The Fight for Clearer Egg Carton Labels: Eggsactly What You d Expect. A Brief Look at the Compassion Over Killing v. FDA Decisions

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1 The Fight for Clearer Egg Carton Labels: Eggsactly What You d Expect I. Introduction A Brief Look at the Compassion Over Killing v. FDA Decisions Maureen Moody Student Fellow Institute for Consumer Antitrust Studies If you picked up an egg carton displaying pictures of un-caged hens milling around and the phrases all natural or animal friendly, you might think you were purchasing eggs hatched by cage-free hens. The animal rights groups Compassion Over Killing and Animal Legal Defense Fund certainly think customers make that assumption, and between 2006 and 2013, these groups along with individual egg consumers filed rulemaking petitions with three federal agencies asking them to adopt regulations that would require egg producers to clearly label the method in which the eggs were produced. The agencies declined to adopt new regulations to clarify egg carton labels and the Plaintiff-animal rights groups filed suit. Ultimately, both the U.S. District Court and Ninth Circuit Appellate Court determined that the agencies rejection of the petitions was proper under their highly deferential standard of review. As a result, egg producers were not forced to disclose on their packaging their chosen method of egg production. II. The Petitions Under the Administrative Procedure Act, courts must uphold a federal agency s decision as long as it is rational, based on consideration of the relevant factors and within the scope of the authority delegated to the agency by statute. 1 Applying this standard, the U.S. District Court and Ninth Circuit Appellate Court in Compassion Over Killing v. FDA upheld decisions of the U.S. Food and Drug Administration ( FDA ), Federal Trade Commission ( FTC ), and the 1 Compassion Over Killing v. Food and Drug Administration, 2014 WL , (N.D. Cal. Dec. 23, 2014) (citing Motor Vehicle Mfrs. Ass n, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983). 1

2 U.S. Department of Agriculture s Food Safety and Inspection Service ( FSIS ) and Agricultural Marketing Service ( AMS ) to deny Plaintiffs petition for rulemaking that would require egg producers to use labels that identify whether their eggs come from cage-free hens. Plaintiffs Petition to the FDA Plaintiffs petition to the FDA contended that 1) eggs from caged hens are nutritionally inferior to eggs from pastured hens; 2) eggs from caged hens have a greater risk of salmonella contamination; 3) consumers care about production methods and rely on egg carton labeling to make purchasing decisions; and 4) many egg producers use labeling that misleads consumers about whether the eggs are cage-free. 2 Pursuant to the FDA s administrative duties under the Federal Food, Drug, and Cosmetic Act ( FDCA ), which prohibits the sale of misbranded food, Plaintiffs requested the FDA to promulgate new regulations, or revise existing ones, to require that all eggs be labeled as free range, cage free, or eggs from caged hens to reflect the conditions in which the hens were kept during egg production. 3 The FDA denied the Plaintiffs petition for three reasons. First, the agency asserted it did not have authorization under the FDCA to regulate egg labeling based solely on consumer interest in animal welfare, as opposed to safety or nutrition-related reasons. Second, it found Plaintiffs evidence insufficient to establish material differences in nutritional value and food safety between free range or cage free eggs and eggs from caged hens. Lastly, the FDA determined, notwithstanding the issues above, that Plaintiffs proposed rulemaking was not a priority given the agency s other priorities and limited resources. 4 Plaintiff s Petition to the FTC 2 Compassion Over Killing v. Food and Drug Administration, 2014 WL , * 2 (N.D. Cal. Dec. 23, 2014). 3 Id. 4 Id. 2

3 Plaintiffs petition requested the FTC to use its authority under the Federal Trade Commission Act ( FTCA ) to initiate rulemaking to address consumer deception stemming from egg producers labeling practices. 5 The FTC is authorized under the FTCA to promulgate rules with respect to unfair or deceptive acts or practices in or affecting commerce when it has reason to believe that the unfair or deceptive acts or practices are prevalent. 6 The FTC determined that Plaintiffs had failed to provide sufficient evidence showing consumers were deceived by current labeling practices, that the terms all natural and animal friendly mislead consumers into thinking eggs are produced without the use of cages, or that any misleading practice of the egg producer industry was prevalent. 7 Moreover, the FTC stated its preference to address this type of deceptive practice through individual enforcement actions rather than prescribing a broadly applicable rule. 8 Plaintiffs Petition to the AMS The Agricultural Marketing Act ( AMA ) gives the AMS authority through the Department of Agriculture to: To inspect, certify, and identify the class, quality, quantity, and condition of agricultural products when shipped or received in interstate commerce, under such rules and regulations as the Secretary of Agriculture may prescribe,... to the end that agricultural products may be marketed to the best advantage, that trading may be facilitated, and that consumers may be able to obtain the quality product which they desire. 7 U.S.C. 1622(h)(1). The Plaintiffs petition requested the AMS to use its authority pursuant to the AMA to issue regulations mandating that eggs sold for retail have labels identifying the 5 Id. at *3. 6 Id. (citing Federal Trade Commission Act, 15 U.S.C. 57a(a)(1)(A); (b)(3)). 7 Id. 8 Id. 3

