CA’s Prop 65: Good for Consumers, Bad for Business?

What is California’s Proposition 65?

Also known as California’s Safe Drinking Water and Toxic Enforcement Act of 1986, Proposition 65 (“Prop 65”) requires the State to publish a list of harmful chemicals known to cause cancer, birth defects, or other reproductive damage. To comply with the regulation, businesses selling products to consumers in California must provide notification to said consumers if their products contain any one of the approximately 800 harmful chemicals listed. This notification must be a “clear and reasonable” warning, allowing consumers to make an informed decision regarding the potentially harmful products they are purchasing.

SOURCE: https://www.sema.org/prop65

How Does Proposition 65 Affect Businesses?

While the regulation is aimed at protecting consumers and their health, it has negative effects on businesses selling products in California for multiple reasons:

The Ever-Growing List

The list of harmful chemicals provided by the State continues to grow and change. This creates a difficult situation for businesses, who, as a result, often do not know a product contains a harmful chemical until after they receive notice from an affected consumer. Other times, businesses fail to provide new warning labels on old products containing newly listed chemicals that originally weren’t listed by the State. In both cases, businesses are subject to penalties and liabilities that could be detrimental to the businesses themselves.

The Cost Factor

Updating labels can be incredibly costly and time consuming for businesses, especially those with a smaller number of employees. However, both small and large business can be negatively affected by Prop 65 in their own way. While smaller businesses may have less products to worry about, they also have less employees and resources to help with Proposition 65 compliance. Less resources means more time must be set aside to comply with this California regulation – and time is money.

Larger businesses could have an equally large product base that needs updating. This means going through each and every product to ensure that the new warning label requirements are met. Furthermore, this could mean testing products to verify whether or not they contain any listed chemicals. This becomes especially true as new chemicals are added to the list. If a business acquires another business with a large product base that has not had to previously comply with Prop 65 and does not know which products contain which potentially harmful chemicals (believe it or not, this does happen), the acquiring business is going to have a tough and costly time.

The National Business Problem   

Businesses whose products sell nationally will most likely put Proposition 65 warning labels on all products, despite whether the products will actually be sold in California or not. It is almost impossible to guarantee that one of your products will not be sold in California (or to a California resident) when you are a national business that sells products to all (or many) states. This has become an even more prevalent issue with the introduction of online retailers. By providing warning labels on all products, while it may be in the best interest of the consumer, many consumers (especially those not from California) will be spooked by the warning label and possibly deterred from purchasing the product. As a result, national companies could lose business by complying with Proposition 65 due to adverse consumer response to the harmful chemical disclosure on products. Unfortunately, unless a business can guarantee that a product will not be sold in California or to a Californian consumer, it is in the best interest of the business to provide a “clear and reasonable” notification to consumers of the potentially harmful chemicals that are within the product.

Whose Problem Is It?

According to Proposition 65, any business that manufactures, distributes or sells any product that contains a harmful chemical “known to the [State of California] to cause cancer or reproductive toxicity” will have to comply with the new regulations. In other words, both manufacturers and retailers have a responsibility to ensure that Californian consumers receive notice or warning of any harmful chemicals in their products. In previous iterations of Proposition 65, more burden was naturally placed on retailers. However, the new regulations will require manufacturers to either label their products with warnings or notify retailers that their products have yet to be labelled and, in addition, provide retailers with all necessary materials for said labelling.

Internet retailers must comply with the updated Proposition 65 as well. While internet-based businesses do have their own unique form of compliance, the burden is just as heavy as it is on manufacturers. With a vast online marketplace that seems to be growing every day, internet purchases are more popular now than ever before. This means that internet-based compliance with Prop 65 is incredibly important, especially given the fact online purchasers will not be able to read an on-product label from manufacturers. Thus, internet retailers must notify consumers independently of (or in association with) manufacturers to ensure “clear and reasonable” warnings are given.

Proposition 65 Moving Forward

On August 30, 2018, the new “clear and reasonable” warning requirements will come into effect, meaning all products manufactured after this date will have to comply with the new standards. Notable changes include a new warning symbol, long-form warnings now requiring exact reference to the chemical substance in question (see above from above), a change in the warning label language itself, and even the inclusion of the Prop 65 website. The extent of these changes will depend on the type of chemical or chemicals in the product (carcinogen, reproductive toxicant, etc.). In any event, businesses should begin to comply with the new regulations as soon as possible to limit any future liability, costly litigation, or government penalties.

SOURCES:

https://oehha.ca.gov/proposition-65/about-proposition-65

https://www.cancer.org/cancer/cancer-causes/general-info/cancer-warning-labels-based-on-californias-proposition-65.html

https://oehha.ca.gov/proposition-65/general-info/proposition-65-plain-language

https://www.sema.org/prop65

27 CCR § 25600.2 

27 CCR § 25601

27 CCR § 25602

27 CCR § 25603

3 comments

  1. Robert · February 27, 2018 at 12:23 pm ·

    Cameron,

    Very interesting article. I was not aware of how extensive proposition 65 was with regard to number of chemicals covered or that it covered both manufacturers and distributor/sellers. I was particularly surprised that online retailers could not fulfill their labeling requirement by have the information posted online with the product.

    It will be interesting to see if these new regulations end up getting challenged in court or not.

    Great Job
    -Bob

  2. bts5128 · February 27, 2018 at 8:39 pm ·

    Because many articles you find about consumer protections are written from the perspective of the consumer, it was enlightening looking at a law like Prop 65 from the business’s point of view. We, as consumers, don’t really think too much about warning labels and the headache they may cause for small businesses. At the same time, it’s tough to dislike a law that aims to protect citizens from harmful chemicals; I guess it’s kind of a balancing act. Something I found intriguing about your post was the idea that a business could be in violation of Prop 65 if they sell to a California resident even if not in California. I wonder how California enforces that rule.
    I was not really aware of Prop 65 before reading this, and it really made me think about the business costs of consumer protection. Well done.

    -Ben Shipman

  3. pwj2 · February 28, 2018 at 4:02 am ·

    This just goes to show how influential a state laws such as these can be. Compliance with California’s regulation will definitely become a must even for out-of-state businesses. I would even go so far to say that proposition 65 may even have consequences internationally for foreign businesses looking to sell their products within the United States. What will be interesting to see is whether other states will adopt similar regulations, one could only imagine how much more complicated compliance would be if no standard form of regulation is adopted. Great read!

    -Paul