U.S. On Verge Of "COOL" War

Those of us born before 1980 probably remember growing up the midst of the Cold War between the United States and Soviet Union. The Cold War ended in 1991, however, the U.S. could find itself facing a trade war, this time with its North American neighbors.

On Monday, the World Trade Organization ("WTO) ruled the U.S. country-of-origin labeling ("COOL") required on certain meat packaging discriminates against livestock from Canada and Mexico. The ruling could lead to retaliatory measures in the form of tariffs on U.S. imports.  Canada and Mexico have both indicated they intend to impose sanctions on U.S. exports as early as late summer.

The labeling law was originally introduced by Congress as part of the 2002 farm bill. The current rules require labels to state, for example, that the animal that produced the meat was "born in Mexico, raised and slaughtered in the United States" or "born, raised and slaughtered in the United States."  Canada and Mexico argued that these labeling requirements caused the prices of their meats to drop because meatpackers don’t want to go through the hassle and expense of segregating imported animals. The WTO report supports this argument, claiming that U.S. regulations, which require meat producers to indicate on retail packaging where each animal was born, raised and slaughtered, give less favorable treatment to imported meat than domestic products.

As a result of the WTO ruling, Congress is now faced with a tough choice: amend or repeal the law, or suffer punitive tariffs on a range of goods. Any amendment needs to be narrowly tailored so that U.S. meat producers are not favored over imports. In 2013 while the dispute was working its way through the WTO, Congress amend the labeling rules, but the WTO stated in their report the amendment did not go far enough. Repealing the law could appease Canada and Mexico and prevent a trade war; however, what message would this send to U.S. consumers? As consumer demand has been increasing over the past several years for transparency in the food supply, by repealing COOL Congress would in effect be telling consumers that U.S. trade interests are more important. How well this would sit with consumers is unknown, but with the 2016 election on the horizon I'm willing to bet legislators are polling their constituents on this issue. If Congress does nothing U.S. exporters will certainly suffer, most likely passing the additional cost onto consumers. But it isn't just additional cost, it's lost jobs. Jobs in the industries affected by the tariffs and jobs that supply those industries. In the stagnant economy in which we live, any action that results in job losses needs to be thoroughly reviewed.

The U.S. Congress is on the clock and the world is watching.  Whatever side you may be on, this is going to be a fight of historic proportions as money continues to pour in from all sides. Stayed tuned for updates as we closely follow this matter.

Label Reviews Are Critical For All Food Businesses

Imagine you are sitting at your desk on a Tuesday morning.  You are going over your financials in preparation for tax season when your assistant knocks on your door.  She walks into the office and drops mail on the desk.  She mentions an envelope addressed to your attention with the FDA listed as the return address. Curious, you open it and to your surprise you find a letter stating that your company has violated the Federal Food, Drug, and Cosmetic Act (the "Act"). The letter states that you have 15 days to respond with corrective actions you plan to take in response to the violations.

This isn't a hypothetical, this is similar to what happened to Kind LLC last month, the maker of Kind bars.  In the Warning Letter, the FDA noted multiple violations, including the improper use of the word "healthy" on the Kind bar labels.  Pursuant to federal regulations, a food can make a “healthy” claim only if it has 1 gram or less of saturated fat per serving and gets no more than 15 percent of its calories from saturated fat. The four Kind bars called out in the FDA’s letter—Fruit & Nut Almond & Apricot, Fruit & Nut Almond & Coconut, Kind Plus Peanut Butter Dark Chocolate + Protein, and Kind Plus Dark Chocolate Cherry Cashew + Antioxidants—have between 2.5 and 5 grams.

The letter also stated the use of the “+” symbol was in violation of the applicable regulations. The regulations state that “plus” can be used if a food has 10 percent more of a nutrient than another similar food, and the product lists that food. The Kind bars don’t.  Kind bars carry a “good source of fiber” claim, which claim is defined as 10 to 19 percent of the DRV for a nutrient. In this case, that’s 2.5 to 4.75 grams of fiber—and the Kind bars in question do meet the definition. However, if the product is not low-fat (containing 3 grams or less), then that fact must be disclosed on the label, near the fiber claim. Again Kind bars don’t.

While these are only some of the alleged violations in the Warning Letter, you can see the list is pretty extensive.  Not only must Kind respond to the FDA with corrective actions, but now they face the significant expense of revising their labels, adverting and website.  This is no small task for an international food producer. However, this risk could have been mitigated through an in-depth label review. The FDA's regulations covering health and nutritional claims are complex and not always transparent.  As demonstrated in the letter to Kind, this is a reminder of how important it is for food businesses to have an in-depth review of their labels and marketing prior to production.  Most important to point out is that FDA regulations affect businesses of all sizes, so small and startup food businesses with limited experience navigating federal regulations should pay particular attention to their labels and marketing.