4 method of production for those eggs. 9 Because the AMS s authority is expressly limited by the fact that no person shall be required to use the service authorized by the subsection above, however, the AMS denied Plaintiffs petition for lack of authority to force egg producers to label their cartons in a particular way. 10 Plaintiffs Petition to the FSIS Using the Egg Products Inspection Act ( EPIA ) as its authority, Plaintiffs petition to the FSIS requested the agency to promulgate rules mandating that egg producers use labels designating the method by which the eggs were produced. 11 The agency denied Plaintiffs petition for lack of authority under the EPIA. While the EPIA gives the agency power over the regulation of egg products, such as dried, frozen, or liquid eggs, it does not afford the same authority over shell eggs, which fall into a separate category. 12 Moreover, the statute provides only limited authorization for regulating false or misleading of labeling of shell eggs. 13 III. U.S. District Court and Ninth Circuit Decisions After each federal agency denied Plaintiffs petitions, Plaintiffs filed suit in the U.S. District Court for the Northern District of California, alleging that the agencies had acted arbitrarily and capriciously in dismissing their rulemaking petitions. The District Court ruled that each federal agency had reasonably denied Plaintiffs request and granted summary judgment in favor of Defendants. Plaintiffs then appealed to the Ninth Circuit, which affirmed the lower court s judgment. The District Court upheld the agencies decisions to deny Plaintiffs petitions for rulemaking on two primary grounds. First, because agencies have broad discretion to choose 9 Id. at *4. 10 Id. at *5. 11 Id. at *5. 12 Id. at *5; See also 21 U.S.C. 1033(f), (g). 13 Id. at *5. 4

5 how to use their limited resources and personnel to carry out their responsibilities 14 and, second, because agencies cannot mandate adherence to regulatory requirements outside their statutory authority. The FDA determined that Plaintiffs requested rulemaking would not be the best use of the agency s limited resources, given its other competing priorities. Because an agency s refusal to promulgate a rule is susceptible only to extremely limited and highly deferential judicial review, the Court concluded that the FDA s decision was neither arbitrary nor capricious, and upheld the decision. 15 Similarly, the FTC determined that Plaintiffs concerns could best be addressed through individual enforcement actions, rather than the rulemaking process. Once again, the District Court upheld the denial of Plaintiffs petition as neither arbitrary nor capricious because the agency, after considering the merits of the petition, reasonably exercised its discretion in denying the petition. 16 With regard to the AMS s and FSIS s decisions to deny Plaintiffs petitions, the District Court found that the agencies had correctly concluded they lacked authority to promulgate the requested rules, and therefore, the agencies determinations were neither arbitrary nor capricious. 17 The Ninth Circuit reviewed the final agency decisions de novo and, adopting the same reasoning and legal conclusions as the lower court, affirmed the District Court s grant of summary judgment in favor of Defendants. The Ninth Circuit, however, issued a veiled warning to federal agencies in its opinion. The Court noted that while the judicial review under the APA is deferential, it does not provide an immediate stamp of approval in all matters involving the 14 Id. at *2 (citing Massachusetts v. E.P.A., 549 U.S. 497, 527 (2007)). 15 Id. at *2. 16 Id. at *4 (citing 15 U.S.C. 57a(a)(1)). 17 Id. at *5-6. 5

6 allocation of agency resources. 18 To that end, the Court chastised the FDA for barely meeting its burden of explaining the basis of its decision to deny Plaintiffs petition for rulemaking, and noted that the FDA could have better addressed Plaintiffs evidence of misleading representations that appear on egg cartons to demonstrate that the agency fully appreciated one of the primary bases for Plaintiffs rulemaking petition. 19 IV. What Does this Mean for Consumer Groups? Given the highly deferential standard of review for final federal agency decisions, the opinions of the U.S. District Court and Ninth Circuit in this case are unsurprising. So long as agencies indicate they have considered a petition for rulemaking, and articulate a reasonable justification for not exercising their discretion to initiate said rulemaking, courts will likely continue to uphold agency decisions. Therefore, Compassion Over Killing v. FDA, rather than setting new precedent, offers a lesson to consumer groups: don t put all your eggs in one basket. The rulemaking process is long, discretionary, and affords highly deferential treatment in judicial review. Any one of these factors could be enough to derail an effort to effect rule changes, but together, they create an uphill battle that can be almost impossible for consumer groups to win. Given these challenges, it may be more beneficial for consumer groups to lobby Congress, engage in state level and grassroots efforts, or take up a combination of these or other actions to achieve their desired changes. Animal welfare groups and consumers concerned about the egg production process, for example, scored a victory in California when the state approved a ballot initiative in 2008 requiring that all egg cages in the state be large enough for hens to stand 18 Compassion Over Killing v. U.S. Food and Drug Administration, 849 F.3d 849, 857 (2017). 19 Id. 6

7 up, turn around, and spread their limbs. 20 While these group s efforts in the Compassion Over Killing case to attempt to mandate clearer egg carton labels to make it easier for conscientious consumers to buy truly animal-friendly eggs, failed, the ballot initiative in California drives home the point that consumers can and should examine alternate directions from which to advance their advocacy goals. That, at its core, is the lesson to be learned from Compassion Over Killing v. FDA. Industry players should not, however, interpret this case as tacit approval of their labeling practices. As the FTC noted in its decision on the rulemaking petition, it (and other agencies) can strike down deceptive and misleading practices through individual enforcement actions. While the egg industry does not yet have a mandatory labeling rule, egg producers should be wary of the message their labels are sending egg consumers. 20 See Karin Brulliard, How eggs became a victory for the animal welfare movement, Washington Post (Aug. 6, 2016), 7