Individuals and small businesses who sell through distribution channels such as Amazon E-Bay, Etsy and others should be concerned about indemnification for California Prop 65 exposure. Allen Barron is cautioning all business entities regarding their legal responsibility and liability to indemnify online platforms regarding California Prop 65 exposure for all channels of distribution and manufacture of commercial and consumer products throughout the state.
Any business with 10 employees or more (or who sells on an online platform with 10 or more employees) who is involved in the manufacture, production, distribution, cataloging or online sale or retail sale of commercial and consumer goods is subject to onerous compliance with California Prop 65 regulations or face draconian penalties.
“I don’t live in California!” This law applies to anyone selling to consumers in California, regardless of where the seller resides or conducts business. It doesn’t matter if you are outside the State of California or even outside of the US.
“I don’t have 10 employees!” No, you don’t. However, Amazon, Ebay, Etsy (and all other online distribution channels) do. If you want to sell your product(s) online you are required to sign an agreement with each vendor known as a Terms of Service Agreement or TOS. But the Terms of Service (TOS) Agreement with Amazon or similar agreements with Ebay or Etsy require you to indemnify (compensate for harm or loss including financial penalties) the online merchant.
Why should you be concerned? According to the State of California up to 10% of all Proposition 65 notices involve a product listed on Amazon.
Amazon’s guidance reads: ”For all products you currently sell or will sell on Amazon Prime Now, you have an obligation to determine if the product requires a Proposition 65 warning and provide the warning to us as required by California law and this policy. Even if your products currently contain a Proposition 65 warning label, you need to provide us with the warning that must be displayed online.”
More importantly, the terms of these agreements require you, as the seller, to indemnify the online platform from any issue related to Prop 65 (this exposes you to all associated costs). In Amazon’s case, the failure to provide indemnification for California Prop 65 exposure results not only in financial exposure, but removal of all product listings and serious, often permanent damage to your seller trust rating.
The costs for failure to comply with California Proposition 65 are up to $2,500 per day in civil penalties for every day of violation, plaintiff’s legal fees as well as the cost of the proven litigation defense, compliance and restitution issues your company will face.
Generally speaking, California Proposition 65 is designed to limit potential exposure for commercial and residential customers of hundreds of specific chemicals known by the State of California to cause cancer or “reproductive toxicity” in users of any product.
“No person in the course of doing business shall knowingly or intentionally expose an individual to a chemical known to the state to cause cancer or reproductive toxicity without first giving a clear and reasonable warning to such individual, except as provided in Section 25249.10.” – Cal. Health & Safety Code §25249.6.
These regulations apply not only to the manufacturer of the goods or those who grow or produce food and food products, but to all those businesses who play any role in bringing those goods or foods to market.
Are you concerned about indemnification for California Prop 65 exposure for any channel of distribution, production, manufacture, direct or online sales and cataloging? We invite you to contact Allen Barron‘s Proposition 65 compliance and litigation defense team or call 866-631-3470 for a free consultation. Learn more about the regulations which require you to provide a clear and reasonable warning or face a 60 day notice and the initiation of an expensive lawsuit, and how to avoid these consequences and come into full compliance with California Proposition 65.
