieve broad-spectrum sun protection.  The health benefits of effective UV sunscreens are well documented, but the broad suggestion of “endocrine toxicity” or “dermatoxicity” in DTSC’s identification of oxybenzone is on shaky scientific footing.  Dr. Williams noted that the 2018-2020 Priority Product Work Plan is only in draft form, and that DTSC recognizes the broad nature of the chemical groups identified and is working on identifying specific chemicals of concern rather than entire classes of chemicals.

DTSC’s Richard Brausch spoke of the hazardous waste logistics issues facing the personal care product industry, affecting the entire supply chain from manufacturers to retailers.  The issue often occurs when products are returned from retailers, and questions arise as to whether they may be regarded as hazardous waste if they are no longer considered fit for regular sale, such as when new product labeling is introduced.  Issues can arise as to who has responsibility for proper transportation and disposal of the products, whether by sale in secondary markets, repair or refurbishment, donation to charities or recycling.  It is notable here that improper transportation and disposal has led some local authorities to sue retailers and wholesalers for failing to use hazardous waste transporters.  That in turn has caused retailers to impose anticipatory disposal charges on manufacturers and wholesalers for a wide range of products.  PCPC therefore supports Assembly Member Bill Quirk’s introduction of new legislation, AB 2660, which places the onus on the disposal company to determine the correct method of transportation, as that is not within the expertise expected of retailers.

The overriding hazardous waste concern is that California uses an “aquatic toxicity” (aka “fish kill”) test that is grossly out of alignment with federal law, and which results in most cosmetic products being characterized as hazardous under California law.  The “fish kill” test is exactly like it sounds – it tests only whether quantities of the subject product added to a water tank will kill fathead minnows.  The test is not regarded as especially accurate, notably because high viscosity products that are otherwise harmless can kill the fish by clogging their gills.  Further, the test presents a significant problem for the personal care products industry, which has taken a strong stand against animal testing, so manufacturers generally do not conduct this “fish kill” test on finished products.  PCPC therefore advocates a more modern approach to accomplish the same goal, by use of a more recently developed fish embryo test (FET), in which live fish are not killed.

An interesting side note is that SB 1249 was introduced by Senator Cathleen Galgiani to prohibit importation or retail sale of any cosmetic that was developed or manufactured using animal testing after January 1, 2020.  While PCPC takes a strong stand against animal testing, it could not support the bill as written because it included no exception for products marketed in countries (notably China) which require that products be subject to animal testing.  Rather, the PCPC has been working to obtain an amendment of the proposed legislation to make it conform to that of the European Union, which has strong anti-animal testing regulations but allows for accommodations to make products acceptable for sale in China.

Dr. Michael Benjamin, Air Resources Board Chief of Air Quality Planning and Science spoke about the substantial product data that ARB had collected from product manufacturers selling in California, through extensive annual surveys conducted over the past three years.  From that data, ARB is working to identify trends in emissions of VOCs.  Of particular interest is a February 15, 2018 publication in the academic journal Science of a study of VOC emissions from consumer products.  The Science publication (Volatile Chemical Products Emerging as Largest Petrochemical Source of Urban Organic Emissions, by Brian C. McDonald, Joost A. de Gouw, Jessica B. Gilman and others), Science Vol. 35, Issue 6377, pp. 760-764 (Feb. 16, 2018)) caught popular attention and some popular press because it found that vehicle emissions had become so much cleaner over the past decades that they were now responsible for less than half of VOC emissions.  Overall, the total volume of VOCs had diminished greatly.  Further, while the Science article authors made many assumptions on which they based their assessment of VOC contributions of consumer products, Mr. Benjamin pointed out that ARB has the actual data from its industry surveys to determine whether the author’s assumptions and conclusions are well founded.  ARB therefore intends to do its own assessment of the points made in the Science article to determine what further action is appropriate.

PCPC’s first Legislator of the Year Awards were presented to Senator Ed Hernandez, Assembly Member Bill Quirk and Senator Galgiani.  In his comments to PCPC members, Senator Hernandez emphasized, “We want business to stay here in California, we want businesses to be successful.  There’s a lot of people here that purchase your products.”   Assemblyman Quirk addressed the need for common sense limitations on legislation such as Proposition 65, remarking that “[Someone] sent me a package of Coors beer with a Prop 65 warning on it.  We now have cases in court where people want Prop 65 warnings on coffee. * * * One study after another shows it’s not a health risk. * * * We’ve got to do something about this.  I’m definitely going to be working as time goes on in the legislature so that we don’t end up with things that are harmless being labeled.”  Finally, Senator Galgiani observed that good legislative policy is not a zero sum game:  “It’s not about having a proposal that’s just good for the environment or just good for business but we can meet in the middle and have regulations and policies that work for both sides and help everybody involved.  It’s just harder to get there – it takes more work, it takes more time and it takes patience, and all of you [at PCPC] have done a great job.”

 

 

 

 

 

 

 

 

 

 

See the Beauty Industry Report article on the PCPC California Lobby Day here.

 

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