Mother Nature’s Perfect Litigation Storm: “Natural”

Claims December 11 , 2012

Moderator Travis Tu, Patterson Belknap Webb & Tyler LLP

Panelists Amy Mudge, Venable LLP

Annie Ugurlayan, National Advertising Division Svetlana Walker, The Clorox Company

Natural Claims

An Overview of the Regulatory Landscape

Travis Tu Patterson Belknap

Webb & Tyler LLP

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Natural Claims Are Everywhere

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The Market for Natural Products Continues to Grow in All Channels of Trade

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Natural Food Merchandiser 2012 Market Overview

As Natural Claims Have Moved From Niche to Mainstream They Have Attracted Attention From:

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As Natural Claims Have Moved From Niche to Mainstream They Have Attracted Attention From:

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As Natural Claims Have Moved From Niche to Mainstream They Have Attracted Attention From:

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As Natural Claims Have Moved From Niche to Mainstream They Have Attracted Attention From:

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As Natural Claims Have Moved From Niche to Mainstream They Have Attracted Attention From:

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But what are the rules?

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Federal Trade Commission

Has declined to define “natural”

1978 – 1983 Abandoned effort to regulate natural claims Decided to scrutinize “on a case-by-case basis”1

2010 Declined to define “natural” in the Proposed Revisions to the Green Guides because: – No commentators provided data on consumer understanding of

the term “natural,” and – “Natural” conveys different meanings depending on the context2

11 1. 48 Fed . Reg. 23270 (May 24, 1983). 2. 16 CFR Part 260 (Oct. 6, 2010).

Federal Trade Commission

Current position: Advertisers must be able to substantiate whatever message their “natural” claims reasonably convey to consumers

Context will matter.

12

FTC Green Guides Statement of Basis and Purpose, pp. 265-66 (Oct. 2010).

Food and Drug Administration

Has so far declined to define “natural” across the board

1991-1993 Declined to define “natural” after requesting comments Cited resource limitations and other agency priorities1

2006—2007 Declined to act on citizen petitions requesting rulemaking

2010 Declined to act on referral from a Federal District Court

13 1. 56 Fed. Reg. 60421, 60466-60467 (Nov. 27, 1991)

Food and Drug Administration

Current position:

Definition of “natural flavor”1

Informal Policy on Natural Claims:

“The agency will maintain its policy regarding the use of ‘natural,’ as meaning that nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in the food”2

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1. 21 CFR §101.22(a)(3). 2. 58 Fed. Reg. 2302, 2407 (Jan. 6, 1993).

U.S. Department of Agriculture

USDA permits natural claims for meat and poultry if:

1. No artificial flavor, color, chemical preservative, or other artificial or synthetic ingredient

1. Minimal processing

1. Label explains meaning of natural

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United States Department of Agriculture Food Standards and Labeling Policy Book (August 2005).

U.S. Department of Agriculture

National Organic Program (“NOP”)

Regulates the term “organic” for agricultural products

Products sold or labeled as “100 percent organic,” “organic” or “made with organic ingredients” must meet NOP standards:

Must be produced and handled without using prohibited methods or synthetic substances Operators who produce or handle must be certified by NOP-accredited agent

Products that are “100 percent organic” or “organic”may use the USDA organic seal

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7 CFR Part 205

Topics For Discussion

1. How much and what type of processing is okay?

2. Should all product categories be held to the same standard?

3. Is there a difference between “natural” and “all natural”?

4. Do consumers understand the difference between “natural” and “organic”?

5. When, if ever, does “natural” imply products are healthier?

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1. 48 F.R. 23270 (May 24, 1983). 2. 16 CFR Part 260 (Oct. 6, 2010).

Food and Natural Claims

Amy Ralph Mudge

Venable LLP

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Longstanding Concerns over Natural Claims

• “If they have to put the word ‘natural’ on a box to convince you, it probably isn’t”

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The Courts are the New Battleground

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• “More than a dozen lawyers who took on the tobacco companies have filed 25 cases in the last 4 months against industry players . . . that stock pantry shelves and refrigerators across America.”

