Seventh Generation Settles Class-Action Lawsuit Over ‘Natural’ Claims
After almost two years of litigation, Seventh Generation reportedly agreed to pay a $4.5 million settlement over allegations that it deceptively marketed, labeled, and promoted its cleaning and personal care products as 'natural.' The case, which was settled before it went to trial at courts in California and New York, stemmed in part from the fact that Seventh Generation admitted in a document on its website that it used synthetic ingredients in several products. Those substances include glycerin, sodium citrate and sodium hydroxide. The plaintiffs who filed the lawsuit alleged that by describing its products as “natural,” the company deceived customers into paying a premium for goods such as dish soap, surface cleaners and laundry detergent. This summer, the Vermont-based company unsuccessfully argued for the cases to be dismissed. When those attempts failed, the company agreed to pay a settlement after a year of negotiations. Seventh Generation also said it would remove labels such as 'all natural' and '100 percent natural' from its packaging. It will also clarify how it defines terms such as 'hypoallergenic' and 'nontoxic.' Plaintiffs suing the company claim the use of chemicals such as methylisothiazolinone and benzisothiazolinone, which are antimicrobial preservatives, further confused customers. Clearly wanting to sweep this controversy under the carpet, at press time Seventh Generation made no mention of the settlement by press release. Seventh Generation's competitors have challenged the veracity of its products’ safety for years. In 2010, the consumer packaged goods (CPG) giant Procter & Gamble accused the company of making false claims that its products lacked any harmful ingredients and were completely natural. As a result, Seventh Generation removed a video, which also asserted that P&G’s brands posed risks to consumers, from its website. Ironically, Seventh’s Generation’s enduring success has proven to become one of many thorns in P&G’s side as investors become increasingly worried about the Cincinnati-based company’s financial performance. As Bloomberg reported this month, companies including Tom’s of Maine, Method Home and the Honest Co. – all of which were nailed for 'natural' claims – contributed to P&G’s recent woes as more consumers want more sustainable products. Many of these smaller companies’ products are now mainstream and readily available in retailers such as Target, Walmart and Costco. Meanwhile, Unilever has proven adept at identifying niche companies that can add value to its portfolio. Starting with Dollar Shave Club, the Anglo-Dutch conglomerate is on a spending spree that included an interest in the Honest Co. before its September announcement that it would acquire Seventh Generation. Hence the eventual decision for Seventh Generation to settle its litigation in order to maximize its going price, which was reportedly an estimated $700 million. Seventh Generation joins a long list of companies targeted for making 'natural' claims that many consumer groups find nebulous. Six years ago, Unilever’s Ben & Jerry’s agreed to remove 'natural' from its colorful and cartoonish ice cream cartons. PepsiCo, another example of a multinational buying more niche and healthy brands, removed 'all natural' from its Naked Juice bottles after mounting complaints. This roster also includes the likes of Trader Joe’s, which was called out for listing ingredients such as evaporated cane juice (fancy speak for sugar) on its private-label food products. The lesson for all companies here is that any and all claims about their ingredients’ safety and origin must be watertight – or else these brands risk becoming ensnared in a social media frenzy or, even worse, costly litigation. To do otherwise ignores market realities. After all, products such as those labeled 'organic' began to thrive not because of proven science, but because of exaggerated worries over conventional products. On that point, claims about so-called “dangerous” ingredients, such as methylisothiazolinone, are made by organizations such as the Environmental Working Group (which currently urges visitors to its site to first consider making a donation) are not made to protect consumers. And their fundraising models are often dependent on appealing to consumers’ worst fears. In turn, those worries fuel donations that allow this cycle to continue. Meanwhile, many consumers are still confused and do not know which brands to trust. CPG companies must decide whether they want to make exhaustive claims that their products are safe, or just eliminate them entirely. So, if you are still puzzled over whether you should buy cleaning products from the likes of Seventh Generation or those branded by P&G or Colgate-Palmolive, there is a middle ground: Clean your house with a 5 percent white vinegar solution. Unless, of course, you are gluten intolerant. Image credit: Seventh Generation Published earlier today on Triple Pundit.