And What Amazon Businesses Need to Do to Comply with New Amazon Regulations

Rarely is a random email from Amazon good news. Most lines of communication with the conglomerate seem to be something Amazon is “restructuring” that rarely benefits sellers. The most recent addendum to Amazon’s T.O.S. is no exception – it has many merchants reeling.   

In recent days, you may have received an email from Amazon that reads something like this: 

“To whom it may concern:  

We represent Amazon.com, Inc. (“Amazon”) in connection with the above referenced matter. The notice of violation alleges an exposure to [chemical] from your company’s product that was allegedly sold without a Proposition 65 warning, specifically identifying [make and model] as an “exemplar” product. 

This product was supplied through one or more of Amazon’s online retail websites into California. A copy of the complaint is attached for your reference. We expect your company to defend and indemnify Amazon with respect to the notice of violation and any proceedings related to the notice, as required by the terms of the Business Solutions Agreement.  

Please promptly confirm receipt of this correspondence and your agreement to defend and indemnify Amazon with respect to this matter. Please be aware that failure to promptly respond and to honor fully your defense and indemnification obligations to Amazon may result in suspension or termination of your selling privileges.” 

The letter goes on to explain what actions you can take to absolve your company of any further legal and/or account suspension issues with regards to Prop 65 violations. We will address those in this article, but first…  

What is California’s Prop 65 ?

Originally named “The Safe Drinking Water and Toxic Enforcement Act of 1986”, California’s Proposition 65 legislation is a grassroot initiative that was designed to protect consumers from toxic substances and chemicals in their drinking water. There are over 1,000 chemicals named in the prop 65 list that are linked to cancer and birth defects, and any consumer product sold in the state of California that contains trace elements of said chemicals are required, by law, to disclose a warning label. In addition, Prop 65 also prohibits California businesses from knowingly excreting or dumping significant amounts of these chemicals into sources of drinking water (like bodies of water).  

What is the History Behind Proposition 65?

California’s Prop 65 bill was a political initiative proposed by political strategist, Tom Hayden, and environmental-activist, Jane Fonda, as a means of persuading more liberals to vote for then Governor-runner, Tom Bradley, against incumbent Republican, George Deukmejian. While the bill was passed by voters 2-1, Bradley lost the race, nonetheless.  

The act states: “No person in the course of doing business shall knowingly discharge or release a chemical known to the state to cause cancer or reproductive toxicity into water” or into anywhere that feeds a drinking water source. It also says that “no person in the course of doing business shall knowingly and intentionally expose” anyone to those chemicals “without first giving clear and reasonable warning.” 

Which Amazon Categories Does Prop 65 Apply To? 

It’s important to understand which businesses and products are subject to California Proposition 65 compliance. Here are examples of covered categories (but not all, so please do further research as to whether Prop 65 applies to the products you sell).  

  • Apparel and textiles 
  • Leathery products 
  • Food contact products 
  • Food packaging 
  • Toys 
  • Childcare products 
  • Children’s Jewelry 
  • Sport equipment 
  • Cosmetics and personal care products 
  • Electronics 
  • Batteries 

P65 restricts products according to daily intake. So, there are some categories of products that are considered riskier than others – food and supplements would be good examples. There are also some products you wouldn’t think would be considered high risk but are, like sippy cups and underwear.   

But just because you believe your product doesn’t warrant daily use, doesn’t mean you aren’t held accountable for compliance of P65. All consumer products on the list need to comply with California’s toxicity regulations. 

Why are Amazon Seller Affected by Prop 65?

If you aren’t a business based out of California, you are probably wondering why any of this applies to you. But it’s really pretty simple: If you sell online (whether Amazon is your specific marketplace or you utilize other platforms), you have (almost) no control over who purchases your products. Thus, you may have many customers from California. By default, this means that any laws and/or regulations coming out of the Golden State pretty much becomes natural law.  

Now, you may be wondering why, if Proposition 65 has been around for quite some time, you are just now receiving threats of Amazon account suspensions and legal actions. Here’s why: 

A clause in the bill states that small businesses that have less than 10 employees are exempt from the warning label mandate. Up until now, if you were a very small ecommerce retail company, you could surpass the Prop 65 restrictions.  

Why Are Small Businesses No Longer Exempt from Using Proposition 65 Warning Labels?

It’s fairly straightforward.  

In the eyes of Amazon, its sellers have a responsibility to indemnify and absolve Amazon of legal responsibility for their products. If, for example, a pregnant woman uses a seller’s product and she experiences complications with her baby as a direct result of using said product, the course of action would be for the woman to sue Amazon for violating Prop 65 act. 

Clearly, Amazon doesn’t want to be held legally responsible for customers’ medical complications (like the woman above), so they have found a way to skirt tail the “10 or less employees” exemption by claiming that Amazon workers are an integral part of every merchant’s business operations and are, de facto, a part of every third-party’s company.  