If your business is unsure whether a product label is in compliance with, or need assistance in adapting your label to meet, FDA regulations please contact our attorneys at Morsel Law.

How Beverage Companies Can Avoid Unnecessary Lawsuits

In a recent suit filed in California, Millennium Products, Inc., the maker of GT’s Kombucha and Synergy drinks, was challenged on claims that its drinks contain "powerful antioxidants", which plaintiffs claim is in violation of the Food, Drug and Cosmetics Act because the antioxidant statements it makes are misleading and unauthorized nutrient content claims as proscribed by the FDA.

Pursuant to federal regulations, a nutrient content claim is a claim on a food product that directly or by implication characterizes the level of a nutrient in the food (e.g., "low fat," "high in oat bran," or "contains 100 calories"). Only those claims that are specifically defined in the regulations may be used, all other claims are prohibited. Previously approved nutrient content claims characterize the level of a particular nutrient (e.g., ‘low sodium’), whereas a term such as ‘high in antioxidants’ ties a claim (i.e., ‘high’) to a class of nutrients that share a specific characteristic (i.e., they are antioxidants).

GT’s label use lists “EGCG 100mg" (a polyphenol found in tea with recognized antioxidant properties) in order to substantiate their antioxidant claim. However, for claims characterizing the level of antioxidant nutrients in a food, a reference daily intake (RDI) must be established for each of the nutrients that are the subject of the claim, but in this case there is no established RDI for EGCG. Moreover, since GT's product is a type of tea, and the FDA considers tea a food with no nutritional significance, the plaintiffs claim the drinks do not contain “even a single antioxidant nutrient with an established RDI."

It is important to note that Millennium Products, Inc. isn't the only company to face legal action in recent years from consumers making false labeling claims. Recently, Twinings North America, Inc. was sued for allegedly deceiving consumers by mislabeling its teas as a "natural source of antioxidants", however, in this case the judge dismissed the lawsuit stating that a "natural source of antioxidants" is not a nutrient content claim because it did not state or imply the level of antioxidants. However, in warning letter sent in 2012 the FDA noted that the statement "very powerful antioxidant" is an unauthorized nutrient content claim because "very powerful" characterize the level of antioxidants in the product. Other tea producers were also sent warning letters by the FDA over their green teas because they were improperly labeled with the term “antioxidant” (see Unilever, Inc. maker of Lipton Tea and Dr Pepper Snapple Group).

As lawsuits are increasingly targeting food and beverage makers challenging their labeling claims, it is more important than ever to make sure your labels are thoroughly reviewed prior to introducing the products into the marketplace. If your business is unsure whether a product label is in compliance with, or need assistance in adapting your label to meet, FDA regulations please contact our attorneys at Morsel Law.

Update: Avoiding Costly Mistakes For Your Food Business

In an article I published last fall, the maker of Hellman's mayonnaise sued Hampton Creek Inc., the maker of Just Mayo, accusing the company of false advertising for calling its eggless spread "mayo". But due to the negative publicity Unilever received which painted it as a corporate bully, they eventually dropped the suit. However, Hampton Creek’s worries have not disappeared as they are now facing another legal challenge.

Earlier this month, a class-action lawsuit was filed in Florida state court again stating, among other things, that Just Mayo is misleading and therefore “misbranded” in violation of federal law. Unlike the previous suit, these plaintiffs are also asserting that Hampton Creek violated the Florida Deceptive and Unfair Trade Practices Act, which have more flexible standards than the federal Latham Act (the act under which the previous suit was filed). Considering many legal experts at the time thought Unilever has a strong case, Hampton Creek could be in a bit of trouble this time around. There is no multi-national corporation to launch a campaign against, only consumers who claim they were misled into thinking Just Mayo’s product was actually mayonnaise. Although I’m sure they are working diligently to come up with a strategy to combat their new foes.

The FDA regulations state that "mayonnaise" must contain at least 65% oil by weight, vinegar, and egg or egg yolks. However, Just Mayo doesn’t include eggs, instead it gets its emulsification from vegan pea protein. Hampton Creek states that it calls its spread "mayo", not "mayonnaise", and therefore argues that it doesn't need to comply with the "mayonnaise" definition.

