Slave Labor: What Big Chocolate Doesn't Have to Tell You

No, Mars doesn’t have to tell you their chocolate was made using slave labor

Co-Author: Maira Velazquez

Co-Author: Maira Velazquez

But, can consumer protection laws be used to stop corporations from committing human rights abuses?

Despite setbacks, over the past twenty years creative human and civil rights attorneys have had some success using consumer protection laws to compel corporate transparency related to supply chain labor exploitation. On this bumpy road towards corporate accountability—from Kasky v. Nike to Walker v. Nestle—human rights attorneys have grown wiser. Since Kasky v. Nike, human rights attorneys have learned how to overcome standing barriers, how far the duty to disclose can be expanded, and discovered some possible roads ahead.  

We begin with Kasky v. Nike, the case widely recognized among human rights advocates as one of the most successful consumer protection cases. Because of a special provision under the Unfair Competition Law (Business and Professions Code §17204), California resident Marc Kasky was able to sue Nike in California state court under a human rights-related consumer protection theory. This special provision gave Mr. Kasky, as a consumer, standing to sue Nike when it became the target of protests and harsh criticisms for its treatment of workers and use of sweatshops in the 1990s. Mr. Kasky alleged that, in response to this negative press and in order to “induce consumers” to buy Nike products, Nike “made false statements of fact about its labor practices and about working conditions in factories that made its products.” The plaintiff argued that by making “false statements,” Nike had violated California’s unfair competition law, which prohibits “any unlawful, unfair or fraudulent business act or practice,” including “any statement … which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading….” Although the California Superior Court dismissed the case, the California Supreme Court reversed and remanded it, holding that when “promot[ing] and defend[ing] its sales and profits,” corporations “must speak truthfully.” Nike appealed the case to the U.S. Supreme Court, but although the Court took the case, it ultimately held that certiorari had been improvidently granted. Nike then settled with Kasky for $1.5 million and agreed to develop workplace monitoring and factory worker programs. In the wake of Kasky, human rights advocates were hopeful and believed that such cases could change human rights-focused litigation.

While Kasky resulted in a $1.5 million settlement, Kasky’s impact fell short of expectations when the law granting citizens standing changed. Unfortunately, the precedent established in Kasky became moot when the Business and Professions Code §17204, a section of California’s Unfair Competition Law, a legal provision granting citizens such as Kasky standing, changed. Under the amended Business and Professions Code §17204, only government attorneys (i.e. the attorney generally, district attorneys, county counsel, and city attorneys) could bring cases on behalf of the general public under California’s unfair competition law; as in most cases, regular citizens required an “injury-in-fact” to have standing. 

Do consumers have standing? Yes, because they purchased chocolate!

Following the changes in California’s Business and Professions Code §17204, human rights litigators tested the boundaries of standing under California law to determine where the federal courts would draw the line on consumer protection cases related to the non-disclosure of exploitative labor abuses. Starting in 2015, a series of consumer protection suits were filed against large food-products and other multinational corporations that profited from exploitative supply chain labor abuses. While these cases touched many industries, a number focused on chocolate companies. In three California cases (Hodsdon v. Mars, Dana v. Hershey, and McCoy v. Nestlé) the plaintiffs claimed they would not have purchased chocolate products had they known that the cocoa in the chocolate had been harvested using child and slave labor. They argued that California law—the Consumers Legal Remedies Act, the Unfair Competition Law, and the False Advertising Law—obligated chocolate companies to disclose information on their packaging about labor abuses in their supply chains and requested that the California courts mandate such disclosures. These cases aimed to actualize the right to purchase products consistent with one’s values and, ultimately, with American laws prohibiting slavery. 

Somewhat surprisingly, these cases were not dismissed based on the plaintiffs’ lack of standing. In fact, the courts found that “economic injury . . . affords the consumer standing to sue.” By purchasing chocolate products, the plaintiffs had “paid more than [they] actually valued the product.” Under California law “[t]hat increment, the extra money paid, is economic injury and affords the consumer standing to sue.” Therefore, “[a] consumer who relies on a product label and challenges a misrepresentation contained therein can satisfy the standing requirement of section 17204 by alleging … that he or she would not have bought the product but for the misrepresentation.” However, although the plaintiffs had standing, the cases were ultimately dismissed. 

