The Food, Beverage and Cosmetics Law Review: USA - California

Overview

Companies seeking to sell or manufacture food, beverage and cosmetics products in California face a host of laws that regulate their business activities. Perhaps the most far-reaching of these laws is the Sherman Food, Drug, and Cosmetic Law, which regulates the packaging, labelling and advertising of food and cosmetic products sold in California.2 Additionally, sellers and manufacturers should also be mindful of Proposition 65, a unique California law that requires companies doing business in California to provide certain warnings if their products cause exposure to one or more of the 900 chemicals on the state's regulated list.3

Recently, California lawmakers have focused on consumer right-to-know laws. For example, the California Transparency in Supply Chains Act of 2010 requires manufacturers and sellers in California to disclose certain information about labour abuses in their supply chains to consumers.4 Further, starting in 2022, the California Department of Health will require companies to make certain disclosures that will be added to the California Safe Cosmetics Program Database.5

Year in review

Over the past year, California has introduced and enacted a number of bills to further regulate the use of chemicals in food and cosmetic products.

i Cosmetic Fragrance and Flavor Ingredient Right to Know Act of 2020

Commencing 1 January 2022, the Cosmetic Fragrance and Flavor Ingredient Right to Know Act requires manufacturers of cosmetic products sold in California to make certain disclosures to the state's Department of Public Health.6 Among other things, manufacturers must disclose each fragrance ingredient or flavour ingredient that appears on any one of a list of chemicals maintained by an 'authoritative body', including state and federal agencies and certain lists maintained by the Canadian and European Union governments.7 Manufacturers also must disclose any fragrance allergen included in Annex III of EU Cosmetics Regulation No. 1223/2009.8 This information will be made available to the public through the state's Safe Cosmetics Database.9 The State Department of Health Services administers and enforces the law.10

ii Hazardous Substances Information and Training Act

Effective 1 July 2020, manufacturers and importers of a hazardous substance that takes the form of a cosmetic are required to post material safety data sheets (SDSs) to their websites and translate the SDSs into four or more languages.11 The Director of Industrial Relations maintains the list of hazardous substances.12

The new requirements do not apply to cosmetics packaged for distribution to, and use by, the general public, nor do they apply to retail trade establishments.13 Thus, manufacturers or importers of cosmetics whose sole connection to California is the distribution of finished goods or retail sales are unaffected.14 The Division of Occupational Safety and Health enforces the rules in the Labor Code.15

iii Cosmetic Safety Law

Beginning 1 January 2025, this law prohibits the manufacturing and selling of a cosmetic product with any intentionally added amounts of 24 specified chemicals.16 The list includes formaldehyde, certain plasticisers (i.e., phthalates), certain perfluoroalkyl and polyfluoroalkyl substances (PFAs) and mercury.17 Some of these substances, especially phthalates and PFAs, have become an increasing target of state regulation across various consumer and commercial uses. The law provides for the presence of the listed substances as an impurity only in trace quantities.18

iv Food packaging and cookware

California Assembly Bill No. 1200, currently pending, would amend the Health and Safety Code to apply similar restrictions to the Cosmetic Safety law (discussed in Section II.iii, above) to food packaging and cookware. If the bill passes the California legislature, it will present yet another example of the increasingly common trend of right-to-know laws aimed at consumer notification of the presence of chemicals.

Food and cosmetic safety

i Regulatory framework

The California Department of Public Health (CDPH) regulates several aspects of public safety for food, beverages and cosmetics. Notably, CDPH collects information on ingredients in cosmetics and makes it available publicly in its California Safe Cosmetics Program Database.19 Reporting to the CDPH under the Cosmetic Fragrance and Flavor Ingredient Right to Know Act of 2020 will commence 1 January 2022.20 CDPH will enforce bans on certain ingredients in cosmetics commencing 1 January 2025 under the Toxic-Free Cosmetics Act.21

Both the CDPH and the California Department of Food and Agriculture, along with local county and city health departments, regulate the food industry, with special programmes for food safety, milk and dairy, meat, produce and, increasingly, cannabis-containing foods.

The California Department of Toxic Substances Control (DTSC) enforces the Toxics in Packaging Prevention Act and regulates green chemistry under its safer consumer products programme and may select any product-chemical for regulation.22

CalRecycle regulates beverage containers and has long administered the California Beverage Container and Recycling and Litter Reduction Act, requiring certain beverages to be subject to a 5 or 10 cent California Redemption Value,23 and the Rigid Plastic Packaging Container Law governing content and recyclability.24 More recently, CalRecycle has regulated the content of the containers, which must have a post-consumer plastic recycled content of 15 per cent commencing 1 January 2022, increasing to 25 per cent in 2025 and 50 per cent in 2030.25

Violations of the regulations of all state agencies are subject to investigation and enforcement by the agency itself, by the Attorney General, by local district attorneys and by private citizen enforcers.

ii Food additives and contaminants

The Sherman Food, Drug, and Cosmetic Law regulates the packaging, labelling and advertising of food, including dietary supplements, cosmetics, drugs and medical devices in California.26 As it relates to additives, a food that contains a food additive27 or colour additive28 is considered unsafe and adulterated unless use of the additive is otherwise authorised by state law.29

