(September 3, 2010) A California Chamber of Commerce-opposed bill that would have put financial stress on manufacturers and wholesalers was stopped in an Assembly committee.

SB 928 (Simitian; D-Palo Alto) would have increased costs to consumers and exposed confidential business information by prohibiting the manufacture, sale or distribution of a designated consumer product unless the manufacturer disclosed each ingredient contained in the product on a website.

Onerous Provisions

The CalChamber and a coalition of business groups pointed out a number of definitions in the bill that made it particularly onerous:

• “Consumer Product”—Although the bill focused on four specific product categories, the definition of consumer product under the bill encompassed the definition included under the Green Chemistry Law. This is an extremely broad definition and suggested that the law would be expanded to include additional categories of products in future years.

• “Hazardous Substances”—Incredibly broad such that it included not only chronic results, but also eye and skin irritation, endocrine disruption and ecotoxicity.

• “Incidental Ingredients”—Failed to prioritize and focus on those products containing intentionally added chemical ingredients in concentrations above applicable thresholds and products containing chemical ingredients that pose more than a de minimis exposure threat.

• “Trade Secrets”—Although the bill appropriately defined trade secrets based on Civil Code Section 3426.1, it exempted from that definition hazardous substances and any ingredient that can be reverse engineered. It is impossible for manufacturers to know in advance what is capable of being reversed engineered for the purposes of disclosing ingredients.

Trade Secrets

The CalChamber and coalition pointed out that disclosure of all chemical ingredients in products may lead to final product manufacturers being placed in the awkward situation of asking suppliers to divulge ingredient information, unique combinations of ingredients, and/or formulas that are patented, proprietary or considered trade secrets. Many times these formulas are provided to final product manufacturers under confidentiality agreements.

SB 928, in those cases, would have required manufacturers to violate those confidentiality agreements by disclosing chemical ingredient information.

The bill also would have eliminated trade secret protection after six years unless the manufacturer renewed its claim. There is no purpose for such a sunset provision on a trade secret claim other than to burden and place additional expense on the manufacturer and the Department of Toxic Substances Control.

Website Posting

Requiring companies, small manufacturers in particular, to establish websites just to comply with this law would have added unnecessary increased ongoing costs to doing business. For companies unable to absorb the cost of creating and maintaining a website, this could have limited access to the California market.

Third Party Lawsuits

It was unclear how the state of California intended to ensure compliance with the proposal and a level playing field for those complying. It also was not certain how the state monitors and audits worldwide websites and if there was to be sampling and verification of testing.

In addition, the bill provided no protections against private rights of action, including actions that may arise under California Business and Professions Code Sections 17200 and 17500. A manufacturer or wholesaler acting in good faith should not be liable to third party lawsuits.

Staff Contact: Robert Callahan