Hunton Retail Law Resource

We previously reported on the proposed regulations initiated by the California Office of Environmental Health Hazard Assessment and its impact on retailers. Retailers should take steps to ensure that they are protected from Prop 65 claims, particularly with the proposed regulations in the pipeline. As with any regulatory requirements that impact businesses, often the best defense is a good offense -- forethought, assessment and implementation of a compliance program can minimize the costs, headaches, business disruption and negative publicity that may otherwise occur.

The proposed regulations would allow retailers to enter into written agreements with other entities in the chain of commerce to allocate responsibility, and supersede much of the regulatory allocation of responsibility. However, this exemption would only apply “to the extent that the warning” meets Prop 65’s warning requirements. Therefore, if this provision is finalized as written, such allocation agreements would need to be carefully crafted to ensure an adequate warning be provided to consumers.

Further protections can be implemented by requiring certifications that products meet Prop 65 requirements, by including indemnity clauses in purchase agreements or by requiring a holdback to cover potential costs of defending against a Prop 65 action. Retailers can also request testing results from manufacturers showing Prop 65 compliance or can perform their own independent testing, though this can be costly, particularly when a large number of products are involved and the chemicals that may be in such products are unknown. By taking such steps, retailers can begin to manage their risks but, from what we see, the proposed new regulations would create more problems and headache for retailers by making it easier for citizen enforcers to extract settlements from retailers.

Download our client alert for more information on the proposed regulations.