The Attorney General, a district attorney or a city attorney may bring a civil or criminal action to remedy a violation of the law.30

iii Proposition 65

The Safe Drinking Water and Toxic Enforcement Act (commonly known as Proposition 65) requires companies doing business in California to provide a clear and reasonable warning before causing an exposure to a chemical known to cause cancer, birth defects or other reproductive harm.31 There are approximately 900 chemicals on the list,32 and ingestion is a form of exposure.33 The regulations implementing Proposition 65 contain safe harbour warnings that are deemed to be clear and reasonable warnings if they are displayed prominently and conspicuously.34 There are different safe harbour warnings for exposure to chemicals from food and cosmetics and safe harbour warnings also vary depending on whether the exposure being warned of is to a carcinogen, a reproductive toxicant or both.35 The law may be enforced by public enforcers or private citizens acting in the public interest after giving notice and meeting certain other conditions.36 Private plaintiff attempts to bypass Proposition 65's notice requirement by pleading claims under the state consumer protection laws have been rejected where 'the claims asserted . . . are entirely derivative of an unspoken Proposition 65 violation'.37

Failure to comply with Proposition 65 may result in civil penalties of up to US$2,500 per day per violation and injunctive relief.38 Private enforcers may keep 25 per cent of the civil penalties they recover and seek attorneys' fees under California law.39

iv Recalls

The California Product Recall and Safety Act prohibits commercial dealers, manufacturers, importers, distributors, wholesalers and retailers from in any way placing a product into the stream of commerce if the person or entity knows the product is unsafe.40 A product is deemed unsafe if it has been recalled for failure to comply with state or federal laws and regulations or recalled for a safety hazard reason voluntarily or in cooperation with the Consumer Product Safety Commission.41 The Act requires the entity that has placed the unsafe product into the stream of commerce to contact customers and prominently post relevant information on the company's website homepage within 24 hours after issuing or receiving the recall notice or warning.42 Manufacturers must provide for safe no-cost returns by end consumers or retailers and ensure proper disposal of the recalled product.43

The Sherman Food, Drug, and Cosmetic Law requires suppliers to provide the California State Department of Public Health with a list of customers that may or will receive meat- or poultry-related products that meet the criteria for Class I or Class II recalls according to the United States Department of Agriculture.44 Class I recalls involve a health hazard with a reasonable probability of causing death or health problems if the product is consumed.45 Class II recalls involve a potential health hazard with a remote probability of adverse health consequences from eating the food.46

In addition to notifying the state, suppliers must contact consumers according to the procedure outlined in the Sherman Food, Drug, and Cosmetic Law.47 The State Department of Public Health will then notify local public health officials of the recall and those officials will then determine how to notify the public.48 The Sherman Food, Drug, and Cosmetic Law also provides a public relations shield for restaurants: if local health officials determine that the contaminated products were never offered to the public, and the recalled products have been removed from the restaurant's supply, then the restaurant's name may be excluded from the public health notice.49

Supply chains

i Special legal issues for growers

In addition to the numerous California statutes that apply to California employers, the Industrial Welfare Commission requires California employers to follow the wage orders applicable to their industry. Employers in the food industry may have employees that fall under one of several California wage orders: (#1) Manufacturing Industry;50 (#3) Canning, Freezing, and Preserving Industry;51 (#8) Industries Handling Products After Harvest;52 (#13) Industries Preparing Agricultural Products for Market, on the Farm;53 or (#14) Agricultural Occupations.54 These wage orders cover topics from hours of work and minimum wage, to the employer's obligation to provide uniforms and seats at the workplace.

The wage orders generally apply to all employees in the industry, unless the employee is exempt from some portions of the wage order. In order to be exempt, the employees must fall into one of the three categories of exemption – executive, administrative or professional – and make a salary of at least twice minimum wage. The employee must have the specific job duties or experience set out by each exemption to be considered exempt, but the rules for each exemption are the same across the wage orders.

Wage Order #14, which applies to agricultural operations, is quite different from the other wage orders and has an expansive definition of what types of employees it covers. This order covers planting, caring for and harvesting agricultural or horticultural commodities, as well as raising and caring for animals such as livestock, fish and poultry. One of the main departures in Wage Order #14 is the graduated overtime pay requirement. By 1 January 2022, employers of more than 25 employees will be required to pay overtime for all hours worked in excess of eight in one day, matching the overtime requirement for other employees in the food industry. Employers with 25 or fewer employees will match up with larger employers and the rest of the industry by 1 January 2025.

ii Special rules regarding processing (non-GMO, organic, etc.) and related certifications

The California Organic Foods Act, passed in 1990, established the California State Organic Program (SOP).55 The Act also created standards for the production and sale of organic foods in California.56 In 2003, the Act was revised to apply in conjunction with the Organic Food Products Act of 1990, a federal law establishing the National Organic Program to regulate the sale and production of organic foods across the country.57

In 2012, California voters rejected Proposition 37, which would have required foods containing GMOs to be labelled. Since then, California has not passed any statute regulating GMOs. Several other California laws, however, could prohibit the mislabelling of foods. For example, the California False Advertising Act58 prohibits businesses from making any statements that are untrue or misleading.

iii California Transparency in Supply Chains Act of 2010

The California Transparency in Supply Chains Act59 requires large retailers and manufacturers doing business in California to disclose on their websites their efforts to eradicate slavery and human trafficking in their supply chains.60 A company falls within the scope of the Act if:

