The Times Square ball was not the only thing that dropped on New Year’s Eve for condiment maker H.J. Heinz and energy-drink maker Rockstar Inc. Both were hit with consumer class actions last Thursday in California Federal Court, alleging that their products are falsely labeled “Made in the USA” in violation of California’s ultra-strict “Made in USA” labeling statute. Named Plaintiff Suzanne Alaei brought both complaints, claiming she was swindled into buying a bottle of Heinz 57 sauce and a can of Rockstar energy drink, which despite being labeled “Made in the USA,” contained foreign-made ingredients— namely, turmeric, tamarind extract, and jalapenos in the sauce, and taurine, guarana seed extract, and milk thistle extract in the energy drink.
Antitrust Law Source has reported extensively on California’s “Made in USA” labeling law (see additional podcasts part one and two), which declares it a deceptive practice for a product to be labeled “Made in USA” if even the smallest component of the product is manufactured abroad and has led to a wave of class actions over the past few years. This case is notable because of the product targeted. Whereas previous class actions primarily targeted apparel and other durable consumer goods, the cases against Heinz and Rockstar are among the first to target food products. In that respect, Alaei’s claims could put the California law to its toughest test yet—raising the question of whether foreign-grown, rather than foreign-manufactured, components are sufficient to trigger liability for companies that market their products as being “made” domestically.
The timing of Alaei’s lawsuits may have been by design. On New Year’s Day, a significant amendment to California’s “Made in USA” labeling statute went into effect that is intended to ease the law’s requirements. Signed into law last September by Governor Jerry Brown, the new law allows companies to label their products “Made in USA” if either: (1) all the foreign components of the product constitute no more than 5 percent of the final wholesale value of the manufactured product; or (2) all the foreign components of the product constitute no more than 10 percent of the final wholesale value of the manufactured product, and the manufacturer of the product shows that it can neither produce the components in the United States, nor obtain the components from a domestic source. This change in the law would likely have come too late for Heinz and Rockstar anyway, as the products at issue were sold prior to the new law’s effective date, but Alaei’s lawyers may have wanted to head off any argument by the defendants that the new law is retroactive.