• Cases take aim at: -“healthy” claims -Ingredient claims (e.g., “evaporated cane juice” or fruit claims) -“natural” claims

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• “Food companies will argue that these are harmless crimes — the tobacco companies said the same thing.”

• Mislabeling food products per Don Barrett “It’s a crime — and that makes it a crime to sell it.”

• “That means these products should be taken off the shelves.” • “The lawyers are looking to base damages on products’ sales.”

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Breakdown of Natural Food Cases

• How Sweet It Is – High Fructose Corn Syrup – No-Calorie Sweeteners – Sugar in the Raw – Evaporated cane juice

• Genetically Modified Ingredients • Artificial Preservatives • Processed with Chemicals or Other Alleged Unnatural Ingredients

– Alkalized cocoa powder – Not quite fruit – Processed vitamins/minerals – Artificial trans fat – Processed soy and soy protein – Petrochemicals – Thickeners 23

For the Visual Leaners: In Pie Chart

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Venue of Choice

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Venue Plan Bs:

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“I'm not making wheatgrass here. If I could put an agave plant and some limes on a shelf I would. The Skinnygirl Margarita is as close to nature as possible, while still being a shelf-stable product.” Bethany Frankel, to Access Hollywood.

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Isn’t this all Preempted?

• Holk v. Snapple, 574 F. Supp. 2d 447 (D.N.J. 2008) – D.N.J. found implied field preemption for labeling claims – Citing to FDA’s regulation of natural flavor concluded “the FDCA

and the FDA regulations so thoroughly occupy the field of beverage labeling at issue in this case that it would be unreasonable to infer that Congress intended to supplement this areas”

– Court would “not determine’that which the FDA, with all of its scientific expertise, has yet to determine,’ namely how the terms ‘natural’ or ‘all natural’ should be defined and whether either may be used on the label of a beverage containing HFCS”

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Nope

• Holk v. Snapple, 575 F.3d 329 (3d Cir. 2009) – “Health and safety issues have traditionally fallen within the province of

state regulation. This is true of the regulation of food and beverage labeling and branding.”

– Quoting FDA that “[t]he agency does not use its authority to reempt State requirements unless there is a genuine need to stop the proliferation of inconsistent requirements between FDA and the States.”

– “In the instant case, not only do we lack a ‘clear and manifest’ statement from Congress of its attempt to preempt, but we also note that the claims in this case are governed by the presumption against preemption.”

– FDA’s policy statement regarding the use of the term natural does not “have the force of law required to preempt conflicting state law” as it is not the result of a “formal, deliberative process”. . . . There is no conflict in this case because there is no FDA policy with which state law would conflict.”

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Any good news in court?

• Recent cases dismissing some but not all claims – Magnuson Moss – Common law fraud – Unjust enrichment

• But MDLs generally denied – Same bite at apple for different plaintiffs

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FDA Silence

• 1991: solicited comments on a potential rule noting that “use of the term ‘natural’ on [a] food label is of considerable interest to consumers and industry”

• 1993: “After reviewing and considering the comments, the agency continues to believe that if the term ‘natural’ is adequately defined, the ambiguity surrounding use of this term that results in misleading claims could be abated. However, as the comments reflect, there are many facets to this issue that the agency will have to carefully consider if it undertakes a rulemaking to define the term ‘natural.’ Because of resource limitations and other agency priorities, FDA is not undertaking rulemaking to establish a definition for “natural” at this time.” 58 F.R. 2302-01.

• 2007: FDA Interviews said not enough evidence that consumers were being misled: but “[i]f there was, then [the FDA] would definitely raise it as a priority.” and “The bottom line is we’d have to have consumer research that shows overwhelmingly that people are being misled.”

• 2010: “Consumers currently receive some protection in the absence of a definition of ‘natural’ because the [FDCA] and FDA’s implementing regulations require that all ingredients used in a food be declared on the food’s label.”

