Genetically modified organism lemons

California’s Secretary of State recently announced that the California Right to Know Labeling Initiative will be Proposition 37 on this November’s state ballot. If passed, this initiative would require labeling by food manufacturers of any genetically modified organisms (GMOs), also known as genetically engineered organisms (GEOs).

GMOs made their first public appearance in 1994, when a tomato became the first genetically engineered product sold. Since then, GMOs have become increasingly more common in everyday products. In fact, the Grocery Manufacturers of America estimates that approximately 70 to 75% of processed foods available in U.S. grocery stores contain a GMO.   Furthermore, the FDA, which oversees product labeling requirements, considers GMOs to be “generally regarded as safe” (GRAS) and does not require that they be identified on product labels.  Nevertheless, despite nearly two decades of main stream retailing, it seems that the American public remains largely unfamiliar with the both the benefits and commonality of GMOs, as well the scientific community’s support for their safety.

How will Prop 37 impact the food manufacturing industry?

Should California vote in favor of Proposition 37, the imposition of similar labeling requirements is likely to follow in other states around the country.  As a result, manufacturers will likely experience increases in operational costs, as they are forced to adjust their manner of handling and preparing their products to account for GMOs.  Furthermore, food companies will also see increased legal costs,  because increased labeling requirements would also increase the potential for litigation, namely false-labeling class actions, which are becoming increasingly more common.  These class actions are not only costly to defend, but also harmful to a food company’s brand.

Where will these impacts manifest?   

  • Food producers will need to implement a system for maintaining separate inventories of product, so as not to mix the GMOs and non-GMOs.
  • Companies will be forced to amend their HACCP plans to address the handling of GMOs.
  • Overhead may increase as a result of inconsistent GMO labeling requirements nationally.
  • Companies will be forced to choose between having one label which adheres to each state’s requirements and utilizing different labels depending on the state in which the GMO containing product will be sold.
  • In response to potential consumer backlash against products containing GMOs, food manufacturing companies may need to raise the price of their products, discontinue certain brands, or engage in costly marketing campaigns to ensure future profitability.
  • Increased labeling requirements would also increase the potential for litigation in the form of false-labeling claims.

In business, smart companies aim to do business ethically and place the health and safety of their consumers first; they have the ability to meet goals while still complying legally with an ever-changing legislative landscape.

What are smart companies in the California food industry doing to prevent consumer backlash and insulate themselves from potential lawsuits in a post-Proposition 37 market?

  • Communicating: In-house counsel and litigation counsel should be having frequent conversations regarding the short and long impact of this initiative. Great litigation firms not only understand how legislative changes impact their clients’ ability to remain profitable, but they are proactively providing solutions that address present and future challenges, as well as ensuring that their clients understand the risks and outcomes associated with each.
  • Searching for Opportunities: Proposition 37 is an agent of change. Whether that change has a positive or negative impact on a company can depend largely on the ability of the organization’s leadership to seek out opportunities to enhance performance and value. This is another area where outside counsel can be particularly effective by providing in-house training, trend analysis and creative, cost-effective solutions.
  • Understanding that Knowledge is Power: In a real-time, social media driven world smart companies are making sure that their websites are not only current but linked across their social media platforms so that brand loyal consumers have easy access to product information that is transparent and accurate.
  • Seeing the Bigger Picture: Should Proposition 37 pass, other states may soon follow suit and impose similar labeling requirements which could increase the potential for litigation, including class action law suits. Often these types of suits can be prevented by aggressively and rapidly responding to an initial claim. Make sure your litigation attorneys have an intimate understanding of legal nuances and variances for each state where you do business so that they can respond to any threats immediately and appropriately.

Like the food industry, we will watch carefully this fall to see whether California votes in favor of Proposition 37.  Until then, the authors would be pleased to respond to any questions our readers may have regarding Proposition 37 and the potential impact we believe it could have on the food industry.