Why were these cases dismissed?

Unfortunately, the Ninth Circuit held that companies have no duty to disclose supply chain labor abuses on their packaging, since supply chain abuses “were not physical defects that affected the central function of the chocolate products.” Instead, a manufacturer’s duty to affirmatively disclose information on its labels or packaging is confined to product defects that pose safety risks to consumers. In one of the California cases, Hodsdon v. Mars, the Ninth Circuit found that chocolate companies have no duty to disclose information because the plaintiffs could not establish that the chocolate company’s “horrific labor practices pose safety risks to [American] chocolate consumers” or “concern a product defect.” In fact, the courts rejected the idea that corporations had a broad duty to disclose, reasoning that doing so would require corporations to disclose any and all information on their product labels or packaging that could influence consumer purchasing decisions. Similarly, in another California case, Hall v. Sea World Entm’t, Inc., the plaintiffs alleged that they would not have purchased a ticket to Sea World had “they known at the time what they claim to know now about the treatment and condition of the killer whales … held in captivity at the parks.” As in Hodsdon, the court in Hall dismissed the plaintiffs’ claims because they were based on Sea World’s omissions in advertising, holding that “the omitted information concerning whales at the park had no bearing on the safety of plaintiffs who had visited SeaWorld.”

Massachusetts federal courts similarly dismissed non-disclosure cases brought under state consumer protection laws. In Tomasella v. Nestlé USA Inc., the federal district court in Massachusetts found that, under Massachusetts’ consumer protection laws, Nestlé had no duty to disclose that its cocoa beans were harvested by child and slave labor. As in the California cases, the court found that the plaintiffs’ argument was premised “on the omission of facts that have nothing to do with the central characteristics of the chocolate products sold, such as their physical characteristics, price, or fitness for consumption.” The court found that Nestlé had no duty to disclose, reasoning that 

[w]here Nestlé has remained silent about its labor practices at the point of sale, it would not be objectively reasonable for a consumer to affirmatively form any preconception about the use of child or slave labor in Nestlé’s supply chain, let alone to make a purchase decision based on any such preconception.

The court also stated that because Nestlé included information about its supply chain on its website, Nestlé did not act in a way that was “immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers” by not disclosing such information on its packaging. 

So, what now?

While cases based on the non-disclosure on packaging have been dismissed, a recent case, Walker v. Nike, could innovate consumer protection litigation. Walker, a class action suit filed in federal court in California in 2019, illuminates a possible path forward with a novel legal argument

While cases based on the non-disclosure of information about supply-chains on packaging have been dismissed, in Walker the plaintiffs argue that Nestle’s actual representations are themselves an unfair trade practice. The plaintiffs contend that, under California’s Unfair Competition Law and the Consumers Legal Remedies Act, statements made by Nestlé in its labeling, marketing, advertising, and selling of products with fair trade, environmentally sustainable, and socially beneficial seal certifications constitute a misrepresentation or an unfair and/or deceptive trade practice. Unlike previous cases, which focused on chocolate companies’ omissions concerning supply chain labor abuses, Walker focuses on actual representations and statements which may deceive consumers who purchase Nestlé’s products. By focusing entirely on omissions on packaging, previous suits failed to establish that chocolate manufacturers have a duty to disclose. While federal district courts have held that a manufacturer’s duty to affirmatively disclose information to consumers is confined to safety issues, there is an exception for omissions that are “contrary to a representation actually made by the defendant, or  … omission[s] of a fact the defendant was obligated to disclose.” By focusing on Nestlé’s affirmative representations on its product packaging about sustainability, its participation in the “Cocoa Plan,” and UTZ certification, Walker may be able to force corporations to be more honest in their packaging.

Even though the plaintiffs in Walker must still overcome a number of legal hurdles, the theory of liability has the potential to provide an avenue for redress for American consumers. However, for the children and slave laborers who continue to be exploited around the world—making these multi-national food-products companies richer and richer—redress is unlikely. This is why CAL asks you—creative litigators and human rights advocates—to consider this dilemma. How do we bridge the legal abyss between the pain inflicted on children and forced laborers abroad and consumers of these products?

Maira Velazquez is a 2L at the University of Illinois College of Law and was a summer 2019 CAL intern. Alicia Brudney is a CAL Legal Fellow.

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