  1. it is a retail seller or manufacturer;
  2. it conducts business in California; and
  3. it exceeds annual worldwide gross receipts in the amount of US$100 million.61

Notably, the Act may be enforced only by the Attorney General for injunctive relief.62 The Act does not provide for any kind of monetary relief, nor does it provide for a private right of action. Private citizens, however, have alleged violations of the Act as a predicate for class actions under the state's consumer protection laws.63

iv Animal testing

California law prohibits manufacturers and contract testing facilities in California from testing cosmetics on animals if alternative test methods have been scientifically validated.64 Since 2020, California law imposes similar prohibitions on manufacturers that import cosmetics into the state.65 Under this law, a manufacturer may not import for profit, sell or offer for sale in California any cosmetic that was developed or manufactured using an animal test that was conducted or contracted by the manufacturer.66 The law does not apply facially to retailers.

The law recognises some instances where animal testing is unavoidable; therefore, it creates certain exceptions to the general prohibition.67 The law also contains a 'grandfather' provision that protects the lawfulness of current products. Specifically, the prohibition on animal testing does not apply to:

  1. a cosmetic sold in California or tested on animals prior to 1 January 2020, even if the cosmetic is manufactured after that date; and
  2. an ingredient sold in California or tested on animals prior to 1 January 2020, even if the ingredient is manufactured after that date.68

The law authorises public enforcers with enforcement.69 Violations are punishable by a fine of US$5,000 and an additional US$1,000 for each day the violation continues.70

Sales and marketing

i Regulatory framework

As discussed in Section III.ii, above, the Sherman Food, Drug, and Cosmetic Law regulates the packaging, labelling and advertising of food and cosmetics in California.71 The Sherman Food, Drug, and Cosmetic Law incorporates the labelling requirements set forth in the federal Food Drug and Cosmetic Act (FDCA), and broadly prohibits the sale of falsely advertised, adulterated or misbranded food and cosmetics in California.72 Under the Sherman Food, Drug, and Cosmetic Law, an advertisement for food or cosmetics is false 'if it is false or misleading in any particular'.73 Likewise, a food or cosmetic is misbranded if its 'labeling is false or misleading in any particular'.74 The misbranding provision of the Sherman Food, Drug, and Cosmetic Law is identical to provisions of the FDCA, and is thus not pre-empted by federal law.75

The State Department of Health Services administers the Sherman Food, Drug, and Cosmetic Law.76 Because the Sherman Food, Drug, and Cosmetic Law does not provide a private right of action, the Attorney General, a district attorney or a city attorney may bring a civil or criminal action to remedy a violation of the law.77 Specific provisions of the Sherman Food, Drug, and Cosmetic Law that apply to the sale and marketing of certain types of food and cosmetics are discussed below.

Sale and marketing of food

California Organic Food and Farming Act

The California Organic Food and Farming Act (COFFA) makes it unlawful for any person to sell, offer for sale, advertise or label any product as organic unless it is produced according to regulations promulgated by the National Organic Program (NOP), and consists entirely of products manufactured only from raw or processed agricultural products, with the following two exceptions:

  1. water, air and salt may be added to the product; and
  2. ingredients other than raw or processed agricultural products may be added to the product if these ingredients include non-agricultural substances or non-organically produced agricultural products produced in a manner consistent with, or which are on the national list adopted by the United States Secretary of Agriculture pursuant to Section 6517 of the NOP and do not represent more than 5 per cent of the weight of the total finished product, excluding salt and water.78

COFFA adopts the federal NOP regulations as the organic food and product regulations of the state.79

Sale and marketing of cosmetics

California Safe Cosmetics Act

Enacted in 2005, the California Safe Cosmetics Act requires the manufacturer, packer or distributor named on the label of cosmetic products sold in California to provide the California Safe Cosmetics Program (CSCP) with a list of all cosmetic products that contain any ingredients known or suspected to cause cancer or developmental or other reproductive harm.80 Companies with reportable ingredients in their products must submit information to the CSCP if the company:

  1. has annual aggregate sales of cosmetic products of US$1 million dollars or more; and
  2. has sold cosmetic products in California on or after 1 January 2007.81

Common cosmetic ingredients that require reporting are titanium dioxide, retinol/retinyl esters, the surfactant cocamide diethanolamine and the preservative butylated hydroxyanisole.82 In 2014, the CSCP launched its online searchable database, which provides the public with access to the information reported by cosmetics manufacturers, packers and distributors.83

California Organic Food and Farming Act

The California Organic Food and Farming Act, discussed in Section V.i, above, requires that cosmetic products sold, labelled or represented as organic or made with organic ingredients must contain at least 70 per cent organically produced ingredients.84 Multi-ingredient cosmetic products sold as organic that contain less than 70 per cent organically produced ingredients may only identify organic content with one of the following methods:

  1. identify each organically produced ingredient in the ingredient statement with the word 'organic' or with an asterisk or other reference mark that is defined below the ingredient statement to indicate the ingredient is organically produced; or
  2. display the product's percentage of organic contents on the information panel, if the organically produced ingredients are identified in the ingredient statement.85

ii Consumer protection and false advertising

California has three primary consumer protection statues, under which consumers may bring individual and class actions:

  1. the California Consumers Legal Remedies Act (CLRA);
  2. the California Unfair Competition Law (UCL); and
  3. the California False Advertising Law (FAL).86

