July 18, 2013

California Set to Cut Sellers Some Slack . . . Again

Seller Beware: Consumer Protection Insights for Industry,

If you remember when software was mainly sold on a disk inside a big box, you may also remember lawsuits claiming that this violated state "slack fill" requirements -- as if software were sold by volume. Those frivolous suits were eliminated by a 1997 California law, but in recent years the issue has resurfaced for sellers of cosmetics, food, and other consumer products.

In California, as in every other state, nonfunctional "slack fill" is banned: sellers are of course prohibited from misleading consumers into buying more than they are. But there are some good reasons for having empty space in a package -- for instance, contents may settle in shipping, or a package for a very small item needs to be bigger in order to deter shoplifting or even to allow the package to display required information. And -- as with software -- empty space is not necessarily deceptive. Deciding where to draw the line has not been an issue in most of the country, and consumer advocates are certainly policing practices they believe are questionable. But, perhaps not surprisingly, litigation has ensued in California.

Shop 'Til You Drop

In the last few years, enterprising multi-county posses of California District Attorneys have gone on shopping sprees for items they believe violate the state's anti-slack fill requirements. Reports indicate there have been more than a dozen significant investigations, with several so far leading to public settlements. Such lawsuits include a 2011 slack fill claim against Harry & David brought by Sacramento, Yolo, and Fresno counties, and a 2008 lawsuit against the company that makes the drug Mucinex, which netted Los Angeles, Sacramento, and Shasta counties nearly $300,000. Additionally, Alameda, Monterey, Napa, Santa Clara, and Sonoma counties netted a $200,000 settlement from Clorox for allegedly slack-filled detergent containers. Prior to 2004, the penalties from such settlements went to the state's general fund, but with the passage of Proposition 64, which reformed the state's Unfair Competition Law, District Attorneys are allowed to retain penalties. They therefore have an incentive -- and a revolving funding source -- for aggressive enforcement.

Déjà vu All Over Again

During the 1990s, numerous businesses such as software, cosmetic, and toy companies faced California lawsuits by consumer class action lawyers and district attorneys for the use of nonfunctional slack fill in product packaging. Back then, before 2004's Proposition 64, in order to sue, a private plaintiff did not need to have even purchased the product, much less claim he or she was legitimately mislead by the packaging. (District Attorneys of course do not need to represent someone who claims to have been harmed.)

To address the uncertainty and expense of this litigation, in 1997 the California Legislature overwhelmingly enacted AB1394. This law was sponsored by various manufacturer associations and was designed to curtail these harassing and often spurious slack fill claims. More information about the sorts of lawsuits prompting passage of AB 1394 is available here and here. AB 1394 set out a long list of "safe harbors" -- legitimate reasons for a package to contain empty space that does not deceive consumers -- in order to give clear guidance to businesses and prevent spurious lawsuits.

But apparently the monetary incentives of Proposition 64 helped fuel the creative juices of District Attorneys, who have now developed a new view of the AB 1394 safe harbors that allows them to proceed with litigation over packaging that in some cases no consumer has ever even complained about much less been deceived by. The Legislature is now set to quash the District Attorneys' imagination.

Senate Bill 465

On May 29, the California State Senate unanimously reaffirmed its strong stance against fraudulent packaging practices, while reinforcing its commitment to promoting commerce in the state. SB 465 has passed one Assembly committee unanimously and appears to be on the fast track to the Governor's desk.

Sponsors of SB 465, including the food and cosmetics industries, believe that litigious District Attorneys are acting under the false rationale that packaging with nonfunctional slack fill is per se illegal, whether or not the packaging falls within one of the enumerated safe-harbors. SB 465 clarifies that there is no such per se rule and reinforces the scope of the safe-harbor exceptions.

SB 465 amends Sections 12606 and 12606.2 of the Business & Professions Code and Section 110375 of the Health & Safety Code relating to packaging and labeling. The bill is not intended to change the law and therefore would cover pending investigations and suits. It clarifies that the mere existence of nonfunctional slack fill is not sufficient to find a violation of the law. The bill refines the definition of nonfunctional slack fill as "the empty space in a package that is filled to substantially less than its capacity for reasons other than" those specified in the law.

Current law defines fifteen permissible uses of slack fill. SB 465 makes only superficial changes to the language of these safe-harbors. The fifteen safe-harbors are, in short:

  • Protection of the contents*
  • Requirements of the machines*
  • Unavoidable product settling*
  • Space for mandatory labeling*
  • Container has value*
  • Inability to increase level of fill or reduce size of package*
  • "Reasonable relationship"
  • Representation of actual size
  • Necessary space for mixing
  • Delivery device
  • Component kit
  • Tester or display units
  • Holiday and gift packages
  • Free sample or gift
  • Hardware and software

(The six safe-harbors marked with an asterisks are exceptions that also apply to food containers under § 12606.2.)

Even if SB 465 is enacted, slack fill allegations are likely to continue in California, albeit at a slower pace. Although other state and federal laws contain much more general prohibitions on slack fill, the California standards are the most precise, and perhaps the most stringent, in the nation. Sellers of consumer products would be wise to review their packaging closely against the safe harbors set out in California law lest they find themselves encircled by a posse of California District Attorneys.

© Arnold & Porter Kaye Scholer LLP 2013 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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