BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
SB 823 (Corbett)
As Amended April 14, 2011
Hearing Date: April 26, 2011
Fiscal: Yes
Urgency: No
EDO
SUBJECT
Consumer Protections: Made in California Program
DESCRIPTION
This bill would create the Made in California program within the
Governor's Office of Economic Development for the purpose of
encouraging consumer product awareness and to foster the
purchases of products manufactured in California. This bill
would also make it an unfair method of competition or business
practice to use the designated "Made in California" label
without participating in the Made in California program.
BACKGROUND
According to Small Business California (SB-Cal), there are
approximately 3.4 million small businesses in California. This
number includes sole proprietors which account for approximately
2.3 million, leaving 1.4 million small businesses employing 100
employees or less in California. Small businesses in California
make up 50 percent of the employment in California as well as 50
percent of the California economy. On a national level two
thirds of new jobs come from small businesses.
In 2001, the "Buy California Program" was created within the
Department of Food and Agriculture for the purpose of
"encouraging consumer nutritional and food awareness and to
foster purchases of high-quality California agricultural
products." The "California Grown" label was created for this
program, which gave farmers an opportunity to participate in the
marketing campaign promoting California products. In 2010, a
private California-based marketing and management consulting
(more)
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firm, of the California Grown program released a study. The
study found that the specialty crops in the California Grown
program create $15.9 billion in economic output annually. The
study also found that more than 137,435 jobs are created as a
result of the program. Further, the study found that nearly
$567.7 million in indirect business taxes, not including income
taxes are generated from specialty agricultural products in
California. In addition to the vast agricultural products grown
in California, several other products are made and produced in
this state, many by small businesses.
In order to keep business competition fair and to protect
consumers from deceptive practices, the Consumer Legal Remedies
Act (CLRA) (Civil Code Section 1750 et seq.) was created in 1970
with "the underlying purpose . . . as proclaimed in the
statutory scheme itself . . . 'to protect consumers against
unfair and deceptive business practices and to provide efficient
and economical procedures to secure such protection.'" (Kramer
v. Intuit Inc., (2004) 121 Cal.App.4th 574, 579.) The CLRA also
authorizes a consumer to bring a civil action for damages
resulting from violations of the CLRA.
This bill would create the Made in California program within the
Governor's Office of Economic Development (office) and would
also add a new category of unlawful conduct under the CLRA by
making it an unfair or deceptive trade practice for anyone to
represent that a product is made in California unless the
product complies with the standards adopted by the office,
including, but not limited to that the company (i) primarily
designs and manufactures a physical product rather than a
digital product or service; (ii) the company manufactures one or
more products in California; and (iii) the company has a
California-based workforce and has the desire to grow that
workforce over time. This provision would become operative once
standards are adopted by the office.
CHANGES TO EXISTING LAW
Existing law prohibits unfair methods of competition, acts or
practices by any person which either results in or is intended
to result in the sale or lease of goods or services to any
consumer. Existing law enumerates several methods of unfair
competition, acts or practices. (Civ. Code Sec. 1770.)
Existing law provides that any consumer who suffers damage as a
result of a practice declared to be unlawful under the CLRA may
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bring an action against that person to recover damages, as
specified. Existing law allows for a class action suit to be
filed on behalf of a class of consumers adversely affected by an
unfair method of competition, act or practice. (Civ. Code Secs.
1780 and 1781.)
Existing law provides for California to enter into marketing
agreements and to create the "Buy California Program." (Food &
Agr. Code Sec. 58750.)
This bill would create a "Made in California Program" within the
Governor's Office of Economic Development (office) as a public
and private collaboration. This bill would state that the
purpose of the program is to encourage consumer product
awareness and to foster purchases of high-quality products
manufactured in this state. This bill would allow the office to
develop and adopt standards that permit a company to represent
that a product is made in California.
This bill would authorize the office to issue and make effective
marketing agreements, including, but not limited to, issuance of
a Made in California label. This bill would allow California
companies on a voluntary basis to participate in the program.
This bill would provide that representing that a product is made
in California when it does not comply with the standards adopted
by the Governor's Office of Economic Development (office) would
be an unfair or deceptive act or practice under the CLRA.
This bill would provide that the standards adopted by the office
may include:
The company primarily designs and manufactures a
physical product, rather than a digital product or a
service.
The company manufactures one or more products in
California.
The company has a California-based workforce and has the
desire to grow that workforce over time.
This bill's provisions relating to the CLRA, would only be
operative after the office has adopted standards for the Made in
California program.
COMMENT
1. Stated need for the bill
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The author writes:
California's unemployment rate has increased to 12.4 percent,
one of the highest rates in the nation. Nonfarm payroll jobs
decrease by 33,500 each month, according to the California
Employment Development Department. Unemployment is not only a
reaction to the financial crisis, but is also a symptom. Our
economy cannot be sustainable without products made in
California, and our consumer market will continue to be
sluggish until we increase the state's employment rate. Our
main source of employment in the state continues to be local
and small companies.
