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ICMAD Regulatory Update
By: Jeff Falk
Posted: March 7, 2007
page 2 of 3
Judith Praitis, esquire, Sidley Austin LLP, offered an insightful presentation on California’s Proposition 65 and the consequences for the personal care and cosmetics industry.
Billed as an act to protect drinking waters, California voters passed Proposition 65 in 1986. Vagaries in the wording have allowed “bounty hunter plaintiffs” to apply Prop 65 to products across a gamut of industries, taking advantage of the fact that it is usually cheaper to settle than to fight. Leaded, colored glass, for example, cost that industry $7 million. The position presented in court was that there was a reasonable level (as defined in Prop 65) of exposure to lead through touch. Overall, the mean settlement is $160,000, though there are many nuisance settlements for $20-60,000.
Lucrative plaintiff action has made every aspect of the personal care/cosmetic industry susceptible to potential liable actions. Soot from candles, for example, produces Prop 65 chemicals, and Prop 65 chemical are, with very few exceptions, used in the production of clothe materials often used in packaging. This means that manufacturers and marketers have to safeguard themselves by certifying that every aspect of their products meet Prop 65 standards.
Non-compliance is also costly in itself. The penalties can be up to $2,500 per day for each violation. Praitis put that cost in perspective by using a bottle of 100 daily vitamins as an example. In theory, there are 100 violations worth $2,500 in that one bottle—multiplied by X number of users. Once a claim is identified, a manufacturer has a year to comply before fines are imposed.
California has taken the view that if you can be sued in the state, you are under the guidelines of Proposition 65, and both manufactures and retailers can be held liable if the products are sold in the state. The state has interpreted the wording of “knowingly” and “intentionally” in the proposition to mean you should have reasonable knowledge of the chemicals in a product. In California, a business has intentionally spread Prop 65 chemicals (violating the law) “as long as the business intend to sell the product.” In short, if the intention is only to sell product and you are ignorant of chemicals in any aspect of the product, you have intentionally violated the law.