CLRA

The CLRA aims 'to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection.'87 The CLRA enumerates several specific types of conduct that amount to 'unfair or deceptive acts' within the meaning of the Act, including 'passing off goods or services of another' and 'misrepresenting the source . . . of goods or services'.88 The CLRA allows consumers to bring individual or class action lawsuits to recover damages or seek injunctive relief.89

UCL

The UCL prohibits, and provides civil remedies for, 'unfair competition', which encompasses both illegal business practices and false advertising.90 The statute defines 'unfair competition' as 'any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising'.91 Accordingly, the UCL addresses anticompetitive business practices and the public's right to protection from fraud, deceit and unlawful conduct.92 Private standing to bring a UCL claim is limited to individuals who have suffered injury in fact and lost money or property as a result of unfair competition.93 Injunction and restitution are available to private litigants bringing claims under the UCL on an individual or class basis.94

FAL

The FAL 'is the major California legislation designed to protect consumers from false or deceptive advertising'.95 It prohibits advertising property or services with untrue or misleading statements or with the intent not to sell at the advertised price.96 The FAL's prohibition on certain untrue or misleading statements is broad in scope, as it encompasses not only advertising that is false, but also advertising that, although true, is either actually misleading or that has a capacity, likelihood or tendency to deceive or confuse the public.97 Private standing to bring a FAL claim is limited to individuals who have suffered injury in fact and lost money or property as a result of false advertising.98 The FAL allows consumers to bring individual or class action lawsuits to recover restitution or seek injunctive relief.99

Product liability

In California, there are several potential product liability theories of recovery available to plaintiffs against food manufacturers and distributors. Product liability claims are distinct from other forms of recovery in that a plaintiff must have actually experienced an injury or harm.

i Breach of implied warranty of merchantability for food

California recognises an implied warranty for the sale of food in that food must be fit for human consumption. If the food is contaminated or adulterated in such a way that it makes the food harmful to ingest, then the implied warranty is breached.100

ii Strict product liability – manufacturing defect

Under California law, a product is defective if it deviates from the manufacturer's intended result or from other ostensibly identical units of the same product line.101 The manufacturing defect theory posits that a suitable design is in place, but that the manufacturing process has in some way deviated from that design.102 A food manufacturer may be found strictly liable if the food in question contains a harmful defect, such as a bacterial contamination.

iii Strict product liability – failure to warn

In California, a food supplier may be held strictly liable if it was unreasonably dangerous to produce a food without adequate warnings related to known risks, side effects or allergic reactions.103 A food distributor may be liable if a consumer suffers an allergic reaction to a food containing an ingredient to which a substantial number of people are allergic and the supplier failed to adequately warn of the potential allergy.104

Intellectual property

Federal law pre-empts most state law intellectual property (IP) claims. Yet, there are some important California state law carve-outs for trade secrets and trademark protection. Understanding these distinctions is key to developing a robust IP strategy – particularly within the food, beverage and cosmetics industry.

i California Trade Secret Protection

A trade secret is any practice or process that is generally not known outside of the company. The Defend Trade Secrets Act (DTSA) affords a federal right of action for misappropriation of trade secrets.105 However, the DTSA does not pre-empt separate California state law claims under the California Trade Secrets Act (CUTSA).

A state claim under the CUTSA may provide a narrower scope of protection than a federal claim. First, under the CUTSA, the party alleging trade secret misappropriation must identify the facts supporting the claim with 'reasonable particularity' before initiating discovery.106 By comparison, a claim brought under the DTSA requires only a plausible claim for relief.107 Accordingly, the CUTSA's higher pleading standard means a California state claim is more likely to be dismissed at the pleadings. Also, unlike the DTSA, a CUTSA claim does not allow for seizure of property without prior notice to the defendant.108

ii California Trademark Protection

For food, beverage and cosmetic companies that market products that contain cannabidiol (CBD), California laws allow for state trademark protection in the absence of federal protection. Federal trademark protection is limited to lawful goods and services.109 This requirement makes cannabis-related marks ineligible for federal trademark registration – notwithstanding state laws.110

However, cannabis-related products are eligible for California trademark protection.111 Of course, state protection is limited to the geographic areas within California where the mark is in use.112 For example, the trademark for a lotion containing CBD that is sold in Santa Barbara County would not be protected from trademark infringement by another cosmetics company selling under the same mark in Los Angeles County.

In short, federal laws may pre-empt most state law claims for IP protection. But those who take advantage of both traditional and underutilised branches of IP protection – including state-level protections – will likely secure a competitive advantage in the market.

