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Proposed Amendments to Prop 65 Regulations May Force Changes to E-Commerce Warnings

By:  Kate T. Spelman and Amy Egerton-Wiley

Proposition 65 warnings are familiar to any business that manufactures, distributes, or supplies consumer products for sale in California. Enacted through a ballot initiative in 1986 as “the Safe Drinking Water and Toxic Enforcement Act,” Proposition 65 requires businesses to provide “clear and reasonable” warnings to consumers regarding exposure to certain carcinogenic and/or toxic chemicals identified by the California EPA’s Office of Environmental Health Hazard Assessment (OEHHA). image from environblog.jenner.com

Recent amendments—and proposed amendments—to the Proposition 65 warning regulations purportedly seek to clarify ambiguities related to the who, what, where, and when of providing safe harbor warnings under the law. With respect to internet purchases, however, the proposed amendments arguably go farther than simply clarifying the existing law, requiring e-commerce businesses to provide multiple warnings not required of brick-and-mortar retailers.

I. Recent Amendments Addressing Responsibility for Proposition 65 Warnings

OEHHA’s most recent amendments to the Proposition 65 warning regulations became effective on April 1, 2020. These amendments clarify the roles of upstream sellers and retail sellers in providing Proposition 65 warnings to consumers.

The warning regulations previously provided that upstream sellers (including manufacturers, distributors, and importers) could satisfy the Proposition 65 warning requirement with either an on-label warning, “or by providing a written notice directly to the authorized agent for a retail seller.” This “written notice” provision created confusion for upstream businesses involved in complicated supply chains or otherwise without knowledge of the final retail seller of the product at issue. The April 2020 amendments helpfully clarify that upstream sellers are only required to provide Proposition 65 notices to their direct customers, which in some cases may be other manufacturers or distributors as opposed to retailers. The April 2020 amendments also clarify that an upstream seller may deliver such notice to its customer’s “legal agent” if that customer has not selected an “authorized agent” for purposes of Proposition 65.

Moreover, the warning regulations previously imposed on retailers the obligation to provide Proposition 65 warnings to certain consumers after obtaining “actual knowledge” of a covered exposure, with “actual knowledge” defined as “specific knowledge of the consumer product exposure received by the retail seller from any reliable source.” This definition proved ambiguous, and the April 2020 amendments clarify that a retailer has “actual knowledge” only when “the retail seller receives information from any reliable source that allows it to identify the specific product or products that cause the consumer product exposure.” The April 2020 amendments also limit “actual knowledge” to knowledge received by a retailer’s “authorized agent or a person whose knowledge can be imputed to the retailer.” This revision limits retailers’ legal exposure in the event a lower-level employee fails to take action after they obtain knowledge of a covered exposure.

II. Proposed Amendments Addressing Methods for Communicating Proposition 65 Warnings

OEHHA has also proposed several additional amendments to the 2016 warning regulations that are currently making their way through the rulemaking process. These proposed amendments address Proposition 65’s safe harbor provisions as they apply to internet and catalog sales, as well as the sale of alcoholic beverages. As explained further below, while OEHHA has characterized these amendments as clarifications, industry groups have warned that one of the proposed amendments represents a “dramatic change to the safe harbor warning regulations.”

Internet and Catalog Sales

Under the current safe harbor regulations, a Proposition 65 warning provided in connection with an internet or catalog purchase must appear on the seller’s website or in the catalog as specified in Article 6 Section 25602(b) and (c), and must be transmitted using one or more of the methods specified in Section 25602(a). The Section 25602(a) transmission methods include posted signs or shelf tags, on-label warnings, and warnings “provided via any electronic device or process that automatically provides the warning to the purchaser prior to or during the purchase of the consumer product, without requiring the purchaser to seek out the warning” (the electronic warning). Pursuant to the plain language of the regulations, online sellers may—and often do—satisfy Proposition 65’s safe harbor regulations for e-commerce by providing website and electronic warnings only.

According to OEHHA, the agency “has received a number of inquiries from affected businesses concerning the requirement in the safe-harbor regulations to provide both a warning for sales on the internet or through a catalog, and a warning with or on products delivered to consumers.” Thus, OEHHA proposes to “clarify” the requirement by making the following revisions to the regulations:

  • Making clear that the warning requirements for internet and catalog purchases as described in Section 25602(b) and (c) apply must be satisfied in connection with the warnings for specific product, chemical and area exposure enumerated in Section 25607, et seq.;
  • Specifying that internet purchases include mobile device applications; and
  • Limiting the use of the electronic warning method to “physical retail location[s].”

The last of these three proposed revisions has caused significant concern in the business community. A coalition of 26 business organizations, including the California Chamber of Commerce (the coalition), submitted a comment to OEHHA characterizing the proposed revision as a “dramatic change to the safe harbor warning regulations, not a clarification.” According to the coalition, limitation of the electronic warning option to “physical retail locations” will force businesses to provide on-label warnings for all products sold through the internet, thereby resulting in two warnings for such products—one on the seller’s website or mobile application, and one on the label. The coalition expressed concern that this change would require businesses to overhaul their Proposition 65 warning programs after having just significantly revised the programs as recently as 2018, and could spur frivolous litigation.

The coalition’s concerns appear justified. As written, OEHHA’s proposed amendment would seemingly require e-commerce businesses that previously provided online-only warnings to provide additional warnings on the products themselves, resulting in a two-warning requirement for online sellers while permitting physical retailers to continue providing a single warning at the point of sale.

Alcoholic Beverage Warnings

The proposed amendments also revise the Proposition 65 warning requirements for the sale of alcoholic beverages. While the existing regulations require specific warnings for alcoholic beverages sold “through package delivery services,” the proposed regulations would require product-specific warnings “prior to or during the purchase of the product” for any deliveries of alcoholic beverages directly to consumers.

The proposed amendments also impose a separate warning requirement for alcoholic beverages sold over the internet or through a catalog. For such sales, a warning must be provided “prior to or contemporaneously with the delivery of the product” on either the shipping container or package, or by email or text message as part of the e-receipt or confirmation of purchase. This proposed revision would bring the Proposition 65 warning regulations in line with a recent settlement between the California Attorney General and numerous e-commerce businesses, including DoorDash and Postmates, that sell or facilitate the sale of alcohol online.

In light of OEHHA’s proposed amendments, e-commerce businesses should prepare for the possibility that they may be forced to update their compliance programs yet again should they seek the continued shelter of Proposition 65’s regulatory safe harbor.

Reprinted with permission from the May 4 issue of The Recorder. © [2020] ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved. The original article can be viewed here.