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FDA HFCS Flip Flop

• “Synthetic fixing agents in the enzyme preparation, which is then used to produce HFCS, would not be consistent with our . . . Policy regarding the use of the term ‘natural’. Consequently we would object to the use of the term ‘natural’ on a product containing HFCS.” – 4/08 Geraldine June, Supervisor, Product Evaluation & Labeling Team,

FDA Office of Nutrition • “It is our understanding that the enzyme used to make HFCS is fixed

to a column by the use of a synthetic fixing agent, gulataraldehyde. Because [this] does not come into contact with the high dextrose corn starch hydrolysate, it would not be included in or added to the HFCS. Therefore, we would not object to the use of the term ‘natural’ on a product containing the HFCS.” – 6/08 letter from June to the Corn Refiners Association

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USDA Preservative Flip Flop

• The USDA provided in the notes of its 2005 Food Standards and Labeling Policy Book that sodium lactate (from a corn source) is an acceptable use of “all natural” claim

• Hormel Foods brought petition requesting rulemaking for an official definition of “natural” and arguing a classification of sodium lactate as natural substance is not consistent with the USDA’s prohibition of chemical preservatives being described as natural.

• The USDA revised its notes, removing “sodium lactate” from its guidance and USDA now decides whether sodium lactate is “natural” on a case to case basis

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State Law Confusion • November 2012 California Prop 37

defeated • Would have

– required labeling of foods with genetically modified ingredients

– prohibited use of “natural” with GMO foods • Citizen’s Petition filed with FDA urging

same • Efforts to pass similar legislation in 29

other states 34

What to Do?

• Remove natural

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FDA Guidance

• 56 F.R. 60421-01 (1991) • No added color (natural or not) • No artificial flavors

– “Any substance, the function of which is to impart flavor, which is not derived from a spice, fruit or fruit juice, vegetable or vegetable juice, edible yeast, herb, bark, bud, root, leaf or similar plant material, meat, fish, poultry, eggs, dairy products, or fermentation products thereof”

• Nothing “artificial” or “synthetic” included in or added to a product “that would not normally be expected to be there”

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FDA “Guidance”

• “What is the meaning of ‘natural’ on the label of food? From a food science perspective, it is difficult to define a food product that is ‘natural’ because the food has probably been processed and is no longer the product of the earth. That said, the FDA has not developed a definition for use of the term natural or its derivatives. However, the agency has not objected to the use of the term if the food does not contain added color, artificial flavors, or synthetic substances.” www.fda.gov

• Policy carries the weight of an advisory opinion and creates a safe harbor from FDA enforcement only; NOT a legal requirement. 21 C.F.R. § 10.85(d), (e), (j).

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USDA Guidance

• No artificial flavor or flavoring • No coloring ingredient • No chemical preservative (21 CFR 101.22) • No “artificial or synthetic ingredient”

– “Substance that is formulated or manufactured by a chemical process or by a process dependent on an enzyme extracted from a naturally occurring plant, animal, or mineral sources, except that such term shall not apply to substances crated by naturally occurring biological process”

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USDA Guidance

• “Product and its ingredients are not more than minimally processed” • “Minimal processing means that the product was processed in a

manner that does not fundamentally alter the product.” • “The label must include a statement explaining the meaning of the

term natural (such as ‘no artificial ingredients; minimally processed’).”

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USDA NOP Guidance

• Non-synthetic: “A substance that is derived from mineral, plant, or animal matter that does not undergo a synthetic process”

• Synthetic: “A substance that is formulated or manufactured by a chemical process or by a process that chemically changes a substance extracted from naturally occurring plant, animal or mineral sources, except that such term shall not apply to substances created by naturally occurring biological processes.”

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Key Litigation Factual Issues

• What is synthetic? – Products or ingredients

• What is minimally processed? • What is a chemical preservative? • What is not normally expected to be in a food? • Can any product with wheat or corn be called natural because it

almost certainly has genetically modified ingredients?

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What to do? FIGHT!

• Many Class Certification Issues – 23(a) typicality or 23(b)(2) predominance issues: Do consumers

buy food due to natural claims or some other reason? – Can injury and damages be shown on a class-wide basis? – Is the named representative adequate to represent the class? – Can you certify a nationwide class under a state law?

• Substantive Issues Not Ripe for 12(b)(6) are Summary Judgment Fodder

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What to do?

• First clue: can you say it without thinking much? – Propylene glycol monostearate – Tetrasodium pyrophosphate – Pyridoxine hydrochloride – Pantothenate – Fructooligosaccharides – Cyanocobalamin

• If not, you are a target

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What to do?

