BILL ANALYSIS Ó SENATE COMMITTEE on AGRICULTURE Senator Cathleen Galgiani, Chair BILL NO: AB 1871 HEARING: 06/17/14 AUTHOR: Dickinson FISCAL: Yes VERSION: 06/11/14 CONSULTANT: Anne Megaro Agricultural products: direct marketing: certified farmers' markets. SUMMARY : This bill would revise provisions related to certified farmers' markets (CFM) by increasing fees and penalties and expanding requirements, enforcement, and violations. BACKGROUND AND EXISTING LAW : Existing law authorizes the secretary of the Department of Food and Agriculture (CDFA) to regulate and encourage the direct sale of agricultural products to consumers. These regulations may include provisions to ensure product quality and to prevent fraud, deception, or misrepresentation in the marketplace. Existing law provides for the creation of certified farmers' markets (CFMs), a form of direct marketing. Currently, there are nearly 800 CFMs in California with 3,350 certified farmers directly marketing to consumers (Food and Agricultural Code §47000 et seq.). CDFA is responsible for administering and regulating CFMs and county agricultural commissioners are responsible on the local level for issuing producer and operator certificates and conducting onsite inspections to verify that all agricultural products sold at the CFM are grown by the producer (Food and Agricultural Code §47020). Existing law requires each agricultural producer selling at a CFM to pay a stall fee not greater than $0.60 per marketing day. Fees are collected by the CFM operator and deposited into the Department of Food and Agriculture Fund to be used to cover the reasonable costs to carry out CFM administration, inspection, and enforcement (Food and Agricultural Code §47021). Existing law exempts certified producers selling at CFMs from certain packing, size, and labeling requirements under the Fruit, Nut, and Vegetable Standards Law. These producers are AB 1871 - Page 2 instead subject to conditions and regulations specific to direct marketers, which include packing and labeling requirements (Food and Agricultural Code §47002). Existing law prohibits any person engaged in direct marketing from mislabeling or deceptively packing any product or having any false or misleading statement on any label or as part of any display. CDFA and county agricultural commissioners are authorized to levy a civil penalty against those in violation ranging from $50-$1,000, depending on the severity of the violation. Existing law provides for a hearing and an appeal process before the civil penalty is levied (Food and Agricultural Code §47022 et seq.). Existing law establishes the Certified Farmers' Market Advisory Committee, composed of 17 members appointed by the secretary of CDFA. The committee shall make recommendations to the secretary on all matters pertaining to direct marketing, including administration, enforcement, inspections, fees, civil penalties, and an annual budget (Food and Agricultural Code §47011). Existing law provides a sunset date for provisions regarding CFMs, set to expire January 1, 2018. PROPOSED LAW : This bill: 1. Prohibits any person or entity from engaging in false, deceptive, or misleading marketing regarding the sale or availability of agricultural products at CFMs; specifically, where, how, and by whom the product was produced. 2. Provides that a violation of false, deceptive, or misleading marketing is a misdemeanor punishable by imprisonment in county jail by not longer than six months, and/or by a fine not exceeding $2,500. 3. Authorizes the secretary of CDFA or county agricultural commissioners, in lieu of prosecution, to levy a civil penalty between $500 and $5,000 per violation, and authorizes them to take a separate action in regards to licenses and permits. The severity of the penalty shall be based on the seriousness of the deception and impact of the penalty on the violator. AB 1871 - Page 3 4. Creates the Direct Agricultural Marketing Penalty Account within CDFA to be funded by civil penalties collected pursuant to the above provisions and to be used for investigations and enforcement. 5. Specifies that a false, deceptive, or misleading use of the term "California Grown" or similar term with identical connotations is subject to the penalties above. 6. States findings and declarations that CFMs provide the foundation for additional nonagricultural vending activities that are separate but contiguous with the CFM, thereby creating a larger community event and additional revenue for operators of CFMs. 7. Defines "agricultural product" to mean a fresh or processed product produced in California, including fruits, nuts, vegetables, herbs, mushrooms, dairy, shell eggs, honey, pollen, unprocessed bees wax, propolis, royal jelly, flowers, grains, nursery stock, livestock meats, poultry meats, rabbit meats, and fish including farmed shellfish. 8. Excludes from the definition of "agricultural product" those products that are characterized as services, arts, crafts, bakery, candies, soaps, balms, perfumes, cosmetics, pottery, clothing, fabrics, pastas, compost, fertilizers, candles, ceramics, foraged, types of wares, and any product that combines an agricultural product with a nonagricultural product or service that materially increases the purchase price of the product. 9. Defines "practice of the agricultural arts" to mean being predominantly responsible for the decisions and actions of producing an agricultural product, such as planting, growing, feeding, fertilizing, irrigating, cultivating, controlling pests and diseases, and harvesting. 