California is known worldwide for its products, so the "Made
in California" label can help add value to products made in
the Golden State. Because of the high cost of living in
California, companies that choose to manufacture products in
California do so at a higher cost than they might pay in
another state or on foreign soil, and have made a conscious
decision to embrace local manufacturing as a vital component
of their business strategy. SB 823 would help these
businesses in their marketing efforts.
The sponsor of this bill, the California Small Business
Association (CSBA), writes "we feel recognizing products 'Made
in California' will stimulate jobs and the economy. It will
also promote the intent of the legislature and state government
to support these businesses that grow our economy. We strongly
support this legislation and the opportunities it will provide
our small businesses. CSBA is a non-profit, grass roots
organization representing over 203,000 small businesses in
California. The mission is to provide small business with an
active voice in the California government."
2. This bill would make it an unfair method of competition or
business practice to use the Made in California program label
without participating in the Made in California Program
Under existing law, it is an unfair method of competition and
unfair or deceptive act or practice to engage in specified
activities that either intend to or actually result in the sale
or lease of goods or services to any consumer. This bill would
create the Made in California program and provide that
representing that a product is made in California by using the
official "Made in California" label from the program is an
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unfair method of competition and deceptive act or practice.
In order to ensure the success of the Made in California program
created by this bill, it is important to set specific standards
for businesses to meet in order to participate in the program.
Additionally, it is important to protect consumers from
fraudulent uses of the Made in California label by prohibiting
use of the label and making it an unfair or deceptive practice
to use the label. By including the fraudulent use of the "Made
in California" label in the CLRA, it will not only protect
consumers but will also provide businesses with an incentive to
participate in the program. In support of the bill, the
California Teamsters notes that "our economy cannot be
sustainable without products made in California, and our
consumer market will continue to be sluggish as long as we don't
find a way to increase the employment rate. Our main source of
employment is still local and small companies in the state."
They continue that "the 'Made in California' label would
jumpstart collaboration between interested companies and the
State to help promote the California 'brand.'" Including the
unlawful or deceptive use of the label under the CLRA should
further incentivize businesses to participate in the program by
allowing for legal actions against other businesses who
deceptively use the Made in California label.
The CLRA provisions included in this bill would not become
effective until standards are adopted by the Governor's Office
of Economic Development (office). This is appropriate because
the language of the bill specifically references standards
adopted by the office, so it would not make sense to hold
businesses liable for violating the CLRA if the standards do not
currently exist. Also, the label has not yet been created.
3. Proposed standards for Made in California Program
This bill would authorize the Governor's Office of Economic
Development (office) to adopt standards that would permit a
company to represent that a product is made in this state and
use the designated Made in California label. In adopting the
standards, the office may include for consideration (i) whether
the company primarily designs and manufactures a physical
product, rather than a digital product or service; (ii) whether
the company manufactures one or more products in this state, or
(iii) whether the company has a California-based workforce and
has the desire to grow that workforce over time. These elements
are designed to give the office direction; however, the office
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will ultimately be given the authority to designate specific
standards for adoption.
4. Violations of the Consumer Legal Remedies Act
Under existing law, a consumer who suffers damage as a result of
an unlawful practice under the Consumer Legal Remedies Act may
bring a private right of action and recover actual damages; an
order to enjoin the unlawful act; restitution; punitive damages;
or any other relief that the court deems proper. This bill would
allow for a private right of action for a consumer who suffers
damage as a result of the fraudulent use of the designated 'Made
in California' label.
Staff notes, however, that Civil Code Section 1782 provides the
potential defendant a right to cure. As a result of this
section, the potential defendant has the ability to "cure"
within 30 days after receipt of the consumer's notice and if the
potential defendant has corrected the problem, no civil action
can be maintained. (Civ. Code Sec. 1782(b).)
5. Clarifying author's amendment
The author's intent is to allow companies who may currently use
the phrase "Made in California" to continue to be able to use
that phrase, even without participating in the program as long
as they do not use the label sanctioned by the office. The
following amendment is suggested to achieve that goal:
1. On Page 5, line 12 before the comma insert "by using
the Made in California label created pursuant to Section
13985 (d) of the Government Code".
Because of timing constraints, these amendments need to be taken
in the next committee. The Senate Rules Committee has requested
that, should this bill be approved by this Committee, it should
be sent back to the Rules Committee for consideration of a
request by the Senate Committee on Business, Professions and
Economic Development to hear the bill.
Support : California Conference Board of the Amalgamated Transit
Union; California Conference of Machinists; California Labor
Federation; California Official Court Reporters; California
State Council of the Service Employees International Union;
California Teamsters Public Affairs Council; Council for
Responsible Genetics; Engineer and Scientists of California;
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International Longshore and Warehouse Union; Professional and
Technical Engineers, Local 21; Small Business California; Tesla
Motors, Inc.; UNITE HERE!; Utility Workers Union of America,
Local 132
Opposition : None Known
HISTORY
Source : California Small Business Association
Related Pending Legislation : None Known
Prior Legislation : None Known
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