• Look behind your ingredients – GMO

• “Each of the products that are the subject of this action contain corn and vegetable oil as their main ingredients. But the corn and vegetable oils (including corn, soybean, and canola oils) are made from genetically modified plants and organisms.”

• “Monsanto Company defines GMO on its website as food with a genetic makeup altered to exhibit traits that are not naturally theirs.”

– Natural flavors • Is cocoa natural? • Is it processed with potassium carbonate, an artificial

alkalizing agent v. sodium carbonate or sodium bicarbonate?

– Flavor Packets?

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What to do? Focus on Specific Ingredients

• “Made with natural . . .” • “Naturally flavored” • Use caution and look at overall

context. NAD asked Gerber to discontinue “100% natural fruit” claim as concerned implied whole product was natural (#5409)

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What to do?

• Focus on What is NOT in your product

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What to do?

• Alternative language: – “Simple ingredients” – “Homestyle” – “From our kitchen to yours” – “Down to earth”

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What to do?

• Get specific with transparency • Tell your consumers exactly what you mean when you say “natural” • Do it naturally (pun intended) within the main claim itself and not in

mouse type

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What to do?

• Consider use of seals

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What to do?

• Consider an organic claim • 100% Organic: Completely organic/ made of only organic

ingredients qualify for this claim and a USDA Organic seal. • Organic: 95-99% of ingredients by weight are organic (and rest not

available organically) qualify for this claim and a USDA Organic seal.

• Made with Organic Ingredients: At least 70% of ingredients are certified organic. The USDA organic seal cannot be used but “made with organic ingredients” may appear on its packaging and up to 3 ingredients can be listed.

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What to do?

• Take a hard look to make sure no unintended implied claims – of a safer product – of a healthier product – of an environmental benefit

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Natural Claims for Cosmetics

and Cleaning Products

Svetlana N. Walker The Clorox Company

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The Definition of Natural Is: _____

• Lack of official definition/standards for “Natural” has led to companies seeking other alternatives from third party certifying bodies and consumer advocacy organizations

• “Natural” more difficult to define in practice than terms such as “organic” or “non-toxic,” especially for cosmetic and home cleaning products.

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Natural Cosmetics Litigation

• Astiana v. The Hain Celestial Group, Inc., et al. (N.D. Cal. Nov 19, 2012).

– In the absence of any FDA rules or regulations (or even informal policy statements) regarding the use of the word "natural" on cosmetics labels, the court declines to make any independent determination of whether defendants' use of "natural" was false or misleading. Doing so would "risk undercutting the FDA's expert judgments and authority."

• Stephenson v. Neutrogena Corp., class action – filed Feb. 2012 – alleged false claims by marketing cleansers as “natural” when they contain synthetic ingredients

• Trewin v. Church & Dwight, Inc., class action – filed March 2012 – alleged false claims for “natural” deodorant because it contains synthetic ingredients

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Third Party Standards

• Lack of federal standards has led to the development of third party certification programs and seals

• Need for clarity and standardization in the industry to drive certainty for marketers and consumers.

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Third Party “Natural” Standards – Some Notable Names

• NPA (for cleaning products and cosmetics)

• BDIH (cosmetics) • NSF Internationa/Natrue (in

development for cosmetics)

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NPA Home Care Standard

• Launched in February 2010 • Guidelines cover household

cleaners, laundry detergents, and hard surface cleaners

• Aim is to create easily identifiable seal and standardize criteria for “Natural” home cleaning products

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NPA Home Care Standard, cont.

• Natural Certification Program and Seal of Approval: – Product should be made up of at least 95% natural ingredients

or ingredients derived from natural sources (excl. water) – No ingredients with any suspected human health risks – No processes that significantly or adversely alter the natural

ingredients – Ingredients that come from a purposeful, natural source – Processes that are minimal and don’t use synthetic/harsh

chemicals – Non-natural ingredients only when no viable natural alternative

ingredients are available and only when there are absolutely no suspected potential human health risks.

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EPA Commentary

• Design for the Environment FAQ: – “Are products labeled “natural” safer than other products?