Trade organisations

Trade organisations have played a role in impact litigation for decades. In recent years, trade associations have spearheaded California litigation aimed at limiting the reach of Proposition 65 to two chemicals found in food – glyphosate and acrylamide.113

i Glyphosate

In National Association of Wheat Growers v. Becerra, plaintiff growers' associations and agri-business groups sought to enjoin an order from California's Office of Environmental Health Hazard Assessment (OEHHA) requiring a Proposition 65 warning on glyphosate-containing products.114 Glyphosate is the most widely used herbicide in the United States, and is used to control weeds.115 In 2015, the International Agency for Research on Cancer (IARC) classified glyphosate as 'probably carcinogenic' based on 'limited evidence' that the chemical causes cancer in humans.116 Following IARC's lead, OEHHA then listed glyphosate as a chemical known to cause cancer in 2017, thus implicating the warning label requirements of Proposition 65.117

On 22 June 2020, the court in National Association of Wheat Growers granted the plaintiffs' request for a permanent injunction, holding that the warning label requirements, as applied to glyphosate, violated the plaintiffs' First Amendment rights.118 The court determined that, while protecting Californians from chemicals containing cancer-inducing substances is a substantial state interest, 'misleading statements about glyphosate's carcinogenicity and the state's knowledge of that purported carcinogenicity, do not directly advance that interest'.119

ii Acrylamide

On 30 March 2021, the California Chamber of Commerce filed a lawsuit against then-California Attorney General Xavier Becerra and the Council for Education and Research on Toxics (CERT) challenging Proposition 65 warning requirements as applied to acrylamide-containing food products.120 Acrylamide is a 'toxic chemical', 'produced industrially for use in plastic, grouts, water treatment products, and cosmetics'.121 Acrylamide, however, can sometimes occur naturally as the chemical can form when cooking certain foods (e.g., coffee, French fries, almonds) at high temperatures.122

The plaintiff alleged that having to warn that the consumption of acrylamide-containing foods causes cancer in humans would be a forced false statement in violation of the First Amendment because the science on dietary acrylamide is unclear. The court granted the plaintiff's motion for a preliminary injunction and the state has appealed to the Ninth Circuit.123

Financing and M&A

Since Labor Day 2020, M&A activity in the beauty, cosmetic and personal care sector has been on the rise, fuelled by brands with strong digital and direct-to-consumer platforms and more recently by lessening of pandemic restrictions and the resulting normalisation of life. In addition, the great margins and cash flow of beauty companies – many of which are based in California – are attractive to private equity funds and brands with high engagement and loyalty are the focus of strategists. Clean beauty brands (products made with ingredients that are not harmful to human skin or health) and mission-focused brands (those that do well for the community or the environment) are and will continue to be at the forefront of investors' and buyers' minds. The increase in capital directed to female-founded and owned companies should not be underestimated when analysing the robust nature of M&A activity.

Special issues for certain products

i Alcohol

Alcoholic Beverage Control Act

The Alcoholic Beverage Control (ABC) Act is a comprehensive set of laws regulating the manufacture and sale of alcoholic beverages in the state of California. Enacted following the repeal of Prohibition in 1933, the ABC Act amended the California Constitution to empower the state with 'the exclusive right and power to license and regulate the manufacture, sale, purchase, possession, and transportation of alcoholic beverages within the State'.124 Today, the ABC Act is voluminous and amends a multitude of sections of the Business and Professions Code, Civil Code, Penal Code and Vehicle Code.125

Proposition 65

Alcoholic beverages are on California's list of substances known to the state to cause cancer or reproductive toxicity.126 The safe harbour warning for alcoholic beverages is:

WARNING: Drinking distilled spirits, beer, coolers, wine and other alcoholic beverages may increase cancer risk, and, during pregnancy, can cause birth defects. For more information go to www.P65Warnings.ca.gov/alcohol.127

OEHHA recently amended the safe harbour methods of transmission for Proposition 65 warnings on alcoholic beverages, effective 1 April 2021.128 Safe harbour warning methods vary depending on whether the alcoholic beverages are sold at a physical location,129 delivered to consumers in California at a location other than the point of sale130 or sold via the internet.131

ii CBD

In 2016, Proposition 64, the Control, Regulate and Tax Adult Use of Marijuana Act, legalised the use of cannabis and cannabis-related products in California for non-medical use by people aged 21 years or older.132 Currently pending in the California legislature, Assembly Bill 45 would permit CBD to be added to dietary supplements, food, beverages and pet food.133 However, manufacturers of dietary supplements and foods containing hemp would have to be able to demonstrate that all parts of the plant used to grow the hemp came from a state or country with an established and approved industrial hemp programme.134 The bill would also impose a US$250 fee on manufacturers to be used to create an Industrial Hemp Research Program at the University of California.135 Nonetheless, the Food and Drug Administration takes the position that CBD products violate the Federal Food Drug and Cosmetic Act.136

iii Sugar-sweetened beverages

In 2016, the City of San Francisco enacted an ordinance amending its Health Code to require the following warning on certain advertisements for sugary drinks:

WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a message from the City and County of San Francisco.137

The warning was to be enclosed in a rectangular border, also known as a black box warning, covering 20 per cent of the advertising space.138

A group of plaintiffs, including the American Beverage Association, the California Retailers Association and the California State Outdoor Advertising Association, sued, alleging that the ordinance violated the First Amendment because it impermissibly compelled commercial speech.139 The court denied the motion for preliminary injunction, reasoning that 'the City ordinance is factual and accurate, and the City had a reasonable basis for requiring the warning given its interest in public health and safety.'140 A Ninth Circuit en banc unanimously reversed the District Court, applying the Zauderer standard to the law, which 'contains three inquiries' – whether the disclosure is: (1) purely factual; (2) non-controversial; and (3) not unjustified or unduly burdensome.141 The majority focused its inquiry on whether San Francisco had met its 'burden of proving that the warning is neither unjustified nor unduly burdensome.'142 The court reasoned that the rectangular border and 20 per cent size requirements were 'not justified when balanced against [their] likely burden on protected speech', as evidence showed that San Francisco's 'goals could be accomplished with a smaller warning' that covered 'only 10 per cent of the image'.143

Following the Ninth Circuit's lead, in January 2020, San Francisco passed a new ordinance imposing similar warnings requirements on beverage labels, but modifying the text and reducing the required warning size from 20 per cent to 10 per cent.144 The same groups sued.145 The case is currently pending before the Northern District of California.