The plaintiffs’ claim that Just Mayo misleads customers who think they are buying actual mayonnaise, not an egg-free spread. Under Federal law products are “misbranded” if their “labeling is false or misleading in any particular”. See 21 U.S.C. 343. The plaintiffs’ claim, as one of many reasons, Just Mayo is misleading because the label for features an egg with a plant growing over it and it refers to its product as "mayo" and “mayonnaise" in its marketing materials. Again, this is up for the court to decide and so only time will demonstrate whether this argument is a correct interpretation of the law.

Food manufacturers should ensure they thoroughly understand FDA regulations before labeling their products. This is not only to avoid a false advertising lawsuit, but also to avoid misbranding. It’s a prohibited act to distribute misbranded products and manufacturers can be subject to FDA enforcement and/or private party lawsuits. Whether the lawsuit could have been avoided, would be difficult to determine. However, food companies may minimize the chances of their products facing a legal challenge by consulting with an attorney familiar with FDA regulations.

If you need assistance navigating or complying with the laws affecting your food or beverage businesses, please feel free to contact our attorneys at Morsel Law.

The Fight is On: Congress Considers GMO Labeling

On Tuesday, the House Agricultural Committee conducted a hearing aimed at examining the costs and impacts of mandatory GMO labeling laws. If passed, it would create a federal law that would require manufacturers to label all genetically engineered foods and any food products that contain genetically engineered ingredients.

The Genetically Engineered Food Right-to-Know Act, introduced by Rep. Peter DeFazio (D-Ore.) in the House and by Sen. Barbara Boxer (D-Calif.) in the Senate, would direct the FDA to enforce the new rule. However, some industry groups would rather have a federal solution than a federal mandate. These industry groups, including the Grocery Manufacturers Association and the Snack Food Association, seek a federal solution of voluntary labeling that preempts state laws that require mandatory labeling, claiming that complying with a patchwork of state laws would dramatically increase costs for manufacturers and consumers. Whether this is true or not is up for debate.

In response to the Right-to-Know Act and supported by industry groups, a bipartisan bill was introduced on Wednesday by Rep. Mike Pompeo (R-Kan.) and Rep G.K. Butterfield (D-N.C.) that would bar states from requiring the labeling of foods derived from genetically-modified organisms. The proposed legislation would set up, as an alternative, a U.S. labeling program that would certify foods that are free of genetically modified organisms. But the program would be voluntary, and does not require genetically-modified foods to be labeled. Thus, it would preempt state laws requiring mandatory GMO labeling (i.e., Vermont, Maine and Connecticut).

Currently, the FDA currently supports voluntary labeling in which food manufacturers indicate whether their products have or have not been developed through genetic engineering “provided such labeling is truthful and not misleading.” Which, in lay terms, means no federal requirement for GMO labeling exists.

Whatever side you may be on, this is going to be a fight of historic proportions as money continues to pour in from both sides. Stayed tuned for updates as we closely follow these bills while they make their way through the legislative process.

Avoiding Costly Mistakes For Your Food Business

Unilever PLC, the maker of Hellman's mayonnaise, has sued California startup Hampton Creek Inc. accusing the company of false advertising for calling its eggless spread "mayo".  The consumer products giant is demanding that the maker of Just Mayo change its label and is also seeking compensation for unspecified damages.  The question for food companies is could this costly lawsuit have been avoided?

The FDA regulations state that "mayonnaise" must contain at least 65% oil by weight, vinegar, and egg or egg yolks.  However, Just Mayo doesn’t include eggs, instead it gets its emulsification from vegan pea protein.  Hampton Creek states that it calls its spread "mayo", not "mayonnaise", and therefore argues that it doesn't need to comply with the "mayonnaise" definition.

Unilever also claims that Just Mayo misleads customers who think they are buying actual mayonnaise, not an egg-free spread.  Whether this is true or not will be determined by the courts, however, under Federal law products are “misbranded” if their “labeling is false or misleading in any particular”. See 21 U.S.C. 343.  So how is Just Mayo misleading?  Well, for one, the label for Just Mayo features an egg with a plant growing over it and it refers to its product as "mayo" and mayonnaise" in its marketing materials.  We aren't saying that Just Mayo is "misbranded", again that is for the courts to decide, but food manufacturers should watch this case closely as it may have an impact their business going forward.

Food manufacturers should ensure they thoroughly understand FDA regulations before labeling their products.  This is not only to avoid a false advertising lawsuit, but also to avoid misbranding.  It’s a prohibited act to distribute misbranded products and manufacturers can be subject to FDA enforcement and/or private party lawsuits.  So to address the initial question posed above, whether the lawsuit could have been avoided, would be difficult to determine.  However, food companies may minimize the chances of their products facing a legal challenge by consulting with an attorney familiar with FDA regulations.  