• It is impossible to say without knowing the product ingredients and understanding their potential effects. Cleaning products marketed as “natural” typically use chemicals made from corn or other biological sources, rather than petroleum. While these cleaning products may be made out of renewable resources, their “natural” ingredients are still chemically identical to those made from petroleum […].”

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NPA Standard for “Natural” Personal Care

• NPA Natural Seal can apply to both personal care products and personal care ingredients

• Products labeled as natural must: – Be made with at least 95% natural ingredients – excluding water – Contain only synthetic ingredients specifically allowed under this standard – Ingredients derived from renewable resources – Strict restrictions on non-natural ingredients – Ingredients with suspected risk to human health prohibited

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NSF International & Natrue Effort

• NSF International and Natrue are partnering to develop new standard for “natural” cosmetics

• Standard intended to be developed on a consensus basis from interested parties and consumers

• NPA commented against the development of a separate standard, citing that it would only add more complexity and confusion for industry and consumers

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Current Natrue Standard for “Natural” Cosmetics

• No synthetic colors, fragrances, preservatives • Minimal processing of natural ingredients to derive products such as

surfactants • Distinction of “Derived Natural Substances”

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Best Practices in the Industry for “Natural” Claims

• Unofficial best practices for cleaning products and cosmetics include: – Avoiding the use of ingredients that are thought to contribute to

human health hazards; – Using minimal processing of ingredients and formulas as much

as possible; – Transparency of ingredient declarations and product formulas; – Use of ingredients derived from botanical/natural sources (i.e.,

use of corn-based surfactants, essential oils for fragrances).

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Natural, All Natural, Sourced from Nature: An Advertising Primer

NAD’s “Natural” Cases

Annie M. Ugurlayan

Senior Staff Attorney

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• Claims which state or imply that a product is “natural” will be reviewed in context and must be truthful, accurate and not misleading.

• Consider the target audience – consumers who actively seek out natural products and are willing to pay a premium for them.

• NAD tries to harmonize its decisions with any relevant regulatory authority.

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FDA Regulation re: “Natural”

• 53 Fed. Reg. 2302, 2407 (Jan. 6, 1993) – “The agency will maintain its current policy (as discussed in the general principles proposal (56 FR 60421 at 60466)) not to restrict the use of the term "natural" except for added color, synthetic substances, and flavors as provided in § 101.22.

• Additionally, the agency will maintain its policy (Ref. 32) regarding the use of "natural," as meaning that nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in the food.” (emphasis added)

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Tom’s of Maine (Tom’s of Maine Natural Mouthwash), Report #3470 (June 1998)

• “natural mouthwash” • “ingredients from nature”

• Issue: does natural mean 100% natural?

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Answer: Depends on the context

• Label states: “Tom’s of Maine Natural Mouthwash is a refreshing departure from the excessively sweet, alcohol-based mouthwashes on the market today. Unlike most brands, our Natural mouthwash has always been alcohol and saccharin free. Instead, you’ll find delicious natural spearmint oil for a refreshing flavor. And in place of alcohol, we use witch hazel and soothing aloe vera juice.”

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• NAD noted that the advertiser could call its product “Natural Mouthwash” but that to prevent any potential for consumer confusion, the advertiser should 1) avoid claiming, directly or by implication, that its product is 100% or completely natural; and 2) more accurately communicate on its label and in its other advertising that the product contains an ingredient (poloxamer 335) that is not inherently “natural” or “sourced from nature.”

• While the mouthwash contained mostly natural ingredients, 1% of the product was comprised of poloxamer 335, a synthetic solubizing (dissolving) agent and consumers (especially the target audience’s significant interest in natural products) could reasonably expect the product to be “all natural” when that is not the case.

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McNabb Nutraceuticals, LLC (Sunology Sunblock), Report #5509 (September 2012)

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“Sunscreen for skin that prefers no chemicals.” – “Active ingredients derived from nature.”

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Issue: does the advertising convey an “all natural” or “no chemical” message?

• Main claim is limited by reference to active ingredients being derived from nature.

• All product ingredients, active and inactive (some of the latter include chemicals) are clearly disclosed on the product and its packaging.

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Food products

Issues:

• 1) Does “natural” mean the product is “100% natural?”