Outlook and conclusions

For years, California has actively legislated and regulated the food, beverage and cosmetics industries to protect and inform consumers. State agencies will continue to evolve their regulatory purview to match changes in the market and consumers' concerns. The state legislature's focus on consumer notification statutes signals a trend that is likely to continue.

Footnotes

1 Amy P Lally is a partner, and Adriane Peralta, Celia H Spalding and Patrick D Rubalcava IV are associates at Sidley Austin LLP. The authors would like to gratefully acknowledge the contributions of Maureen Gorsen, David Grinberg, Abigail Hudson, Kristina Martinez and Oge Maduike.

2 See Section II.B. infra.

3 See Section II.C. infra.

4 See Section III.C. infra.

5 See Section II.A. infra.

6 Cal. Health & Safety Code § 111792.6(b)(1).

7 Cal. Health & Safety Code § 111792.6(a)(2) and (b)(1)(A).

8 Cal. Health & Safety Code § 111792.6(a)(2) and (b)(1)(B).

9 Cal. Health & Safety Code § 111792.6(c)(1).

10 Cal. Health & Safety Code § 11045.

11 Cal. Labor Code § 6390.2.

12 Cal. Code. Regs., Tit. 8, § 337 and § 339.

13 See Cal. Labor Code § 6390.2.

14 See Cal. Labor Code § 6390.2.

15 Cal. Labor Code § 6302, 6307.

16 Cal. Health & Safety Code § 10890(a).

17 Cal. Health & Safety Code § 10890(a)(1), (2), (3), (7), (12).

18 Cal. Health & Safety Code § 10890(b).

19 See Section IV.A.2 infra.

20 See Section X.A infra.

21 See Section X.C infra.

22 See Cal. Health & Safety Code § 25214.11 et seq.

23 See Cal. Public Resource Code § 14500 et seq.

24 See Cal. Natural Resources Code § 17942 et seq.

25 On 24 September 2020, California Governor Gavin Newsom signed into law Assembly Bill 793 implementing these new postconsumer plastic recycled content standards. CalRecycle is currently developing regulations to implement Assembly Bill 793. See California Department of Resources Recycling and Recovery (CalRecycle), 'Plastic Minimum Content Standards (AB 793)', available at https://www.calrecycle.ca.gov/bevcontainer/bevdistman/plasticcontent.

26 See Cal. Health & Safety Code § 109875 et seq.

27 See Cal. Health & Safety Code § 109940.

28 See Cal. Health & Safety Code § 109895.

29 See Cal. Health & Safety Code § 110555 and § 110445.

30 See Cal. Health & Safety Code § 111825 et seq., § 111840 et seq., § 111860 et seq., and § 11190 et seq.

31 Cal. Health & Safety Code § 25249.5 et seq.

32 Cal. Code Regs., Tit. 27, § 27001(b).

33 Cal. Code Regs., Tit. 27, § 25102(i).

34 Cal. Code Regs., Tit. 27, § 25601(a) and (c).

35 Cal. Code Regs., Tit. 27, § 25602; § 25607.2(a)(2)–(5).

36 Cal. Health & Safety Code § 25249.7(c)–(d).

37 Sciortino v. Pepsico, Inc., 108 F. Supp. 3d 780, 792 (N.D. Cal. 2015); see also Hanna v. Walmart, Inc., No. 520CV01075MCSSHK, 2020 WL 7345680, at *1 (C.D. Cal. Nov. 4, 2020) (finding that complaint for failure to warn about glyphosate in the Roundup-brand herbicide was a Proposition 65 claim even though Proposition 65 was not mentioned in the complaint).

38 Cal. Health & Safety Code § 25249.7(a) and (b).

39 See Cal. Health & Safety Code § 25249.12(d) and Cal. Code Civ. Proc. § 1021.5.

40 Cal. Health & Safety Code § 108044(a).

41 Cal. Health & Safety Code § 108044(b).

42 Cal. Health & Safety Code § 108046(a).

43 Cal. Health & Safety Code § 108046(b).

44 Cal. Health & Safety Code § 110806(a).

47 Cal. Health & Safety Code § 110806(a).

48 Cal. Health & Safety Code § 110806(b).

49 Cal. Health & Safety Code § 110806(c).

50 Industrial Welfare Commission, Order No. 1-2001, Regulating Wages, Hours and Working Conditions in the Manufacturing Industry, available at https://www.dir.ca.gov/IWC/IWCArticle01.pdf.

51 Industrial Welfare Commission, Order No. 3-2001, Regulating Wages, Hours and Working Conditions in the Canning, Freezing, and Preserving Industry, available at https://www.dir.ca.gov/IWC/IWCArticle03.pdf.

52 Industrial Welfare Commission, Order No. 8-2001, Regulating Wages, Hours and Working Conditions in the Industries Handling Products After Harvest, available at https://www.dir.ca.gov/IWC/IWCArticle08.pdf.