This loophole allows Amazon to force products sold on their marketplace to contain chemical warning labels which keeps Amazon from legal responsibility. Sellers that have products that contain one or more of the listed chemicals in the Prop 65 list that do not feature warning labels, have received letters similar to the one paraphrased at the beginning of this article.  

But that’s not all… 

Amazon Resellers May Get Hit the Hardest

In the past, resellers and those practicing online arbitrage would customarily not be held responsible for violating the Prop 65 guidelines. This is due to a concept called “constructive knowledge” in which it is deemed reasonable for wholesalers, manufacturers, and distributors to know exactly what their products consist of while those further down the custody chain aren’t held liable.   

In cases where Amazon was threatened with customer lawsuits over violations of Prop 65, Amazon would give brands a certain amount of time to pay fees and upload a warning/disclaimer in their Seller Central accounts. Historically, resellers wouldn’t have to abide by these regulations because they were not expected to have such knowledge of chemical components. The problem now is that Amazon has become much stricter with the guidelines surrounding this particular bill. And, while brands that make products containing restricted chemicals can simply add a disclaimer to their listing, resellers don’t have control over this.  This could potentially put resellers in a position where they are either 1) legally responsible or 2) can’t sell certain products until the owner of the storefront updates their account.  

What is the Likelihood I Will Get in Trouble for Not Complying with the Prop 65 Act? 

So, now the question becomes “What is the likelihood of the State of California coming after my business?” 

The issue isn’t that people at the state level will come after you (albeit it could happen). The issue is that private attorneys are the ones incentivizing these lawsuits. As Paul S. Rafelson of Rafelson Ecom Law explains in his interview with SellerBasics: 

“California law allows any private attorney to basically act as what we call Private Attorneys General and basically… create these noble sounding organizations. Then what happens is they sue you, they sue Amazon, and they may sue Amazon over certain listings. Every seller who’s on that listing during the time frame involved will [receive a notice from Amazon explaining that Amazon’s been sued]. And what Amazon’s lawyers are saying now is … ‘We’re not going to defend these cases anymore. [We} see this as a seller’s problem, not our problem, and that this is the seller’s obligation to indemnify us and handle this.’” 

Measures You Need to Take for Your Amazon Business to Comply with Proposition 65

If you get hit with an E5 violation, you need to take action immediately. 

An E5 violation is when a business isn’t in compliance with California’s safety and health codes. If your Amazon account gets flagged for an E5 violation, typically you will pay a fine (which is stated in the letter that you may have received from Amazon). Unfortunately, that’s not where it ends because you then get billed for the hours of labor that the lawyers put into your case (which adds up if you know anything about how much lawyers cost on an hourly basis). In essence, you are paying the lawyer to sue you.  

How is that legal? Good question.  

As Rafelson further explains in this video, the motive behind allowing California private attorney generals to sue for billable working hours was to encourage law firms to take on environmental and social justice causes (which historically haven’t been “well paying”). While this may have incentivized many attorneys to take on such public lawsuits, this mandate negatively impacts the pockets of the business owners that are getting sued.  

With all of these changes to Amazon’s T.O.S. regarding Prop 65, you may be thinking, “Well, I might as well just add a disclaimer to my listing just in case.” The problem with that is that you can’t just put up a generic warning label for two reasons:

1. The warning label must be accurate and specific. You have to identify which chemical/s are present in your product

2. If your product isn’t in violation of Prop 65 guidelines, you don’t want to just put a disclaimer on your listing. This could lead to a loss of sales.  

Unfortunately, Amazon gives you a 5-day window to upload a formal disclaimer into Seller Central. Even if you didn’t receive a letter from Amazon, it is advised that you still contact your manufacturer to make sure that your products don’t contain any trace chemicals listed in the P65 list. Or, if they do, that they are under the numbers presented by the State.  

First and foremost, we recommend contacting a lawyer, preferably one who specializes in Amazon or eCommerce.  

Second, reach out to your manufacturer and request a list of ingredients or materials in your product/s.  

Lab Testing Requirements

If you aren’t satisfied with just taking your manufacturer’s word for it, you may want to have sample units tested to ensure you aren’t above the Safe Harbor Levels (explained further down).  

This can be done through volatile organic compounds (VOCs) emission testing or similar testing methods. Testing sites include: 

  • QIMA
  • Intertek 
  • SGS 
  • TÜV Rheinland 
  • Berkeley Analytical 
  • Applied Technical Services 

These testing companies usually also track substances and limit changes that are updated in P65, so they should test for these as well.  

California Proposition 65 regulates both naturally occurring and synthetic chemicals that are added to the products that can cause health issues to humans. 