• 2) Does the product category impact consumer expectation (i.e., would consumers expect artificial ingredients to be in food)?

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Gerber Products Company (Gerber Baby Foods), Report #5409 (January 2012)

Gerber’s NUTRIPROTECT blend provides “healthy growth and natural immune support” “Made with 100% Natural Fruit”

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1) The advertiser should avoid referring to the immune support offered by the product as being “natural.” – product contains additives. – “natural” modified “support” which presumably refers to the

product as offering a natural way to support one’s immune system.

2) NAD recommended that the claim “made with 100% natural fruit” be discontinued. – although the term “natural” literally modifies “fruit,” consumers

could reasonably take away a message that the product is “all natural,” i.e. lacking in any synthetic ingredients.

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Swiss Research, Inc. (Shugr Sweetener), Report #4442 (January 2006)

Heartland Sweeteners, LLC (Ideal®), Report #5125 (December 2009)

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Shugr: “The New Natural Sweetener” “The natural sweetener that you can enjoy and not have to worry about placing your health in jeopardy” Ideal: “More than 99% Natural” “Ideal is the perfect alternative to sugar and sugar substitutes because it…is made with Xylitol, a natural sweetener found in fruits and vegetables.”

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Shugr: • Claims must be discontinued.

– FDA policy suggests that where an artificial ingredient is added to a food that is not expected to be in the food, the food product may not claim to be “natural.”

– Consumers do not expect a “natural sweetener” to contain artificial ingredients.

– Shugr is promoted as being superior to other so-called “artificial sweeteners” yet like other products in this category, what makes Shugr sweet (sucralose) is not natural.

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Ideal: • Claims must be discontinued.

– Reasonable takeaway from the advertising is that Ideal is free of

artificial sweeteners when, in fact, Ideal gets its sweet taste, in large part, from an artificial substance.

– Ideal is not distinguishable from Shugr – simply because federal

regulations do not explicitly prohibit labeling a sugar substitute product as “natural” does not mean that such claims will meet the standards in advertising law.

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Context Specific

• 1) La Crème is an all-natural, real, 100% dairy creamer consisting of milk and cream.

• 2) The 100% diary, natural/real attributes of La Crème create an objectively better tasting creamer versus all non-dairy creamers.

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LALA-USA, Inc. (La Crème Real Dairy Creamer), Report #5359, NAD/CARU Case Reports (August 2011)

• In this context, no such implied claims are being made: – No express claims that the product is “natural” or “all-natural.”

– Reference to “natural” is only with respect to La Crème’s natural

flavors.

– No images (such as farms or other natural outdoor settings) in combination with the La Crème product that would imply, or contribute to the implication, that La Crème is all natural.

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Household Cleaning Products

Issues: 1) Does “natural” mean safer/healthier?” 2) Do consumer expectations change for household cleaning products?

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Seventh Generation, Inc. (Seventh Generation Household Cleaning & Laundry Products), Report #5206 (September 2010)

• Seventh Generation Detergents are [100%] natural.

• There is no regulatory definition of what constitutes “natural” for this product category and no industry consensus.

• Many household cleaning and laundry products are labeled “natural” with no explanation as to what “natural” means.

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1) Product packaging - NAD determined that the use of “natural” on the listed products should be qualified to make it clear that the basis for the claim is the fact that the products are plant-derived or plant-based.

2) Commercial – NAD recommended that the reference to “naturally” be discontinued and that the advertiser avoid conveying the unsupported message that its product is all natural.

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Jelmar, Inc. (CLR Enhanced Formula), Report #4379 (August 2005) “Tough-acting enhanced formula CLR has natural ingredients and even more cleaning power.”

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EPA Label Review Manual, 3rd Ed. (August 2003), at p. 139: “EPA’s policy does not permit the use of the terms “natural” or “naturally” in the labeling of any products, including biopesticide products, both microbials and biochemicals. These terms cannot be well defined, and may possibly be misconstrued by consumers as a safety claim.”

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• Discontinue the claim “CLR has natural ingredients” – Conveys a safety message unsupported by the evidence

• Even though the acids contains in CLR are derived from the fermentation of natural starches and proteins and are arguably “natural,” CLR is still toxic.

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