Legal News

Prop 65 Lawsuits Filed Against Big Fries and Big Chains

Will Raw Foods Be the Fast Food of the Future?

As usual California lawyers will continue to use the state’s own unique laws to tackle food policy issues as two recent lawsuits based upon Prop 65’s notice requirements illustrate.

Saying he doesn’t sue “small fries,” Raphael Metzger, a Southern California “Prop 65” plaintiff’s attorney, has filed an action in Los Angeles Superior Court against Burger King and McDonald’s alleging that the firms have to post Prop 65 health warnings in their restaurants because their french fries (like french fries everywhere along with other fried and baked foods) contain acrylamide, a carcinogen. Prop 65 warning notices are required for acrylamide exposures in excess of 0.2 mg., which is far lower than the amount per serving found in many foods. Metzger’s suit also includes an Unfair Competition Claim. Industry has responded by noting that Prop 65 has an exception for cooking necessary to render food palatable or kill microorganisms. Plaintiffs Prop 65 attorneys are now stating that Metzger’s lawsuit might push the envelope on federal legislation to preempt Prop 65 labeling of processed food products. Talk about a possible self-inflicted wound.

Meanwhile, the Contaminants and Natural Toxicants Subcommittee of the FDA’s Food Advisory Committee recently met to assess the safety of acrylamide. At the meeting the FDA estimated that there is a 500 fold safety factor for current acrylamide exposure and a Swedish study concluded that there is no link between acrylamides and cancer.

California Attorney General Bill Lockyer has filed Prop 65 lawsuits against 5 supermarket chains claiming that they violated the act by not posting warning notices that fresh tuna, swordfish and shark contain high levels of mercury. The California Grocers Association responded that the organization is working with the AG’s office on a proposed notice. It appears that restaurants will be next in line.

 

FTC Extends “Sliding Scale” COPPA Consent Rule; Fines Company for Violations

The FTC has extended the COPPA rule allowing sliding scale parental consent. The sliding scale rule was scheduled to expire on April 21. The FTC’s action extends the rule until April 21, 2005.

COPPA requires that a website operator obtain verifiable parental consent when collecting personal information from children 12 and younger. Under the sliding scale rule, if the website operator is not going to release the child’s information to a third party, then verifiable parental consent can be obtained by email, or obtaining the parent’s address or telephone number and confirming the parent’s consent by letter or telephone call. Once the rule expires, consent can only be obtained by a written consent form, credit card verification, calling a toll free number, digital certificate or use of a PIN.

Separately, Ohio Art, the maker of the Etch-A-Sketch toy, has agreed to pay a $35,000 penalty for collecting personal information from children without obtaining verifiable parental consent, collecting more information than was necessary, not providing parents with the opportunity to review the child’s personal information and not providing opt out alternative.

Comment:
Expect to see continued strict enforcement of COPPA by the FTC. Zackler & Associates can audit your online marketing for COPPA compliance.

 

FTC SUES TO BLOCK SEAGRAM DEAL

Citing concerns that a proposed agreement to acquire Seagram’s wine and spirit business will lead to less competition in the sale and distribution of rum, the Federal Trade Commission has brought suit in October 2001 to block the transaction. Under the proposed deal, Diageo PLC and Pernod Ricard S.A. were to jointly acquire the assets of Vivendi Universal S.A.’s Seagram Wine and Spirits business. Seagram and Diageo are currently the number two and three sellers of rum in the United States. The number one seller of rum in the U.S. market is Bicardi. FTC alleges that if the deal were to be approved, the new number three rum distributor would have only a two-percent market share, leaving the Bicardi and Diageo/Seagram with effective duopoly control of the rum market.

“The proposed merger would consolidate the second and third largest U.S. rum producers, leaving only two large sellers of rum in the United States. This will create a dangerous likelihood of reduced competition and higher prices for the consumers of rum,“ said Joe Simons, the Director of the FTC Bureau of Competition.

All the companies involved in the transaction are hoping to resolve FTC concerns and reach a settlement before the case comes to trial. If the deal were allowed to proceed, Diageo, the world’s number one alcohol and spirits company, would acquire 61% of Seagram’s liquor assets, including Crown Royal, VO Canadian whiskeys, Captain Morgan and Myers rums, 7 Crown American whisky and Sterling Vineyards. Pernod would get the remainder of Seagram’s alcohol business, including Chivas Regal, Glen Grant, Royal Salute and Glenlivit whiskies, Seagram’s Extra Dry gin and Martell cognac. Earlier this year, the deal was approved by European regulators after the acquiring companies agreed to divest certain Seagram’s assets including Sandeman ports and sherries and Seagram’s coolers and mixers divisions.

 

FTC APPROVES NESTLE PURCHASE OF RALSTON PURINA

On December 11, 2001, the FTC approved a proposed consent decree that will allow Nestle Holdings, Inc. to complete its $10.3 billion purchase of Ralston Purina Company. FTC said the consent decree ensures that the combined companies will not control the dry cat food market in the United States. Under the consent decree, Nestle has agreed to divest Ralston Purina’s Meow Mix and Alley Cat brands to J.W. Childs Equity Partners (d.b.a. Hartz Mountain). Nestle has also agreed to relinquish its international trademarks in the brands and to co-pack both brands for Childs for up to two years. Childs has agreed not to re-sell the cat food assets for five years without the FTC’s consent.

“Without the terms provided by this consent decree, Nestle would acquire, among other things, Meow Mix, the best selling cat food brand in the country, and as a result would have nearly a 45% share of the U.S. dry cat food market across all levels of distribution. The order will ensure that Childs becomes a strong competitor in the market for dry cat food, to the benefit of consumers nationwide,” said the FTC’s Joe Simons. Nestle’s current pet food business includes the Friskies, Fancy Feast, Mighty Dog and Alpo brands. Ralston Purina’s remaining pet food brands include Dog Chow, Cat Chow and Purina Special Care. Even after the divestments, Nestle will now control 45% of the U.S. pet food market.