What are Safe Harbor Levels?

In order to discern which products are safe, California has imposed a system called the “Safe Harbor Levels”, which sets the maximum exposure limit of the listed substances. Metrics include: 

  1. No Significant Risk Levels (NSRLs) = chemicals that might cause cancer 

This is defined in section 25705, Title 27 of the California Code of Regulations in these terms: “Daily intake/exposure at this level could cause < 0.001% risk of cancer through a lifetime of exposure.” The NSRL is calculated through scientific research and risk assessments. 

2. Maximum Allowable Dose Levels (MADLs) = chemicals that are linked to reproductive complications.  

This is expounded on in section 25801, Title 27 of the California Code of Regulations and represents a daily level of exposure having no observable reproductivity damaging effect when multiplied by 1,000.

These testing companies usually also track substances and limit changes that are updated in P65, so they should test for these as well.  

California Proposition 65 regulates both naturally occurring and synthetic chemicals that are added to the products that can cause health issues to humans. 

California Proposition 65 Label Requirements for Amazon Sellers

If you have spoken with your manufacturer and/or tested your product and have learned that your NSLRs and MADLs are above the acceptable thresholds, then you will need to fill out and upload the correct paperwork to your Amazon listing.  

Amazon requires sellers to use Seller Central to disclose product information including California Proposition 65 warnings and relevant chemical names. The warning label needs to be on both your actual products and displayed on your Amazon listing.  

Warning Labeling Requirements

Guidelines for the warning label can be found in Title 27, Article 6 of the California Code of Regulations. 

Labels should convey clear and accurate information to your potential buyers that they may be exposed to the XYZ chemicals. More specifically, the warning label should contain: 

Warning symbol and text 

A triangle warning symbol to the left of the word “WARNING”. You can download the warning symbol on OEHHA’s website. You may even select the color and size. 

The word “WARNING” shall be written in bold, capital letters. 

Warning statement 

Warning statements for products that contain listed carcinogens above the NSLR and MADL metrics should be written as follows: 

This product can expose you to chemicals including [name of one or more chemicals], which is/are known to the State of California to cause cancer. For more information go to www.P65Warnings.ca.gov. 

Warning statements for products that contain listed substances that may precipitate reproductive issues should be written as follows: 

“This product can expose you to chemicals including [name of one or more chemicals], which is/are known to the State of California to cause birth defects or other reproductive harm. For more information go to www.P65Warnings.ca.gov.” 

If the products contain both listed carcinogens and reproductive toxins, you shall include both risks in the warning: 

“…to cause cancer and birth defects or other reproductive harm…” 

It is important to note that your actual retail units must contain a warning label – not just your listing.  

The good news is that Ashlin Hadden Insurance was recently approved to carry General Liability and Product insurance specific to Prop 65. If you are interested in accruing such a policy – or just have questions regarding the insurance policy and P65 – please reach out to sales@ashlinhaddeninsurance.com 

Summary

 

California’s Prop 65 (a.k.a. the Safe Drinking Water and Toxic Enforcement Act of 1986) is a product regulation that requires companies to provide warning labels if said product contains certain levels of chemical exposure that could directly lead to cancer or reproductive misfortunes.  

Depending on category, many Amazon sellers are forced to comply with California’s regulations since consumers out of California can purchase these items. Categories include – but are not limited to – Grocery, Apparel, Baby, Toys, Makeup, and Sports & Outdoor products.  

Until recently, a large percentage of Amazon companies have been able to apply for Prop 65 exemption due to a clause that allows businesses with 9 or less employees to not have to disclose such warnings. Now, Amazon is forcing such businesses to claim Amazon’s employees as part of their company staff to avoid lawsuits directed at Amazon.  

While this new T.O.S. will impact a significant number of wholesalers, manufacturers, and brand owners, resellers are especially vulnerable to these updates. That’s because resellers have no control over the listing and if brands do not initiate a warning label (and are found in contempt of Prop 65), they are still held responsible for infringements of the act and are exposed to potential lawsuits.  

One of the ways you as a seller can circumvent such legal consequences is by purchasing general liability and product insurance that is specifically designed to cover Prop 65 violations. It’s important to know that this only covers third-party sellers, not resellers. Unfortunately, there currently aren’t any available insurance policies for Prop 65 that safeguard resellers.  

To learn more and apply for this specialized insurance, contact Ashlin Hadden and her team at sales@ashlinhaddeninsurance.com 

For legal advice regarding Prop 65 and your Amazon account, contact Paul S. Rafelsoon at Paul@ecom.law 

Author

  • McClain Warren

    McClain comes to the agency with years of knowledge and experience in the marketing and eCommerce world. She loves people (except Bob), networking, and creating eye-catching and intriguing content. She also loves pineapple on her pizza and will fight you if you say it's awful.