Thursday, June 17, 2010

Organic skin care need not be USDA organic

All One God Faith, Inc. v. The Hain Celestial Group, Inc., 2010 WL 2133209 (N.D. Cal.)

Plaintiff, doing business as Dr. Bronner’s Magic Soaps, sued a bunch of defendants for false advertising of their cosmetics as organic. The court granted a motion to dismiss on grounds of lack of exhaustion of USDA remedies, the primary jurisdiction doctrine, and failure to state a Lanham Act claim, but allowed plaintiff the opportunity to amend.

Plaintiff alleged that consumers expect that personal care products labeled as organic won’t contain synthetic compounds such as preservatives, cleansing or moisturizing agents derived from conventionally-produced agricultural materials, or petrochemicals. These expectations may well be causally connected the federal “organic” standards for food, to which they conform, though plaintiffs’ amended complaint alleged that consumer research surveys established their existence.

Plaintiff also amended its allegations with respect to competition with defendant YSL: Its “liquid soaps and moisturizing lotions are available for sale directly to consumers, on the Internet, through Dr. Bronner’s website,” while YSL’s products “are available for sale directly to consumers online, on the Internet, through a number of websites, including Sears and, among others.” Thus, they allegedly “compete for the business of consumers searching online for ‘Organic’ liquid body cleansers and moisturizing lotions/creams.”

Plaintiff also filed an administrative complaint with the USDA alleging failure to comply with the organic regulations. The USDA has asserted exclusive authority to punish violations of the organic rule, but has declined to mandate that cosmetics follow the rules applicable to agricultural products and asserts that it does not have authority over cosmetics that aren’t made up of agricultural ingredients or don’t make any claims to meet USDA standards. There are moves to change this, but they have not yet occurred.

This situation poses the enduring problem familiar from the FDA context: what if consumers believe, for good reasons including the fact that they see these terms used consistently in the market, that the definitions of the terms are those that the federal regulator uses? In such cases, a violation of the federal rule, or even use of terms in an area not formally covered by the federal rule, might violate a state’s general consumer protection law because the violation causes consumer confusion: the federal regulation is, in essence, a but-for cause of the deception, but the deception occurs because of consumer understanding, which happens to be shaped by the federal regulatory background.

Anyway, the court kicked out the complaint based on the primary jurisdiction doctrine, which allocates matters to relevant agencies first where Congress has given the agency comprehensive authority that requires expertise or uniformity—not quite preemption, but related. The court had already determined that the primary jurisdiction doctrine applied to USDA’s authority over personal care products. Defendants argued that deciding the case would force the court to evaluate how consumer understandings line up with existing regulations and potentially impose standards in conflict with those Congress mandated (for example, statutes and regulations allow some use of synthetic ingredients in products labeled organic, while the complaint alleged that reasonable consumers expect that “organic” products have no synthetic ingredients).

The court agreed that it would have to interpret and apply the regulations to determine what “organically produced,” “nonagricultural,” and “synthetic” mean. Because of active agency review of the general issue of organic personal care products, it would be inappropriate to adjudicate the Lanham Act claim at this time, and thus the court stayed the case pending further USDA action.

YSL, one of the defendants, also moved to dismiss for failure to state a claim. It argued that the parties’ products didn’t compete directly because plaintiff failed to allege that its products could be found in the same store or even the same state. Just because they’re both cosmetics labeled organic doesn’t mean they compete directly. Other defendants’ products were typically sold in the same sections, even the same shelves, of the same retail outlets, including grocery stores, natural food stores, drugstores, and websites. Plaintiff alleged that its products and YSL’s are both sold in the internet and compete for consumers searching for organic liquid body cleansers and moisturizers. But the court thought that this was insufficient to allege competition; plaintiff’s arguments in its papers that it was “very likely” that searches for organic products would return results for both parties’ products weren’t enough. Under Iqbal, this was the mere possibility of standing.

Comment: I don’t get it. Being side-by-side on the shelves doesn’t necessarily mean competition—people could be really specific about what they wanted. The parties sell stuff that claims to do the same things. How is that not competition? I myself purchase both department store cosmetics (the category in which I’d expect YSL to fall) and drugstore/grocery store cosmetics (I have tried Dr. Bronner’s shaving soap), including purchases over the internet, and I’m pretty sure I’m not a unique snowflake in that regard. This case is an example of how Iqbal instructs judges to use their implicit understandings of how the world works to dismiss cases; the problems with Iqbal arise when judges lack epistemic modesty, which is troubling in that federal judges weren’t known for their epistemic modesty in the first place.

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