Speaking at a Snack Food Association webinar on Thursday, Martin Hahn, a partner in Hogan Lovells’ Washington DC office, noted that the Vermont attorney general William Sorrell had recently promised a six-month safe harbor period for foods without compliant labels that were distributed before July 1 and offered for sale through December 31.
Sorrell had also stressed that state enforcement action would focus on “willful violations” of the law (Act 120).
Private litigants can enforce the law as well as the state
However, food manufacturers should be aware that private litigants may also enforce Act 120 (as it is codified in a part of the Vermont code that has a private right of action), and would likely exercise less restraint than the state AG in the first few months, predicted Hahn.
“There is a bounty hunter provision that allows individuals in the state of Vermont, lawyers for example… to enforce the law. We are concerned that bounty hunters will take action as soon as Act 120 goes into effect.
“Private individuals are not entitled to recover $1,000 per day per SKU [the amount the state is entitled to claim for non-compliant products under Act 120] but they are entitled to receive at least three times the [ticket price of the] product they purchase and retrieve their attorney’s fees, which could amount to a significant amount of money.
“We’ve also not been able to ascertain whether you could put together a class action and lawyers could argue that any consumer from Vermont who purchased your product from July 1 and found it was not properly labeled, should be entitled to compensation, so we’re talking about [potential awards amounting to] dollar sales of your product across the state of Vermont times three, and all the legal fees. And at a minimum, legal fees for one of these actions would likely be $250,000 to $1m.”
“Let’s cut to the chase here folks, if you don’t have products properly labeled by early- to mid-May the likelihood that products shipped to Vermont by July 1 [will be compliant] is increasingly unrealistic.” Martin Hahn, partner, Hogan Lovells
Don’t rely on an 11
Asked about the likelihood of a last-minute get-out-of-jail card for the industry in the form of a federal voluntary GMO labeling bill that would trump the law in Vermont and other states, he said: “I haven’t given up hope, and I’m trying to be an eternal optimist, but you have to be pragmatic.”
Meanwhile, those hoping for an 11
Ultimately, he said, the question of state-driven mandatory GMO labeling could end up in the Supreme Court [to settle a long-running debate over compelled speech on product labels], but even were this to happen, it would not be heard for months if not years, leaving food manufacturers stuck between a rock and a hard place, because whatever happens, Act 120 will come into effect first.
It’s frustrating and maddening... but let's cut to the chase...
He added: “It’s frustrating and maddening that they won’t delay implementation until appeals are resolved, but … we need to be pragmatic.
“Let’s cut to the chase here folks, if you don’t have products properly labeled by early- to mid-May the likelihood that products shipped to Vermont by July 1 [will be compliant] is increasingly unrealistic.”
If you have 1,000 non-compliant SKUs, civil penalties could amount to a million dollars a day
He also pointed out that while the Vermnt state attorney general William Sorrell had promised a 6-month safe harbor, that only applied to products shipped into Vermont BEFORE July 1 that might still be on shelf up until Dec 31. However, if products were shipped into the state AFTER July 1, they should immediately be compliant, he said.
“If you’re shipping products [with non-compliant labels] after July, you are vulnerable. It’s $1,000 per SKU per day, so if you have 1,000 SKU, that’s a million dollars a day.”
Just because your product wasn’t intended for sale in Vermont doesn’t get you off the hook
Veronica Colas, senior associate at Hogan Lovells, meanwhile, noted that the law also applied to products that may not have been intended for Vermont, but landed up for sale there nevertheless.
For example if a product is diverted into Vermont by a distributor, or a Mom & Pop retailer purchases a manufacturer's product in a Costco out of state and then sells it in Vermont, that manufacturer is still liable, she said.
“So you need to have close control over your distribution and know how likely it is that your products could be offered for sale in Vermont without your intending to distribute them there.”
Under Act 120 firms supplying foods for sale in Vermont must declare that they are: ‘Produced with genetic engineering’ or ‘partially produced with genetic engineering’ or ‘may be produced with genetic engineering’ unless they can prove otherwise.
It also includes the stipulation that foods containing genetically engineered ingredients cannot be marketed as ‘natural’.
However, it excludes processed foods containing GE material if this material accounts for less than 0.9% of the dry weight of the product. (For example, a salad dressing that contains only a small amount (no more than 0.9% by weight) of corn syrup produced from GE corn and no other GE material would not be subject to the labeling requirement.)
Similarly, it does not require meat or milk from animals fed genetically engineered feed to be labeled, and excludes alcohol, processing aids/enzymes (eg. cheese made with vegetarian GE rennet), dietary supplements, medical foods, foods sold online, unpackagedfoods sold in restaurants or unpackaged foods sold in supermarket delis (eg. hot soup).
The label "must be located on the package so as to be easily found by consumers when viewing the outside of the package [but doesn’t have to be on the front of pack]". Stickers or stamps are also acceptable.
The latest on state GMO labeling initiatives
So what’s happening outside of Vermont?
GMO labeling laws have passed in Maine and Connecticut, and while both require contiguous states to pass similar laws before they come into effect, these conditions could be removed, said Maggie Sommers Gentile, senior director of food and nutrition policy at consultancy Food Directions LLC.
Meanwhile, 15 other states are now considering GMO labeling laws with those in New Jersey and New York in particular fairly likely to succeed, she predicted.