10. Defines "producer" to mean a person, partnership, corporation, or otherwise legally formed farm or ranch that produces agricultural products upon land that the producer owns, rents, leases, sharecrops, or otherwise legally controls. 11. Excludes from the definition of producer a person or entity that rents, leases, or otherwise legally possesses AB 1871 - Page 4 property only at the time of harvest. 12. Authorizes the secretary of CDFA to enter into cooperative agreements with county agricultural commissioners, funded by CFM assessments and fees, to carry out provisions related to CFMs, including administration, investigation, inspection, registration, and assistance to producers. 13. Authorizes a CFM operator, upon reasonable suspicion, to contract with a county agricultural commissioner for a special field or storage verification inspection of a producer selling in the operator's CFM. 14. Repeals the authority for individual CMFs to establish governing bodies and enforce all rules and procedures pertaining to CFMs. 15. Repeals provisions related to certified producer aggrievances with individual CFM rules or procedures. 16. Redefines certified farmers' markets as California agricultural point of sale locations that are registered and certified with CDFA and the county agricultural commissioner. CFMs must have clearly defined marketing areas where only authorized producers may sell agricultural products they have grown. 17. Requires CFM vendors to post a conspicuous sign at the point of sale that states the name and county location of the vendor's farm/ranch and a statement that "We Grow What We Sell" or such similar statement. 18. Requires CFM vendors to ensure that all processed agricultural products offered for sale are made from agricultural products exclusively grown or raised by the farm/ranch, less incidental flavorings or preservatives, and requires vendors to provide a registration number or other identification to indicate the processing facility plus all currently required health and nutrition labeling statements. 19. Requires CFM vendors to ensure all products represented as organic are clearly labeled. 20. Prohibits CFM operators who operate other non-agricultural marketing events in close proximity or contiguous to a CFM from allowing the sale of fresh whole AB 1871 - Page 5 fruits, nuts, vegetables, and flowers outside of the CFM area. 21. Requires CFM operators to keep accurate records and submit a quarterly report of registration numbers and producer participation frequency. 22. Recognizes nonprofit entities and other qualified CFM operators as private entities and allows them to take actions, adopt rules, and impose requirements for market operation, subject to the application of any state or other laws. 23. Clarifies that the goals of the Certified Farmers' Market Advisory Committee to promote consumption of fresh agricultural products purchased at CFMs, ensure that future CFMs benefit participating vendors, and ensure honest and fair marketing. 24. Reduces the number of members on the Certified Farmers' Market Advisory Committee from17 to 14 by eliminating both positions for representatives of major direct marketing associations and one of two positions for county agricultural commissioners. 25. Requires a CFM operator to annually register with CDFA by applying for and obtaining a certificate from the county agricultural commissioner. 26. Requires a producer, prior to selling at a CFM, to register with CDFA by applying for and obtaining a certificate from the county agricultural commissioner, accompanied by a producer declaration that the producer is knowledgeable about good agricultural practices as outlined in the Small Farm Food Safety Guidelines published by CDFA. 27. Authorizes the secretary of CDFA to promulgate regulations specifying the information a producer is required to submit regarding specific crops intended for sale at a CFM. 28. Requires a county agricultural commissioner, at the time of producer or market certification, to provide a schedule of fees estimating expenses for inspections, and a statement that the commissioner may charge a fee equal to actual expenses incurred. AB 1871 - Page 6 29. Requires that all vendors, not just agricultural vendors, pay a $2 fee per market day to the CFM operator, who remits payment to CDFA on a quarterly basis. 30. Allows CFMs to petition the secretary of CDFA to reduce the $2 vendor fee if the CFM only allows the sale of agricultural products produced solely within the same county as the CFM location. 31. Repeals the sunset date for provisions related to CFMs. 32. Makes technical amendments. COMMENTS : Need for this bill: According to the author, "Concerns over fraud, food safety, and traceability have emerged. News reports have indicated that cheating, misrepresentation, and fraud at CFMs has become widespread. The California Department of Food and Agriculture currently lack clear definitions, penalties, and appropriate funding in order to enforce them. Unless these concerns are dealt with, a lack of consumer confidence could hamper this growing economic sector." Creation of CFMs: The federal Farmer-to-Consumer Direct Marketing Act of 1976 was enacted to promote "the development and expansion of direct marketing of agricultural commodities from farmers to consumers" in order to "lower the cost and increase the quality of food to such consumers while providing