53 Industrial Welfare Commission, Order No. 13-2001, Regulating Wages, Hours and Working Conditions in the Industries Preparing Agricultural Products for Market, on the Farm, available at dir.ca.gov/IWC/IWCArticle13.pdf.

54 Industrial Welfare Commission, Order No. 14-2001, Regulating Wages, Hours and Working Conditions in the Agricultural Occupations, available at https://www.dir.ca.gov/IWC/IWCArticle14.pdf.

55 Cal. Civ. Code §§ 46000–29.

56 Cal. Health & Safety Code § 46001.

57 Cal. Civ. Code §§ 46000–29.

58 Cal. Bus. & Prof. Code § 17508.

59 Cal. Civ. Code § 1714.43.

60 Cal. Civ. Code § 1714.43(b).

61 Cal. Civ. Code § 1714.43(a)(1).

62 Cal. Civ. Code § 1714.43(d).

63 Dana v. Hershey Co., 180 F. Supp. 3d 652 (N.D. Cal. 2016), aff'd, 730 F. App'x 460 (9th Cir. 2018); Hodson v. Mars, Inc., 162 F. Supp. 3d 1015 (N.D. Cal. 2016), aff'd, 891 F.3d 857 (9th Cir. 2018); McCoy v. Nestle USA, Inc., 173 F. Supp. 3d 954 (N.D. Cal. 2016), aff'd sub nom. McCoy v. Nestle USA, Inc., 730 F. App'x 462 (9th Cir. 2018).

64 Cal. Civ. Code § 1834.9(a).

65 Cal. Civ. Code § 1834.9.5.

66 Cal. Civ. Code § 1834.9.5(a).

67 Cal. Civ. Code § 1834.9.5(c).

68 Cal. Civ. Code § 1834.9.5(g).

69 Cal. Civ. Code § 1834.9.5(f).

70 Cal. Civ. Code § 1834.9.5(d).

71 See Cal. Health & Safety Code § 109875 et seq.

72 See Cal. Health & Safety Code § 110100, § 110390, § 110620, § 111700, § 110760, and § 111765.

73 See Cal. Health & Safety Code § 110390.

74 See Cal. Health & Safety Code § 110660 and § 111730.

75 See Simpson v. The Kroger Corp., 219 Cal. App. 4th 1352, 1368–69 (2013).

76 Cal. Health & Safety Code § 111791 et seq.

77 See Cal. Health & Safety Code § 111825 et seq., § 111840 et seq., § 111860 et seq., and § 11190 et seq.

78 See Cal. Health & Safety Code § 110820.

79 See Cal. Health & Safety Code §§ 110811, 110812.

80 Cal. Health & Safety Code § 111791 et seq.

81 Cal. Health & Safety Code § 111792.

82 See California Department of Public Health, 'Cosmetics Containing Ingredients Linked to Cancer or Reproductive Harm: Data Reported to the California Safe Cosmetics Program 2009–2015', available at https://www.cdph.ca.gov/Programs/CCDPHP/DEODC/OHB/CSCP/CDPH%20Document%20Library/DataReport.pdf.

83 See California Department of Public Health, 'Cosmetics Containing Ingredients Linked to Cancer or Reproductive Harm: Data Reported to the California Safe Cosmetics Program 2009–2015', available at https://www.cdph.ca.gov/Programs/CCDPHP/DEODC/OHB/CSCP/CDPH%20Document%20Library/DataReport.pdf.

84 Cal. Health & Safety Code § 110838.

85 Cal. Health & Safety Code § 110839.

86 See Cal. Civ. Code § 1750 et seq., Cal. Bus. & Prof. Code § 17200 et seq., and Cal. Bus. & Prof. Code § 17500 et seq.

87 Cal. Civ. Code § 1760.

88 For the full list, see Cal. Civ. Code § 1770(a).

89 See Cal. Civ. Code §§ 1780(a), 1782(d).

90 See Cal. Bus. & Prof. Code § 17200 et seq.

91 Cal. Bus. & Prof. Code § 17200 et seq.

92 Hewlett v. Squaw Valley Ski Corp., 54 Cal. App. 4th 499, 519 (1997).

93 See Hansen v. Newegg.com Ams. Inc., 25 Cal. App. 5th 714, 723 (2018).

94 Cal. Bus. & Prof. Code § 17203.

95 People v. Sup. Ct. (J.C. Penney Corp., Inc.), 34 Cal. App. 5th 376, 392 (2019) (quoting People v. Sup. Ct. (Olson), 96 Cal. App. 3d 181, 190 (1979)).

96 Cal. Bus. & Prof. Code § 17500 et seq.; see also McCann v. Lucky Money, Inc., 129 Cal. App. 4th 1382, 1388 (2005).

97 See People v. Sup. Ct. (J.C. Penney Corp., Inc.), 34 Cal. App. 5th 376, 392 (2019).

98 See Hansen v. Newegg.com Ams. Inc., 25 Cal. App. 5th 714, 723 (2018).

99 Cal. Bus. & Prof. Code § 17535.

100 CACI No. 1233 (2021).

101 Barker v. Lull Engineering Co., 20 Cal. 3d 413, 429 (1978).

102 Lucas v. City of Visalia, 726 F. Supp. 2d 1149, 1155 (E.D. Cal. 2010).

103 CACI No. 1205 (2021).

104 Livingston v. Marie Callender's, Inc., 72 Cal. App. 4th 830 (1999).

105 18 U.S.C. § 1836.