If you need assistance navigating or complying with the laws affecting your food or beverage businesses, please feel free to contact our attorneys at Morsel Law.

"Gluten-Free" Must Now Be Gluten-Free

After a year of phasing in compliance, the Food and Drug Administration now requires any food labeled “gluten-free,” to contain no more than 20-parts per million of gluten, which is the lowest level detectable in food and one that would generally be acceptable even for those who suffer extreme gluten-intolerance health problems. The rule also holds foods labeled “without gluten,” “free of gluten,” and “no gluten” to the same standard.  The rule also brings the United States in line with international labeling standards that are employed across Europe and other parts of the world.

Products must not contain any wheat, barley or hybrids, or be derived from a gluten-containing grain that has not been processed to remove gluten.  However, some products that are labeled "gluten-free" that have levels above the defined levels of acceptability for gluten-free products may still be allowed to remain on shelves for the next six months to a year as the ban isn’t retroactive.  While the FDA has insisted that companies phase out above-acceptable levels of gluten in their gluten-free products, those with long shelf-lives, like pasta, may remain on shelves.

The FDA will engage in additional rulemaking to establish how it will determine compliance for hydrolyzed and fermented foods (e.g., yogurt, sauerkraut, hydrolyzed protein) because the current methods cannot quantify gluten in these foods.  In the meantime, hydrolyzed and fermented foods that meet the definition of "gluten-free" may bear a gluten free claim.  The FDA will exercise enforcement discretion to beer that currently makes a “gluten-free” claim and that are (a) made from a non-gluten-containing grain or (b) made from a gluten-containing grain, where the beer has been subject to processing that the manufacturer has determined will remove gluten.  This enforcement discretion pertains only to beers subject to FDA’s jurisdiction and that were making a "gluten-free" claim as of August 5, 2013. Please note that the FDA regulates non-malt beers (beers made without malted barley or hops).

The effective compliance date of the rule is August 5, 2014.  Products labeled prior to the compliance date that bear the claim “gluten-free” will not be subject to regulatory action by FDA.  However, any product labeled by the manufacturer on or after August 5, 2014, bearing a “gluten-free” labeling claim that does not comply with the definition will be subject to regulatory action.  The "gluten-free" final rule applies only to packaged foods, the FDA expects restaurants that use “gluten-free” on their menus are consistent with the federal definition; however, the final rule does obligate restaurants to be in compliance.  

If you need assistance to determine whether your food product is in compliance with the FDA labeling requirements, please contact the attorneys at Morsel Law.

Is My Product Organic or Natural?

As the natural and organic market continues to gain strength, with sales topping $81 billion in 2012, businesses are striving to meet consumer demand.  However, for businesses that are entering this sector in hopes of capturing some of the market share, understanding the difference between labeling your product as "organic" and "natural" is essential to ensure you don't run afoul of federal regulators.

All agriculture products sold, labeled or represented as organic need to be in compliance with the Organic Foods Production Act of 1990 (the "Act").  Pursuant to the regulations promulgated by the Act, organic growers and handlers (including food processors and distributors) must be certified by state or private agencies/organizations under the uniform standards developed by the USDA; however, farmers and handlers who sell less than $5,000 of organic products per year, and retail food establishments that sell organic products but do not process them, are exempt from certification.  In order to label your product as "organic" at least 95% of the contents need to be certified organic.  Products labeled as "made with organic" ingredients must contain at least 70% organically produced ingredients.  Obviously, if you label your product "100% organic" it must be true.  The USDA organic seal may be used only on products that are "100% organic" or "organic".  Fines of up to $11,000 per violation can be levied against any person who knowingly sells or labels a product as organic that is not produced in accordance with the regulations.

Now labeling your product as"natural" is a whole different story.  Up to this point the FDA has refused to define the term "natural", but has noted on an informal statement support for the policy that "nothing artificial or synthetic is included in, or has been added to, the product that would not be expected to be there."  58 Fed. Reg. 2302, 2407 (Jan. 6, 1993).  The USDA, however, has defined "natural" (when applied to meat, poultry or eggs) as a product containing no artificial ingredient or added color and is only minimally processed.  "Minimally processed" means that the product was processed in a manner that does not fundamentally alter the product.  Although there has been much litigation concerning natural labeling, there is no clear standard under the FDA regulations.

If you need assistance navigating or complying with the laws affecting your food or beverage businesses, please feel free to contact our attorneys at Morsel Law.