increased financial returns to the farmers" (7 USC Sec. 3001). Shortly following, CDFA enacted regulations exempting certified producers from specified packing and labeling requirements under the Fruit, Nut, and Vegetable Standards Law in order to sell agricultural products directly to consumers. The required certification issued by the county agricultural commissioner offered assurance that the produce sold was grown by the producer. As CFMs gained popularity, concerns of fraud grew in the marketplace. AB 593 of 1999 addressed these concerns by authorizing individual CFMs to adopt more restrictive rules and procedures and required that each vendor pay a stall fee of $0.60 per market day to pay for program costs. Today, fraudulent marketing is still of great concern to vendors and consumers. Ad Hoc Committee: CDFA convened the Direct Marketing Ad Hoc Committee to assess the role of direct marketing in California AB 1871 - Page 7 and identify opportunities to improve regulatory control to prevent fraudulent selling activities at farmers' markets. The Ad Hoc Committee published a report in December 2012 with their findings, which confronted the long-term health of direct marketing, funding and enforcement, and potential regulatory frameworks and program designs. Reaching a consensus proved to be challenging for some of these issues; however, the report stated that "the biggest issue confronting the long-term health of the direct marketing industry is the 'buying and reselling' of agricultural products." "However, without appropriate funding, CDFA and county agricultural commissioners are unable to provide an adequate level of enforcement expected by consumers and the direct marketing industry." The current bill utilizes task force recommendations and components of AB 996 from 2013. Specifically, this bill would increase stall fees and require all vendors to pay this fee, prohibit false or misleading marketing, create and expand penalties and violations, and require producers to make a statement that "We Grow What We Sell." Opposition concerns: Those in opposition state several concerns including: requiring non-agricultural vendors to pay stall fees, transferring enforcement of false or misleading marketing from market management to the county or state level, changing advisory committee membership, requiring signage stating "We Grow What We Sell," removing grievance procedures for certified producers, and authorizing CFM operators to contract with county agricultural commissioners. As stated by those in opposition, "With limited resources, now is not the time to create more complexity for CDFA by inventing a new crime. Nor should we abandon our commitment to certified producers and disadvantage them by removing grievance procedures, reducing their number of seats on the Certified Farmers' Market Advisory Committee, and saddling them with new signage requirements." Agricultural products: This bill excludes from the definition of agricultural product a product characterized as "foraged." This term may be confusing as all other excluded products are listed in noun form. The author may wish to consider amending this term from a verb to a noun, such as to say "foraged foods," "foraged wild foods," or other appropriate term. Local laws: The author may wish to consider amending the term "local laws" to "local ordinances" on page 10, line 2. AB 1871 - Page 8 RELATED LEGISLATION : AB 996 (Dickenson) of 2013. Would have expanded requirements, raised fees, and increased penalties for provisions relating to certified farmers' markets. This bill was held under submission in the Assembly Committee on Appropriations. AB 654 (Hall), Chapter 409, Statutes of 2013. Extends from January 1, 2014 to January 1, 2018, the sunset date for the collection of certified farmers' market fees and related penalty and enforcement provisions. SB 513 (Cannella), Chapter 337, Statutes of 2011. Extends from January 1, 2012 to January 1, 2014, the sunset date for the collection of certified farmers' market fees and related penalty and enforcement provisions. AB 2676 (Agriculture), Chapter 440, Statutes of 2006. Extends from January 1, 2007 to January 1, 2012, the sunset date for the collection of certified farmers' market fees and related penalty and enforcement provisions. AB 1726 (Agriculture), Chapter 444, Statutes of 2004. Extends from January 1, 2005 to January 1, 2007 the sunset date for the collection of certified farmers' market fees and related penalty and enforcement provisions. Imposes a late penalty charge on operators who fail to pay the required fee. AB 593 (Strom-Martin), Chapter 833, Statutes of 1999. Codifies regulations exempting direct marketers from specified packing and labeling standards, amends fee structures, and authorizes farmers' markets to establish rules and procedures. PRIOR ACTIONS : Assembly Floor 71-5 Assembly Appropriations 12-0 Assembly Agriculture 6-0 SUPPORT : Beverly Hills Certified Farmers Market California Agricultural Commissioners and Sealers Association California Farm Bureau Federation California Federation of Certified Farmers' Markets City of Beverly Hills AB 1871 - Page 9 City of Santa Monica City of Torrance Community Alliance with Family Farmers Crane Creek Growers Harbor Area Certified Farmers Markets Mar Vista Farmers' Market Marin Country Mart Farmers' Market Model Neighborhood Program Sustainable Economic Enterprises of Los Angeles OPPOSITION : Agricultural Institute of Marin - Oppose unless amended