106 Cal. Civ. Proc. Code § 2019.210.

107 Fed. R. Civ. P. § 12(b)(6).

108 Of course, in practice, DTSA seizures without notice to the other party are only granted under extraordinary circumstances. See OOO Brunswick Rail Management v. Sultanov, No. 5:17-cv-00017-EJD, 2017 WL 67119 (N.D. Cal. Jan. 6, 2017); see also Balearia Caribbean Ltd., Corp v. Calvo, No. 16-23300-CIV-WILLIAM, 2017 WL 8780944 (S.D. Fla. Aug. 5, 2016) (denying a DTSA seizure request for failure to satisfy the 'extraordinary circumstances' test and instead issuing a temporary restraining order).

109 See generally Trademark Manual of Examining Procedure § 907; see also USPTO Examination Guide 1–19: Examination of Marks for Cannabis and Cannabis Related Goods and Services after Enactment of the 2018 Farm Bill.

110 Cannabis has been deemed illegal by the federal government under the Controlled Substances Act unless the product falls within the carve-out for hemp-derived goods and services with less than 0.3 per cent tetrahydrocannabinol. 21 USC § 802(16). Cannabidiol (CBD), a chemical constituent of the marijuana plant, is included in the Controlled Substances Act's definition of 'marijuana'. Id.

111 See Department of Cannabis Control, 'Registering Cannabis-Related Trademarks in California', https://cannabis.ca.gov/2019/04/29/registering-cannabis-related-trademarks-in-california/ (last visited July 24, 2021).

112 Under federal law, the Food and Drug Administration takes the position that CBD products violate the Federal Food Drug and Cosmetic Act.

113 See Section IX.C., infra¸ for discussion of additional impact litigation led by trade organisations.

114 Nat'l Ass'n of Wheat Growers v. Becerra, 468 F. Supp. 3d 1247, 1252–53 (E.D. Cal. 2020).

115 Nat'l Ass'n of Wheat Growers, 468 F. Supp. 3d at 1251 n.1.

116 Nat'l Ass'n of Wheat Growers, 468 F. Supp. 3d at 1252.

117 Nat'l Ass'n of Wheat Growers, 468 F. Supp. 3d at 1252.

118 Nat'l Ass'n of Wheat Growers, 469 F. Supp. 3d at 1265.

119 Nat'l Ass'n of Wheat Growers, 469 F. Supp. 3d at 1264.

120 See California Chamber of Com. v. Becerra, No. 219CV02019KJMEFB, 2021 WL 1193829 (E.D. Cal. Mar. 30, 2021).

121 California Chamber of Com, 2021 WL 1193829, at *1.

122 California Chamber of Com, 2021 WL 1193829, at *2.

123 California Chamber of Com. v. Bonta, Docket No. 21-15745 (9th Cir. Apr. 26, 2021).

124 Cal. Const. art. XX § 22.

125 For the full list of sections of code that the ABC Act amends, see California Alcohol Beverage Contract with Regulations and Related Statutes pages xiii–xv, available at https://www.abc.ca.gov/wp-content/uploads/2020_CA_ABC_Act.pdf.

126 See Cal. Code Regs., Tit. 27, § 27001(b).

127 Cal. Code Regs., Tit. 27, § 25607.4.

128 See C.F.R. § 25607.3.

129 C.F.R. § 25067.3(a)(1)(A)–(C).

130 C.F.R. § 25067.3(a)(2).

131 C.F.R. § 25067.3(a)(3).

132 Cal. Health & Safety Code §§ 11018, 11362.

133 Legislative Counsel's Digest, Assembly Bill 45.

134 Legislative Counsel's Digest, Assembly Bill 45.

135 Legislative Counsel's Digest, Assembly Bill 45.

136 See US Food and Drug Administration, 'FDA Regulation of Cannabis and Cannabis-Derived Products, Including Cannabidiol (CBD)', available at https://www.fda.gov/news-events/public-health-focus/fda-regulation-cannabis-and-cannabis-derived-products-including-cannabidiol-cbd.

137 City & Cty. Of S.F., Cal. Health Code art. 42, div. I, § 4202; § 4203(a).

138 City & Cty. Of S.F., Cal. Health Code art. 42, div. I, § 4203(b).

139 See Am. Beverage Ass'n v. City & Cty of San Francisco, 916 F.3d 749 (9th Cir. 2019).

140 Am. Beverage Ass'n v. City of San Francisco, 187 F. Supp. 3d 1123 (N.D. Cal. 2016), rev'd, 871 F.3d 884 (9th Cir. 2017), on reh'g en banc, 916 F.3d 749 (9th Cir. 2019), and rev'd and remanded, 916 F.3d 749 (9th Cir. 2019).

141 See Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 US 626 (1985).

142 Am. Beverage Ass'n, 916 F.3d at 756.

143 Am. Beverage Ass'n, 916 F.3d at 757.

144 City & Cty. Of S.F., Cal. Health Code art. 42, div. I, § 4203.

145 See Am. Beverage Ass'n v. City & Cty of San Francisco, Case No. 3:15-cv-3415 (N.D. Cal.).

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