The US has seen a wave of lawsuits arising companies alleging that their products have been made by slaves. One of the latest cases brought in the US was Barber v Nestle ( August 2015)

In the case of Melanie Barber et al (Plaintiff) v Nestle USA, INC., a Delaware Corporation; and Nestle Purina Petcare CO., a Missouri Corporation (Defendants [Case No: SACV 15-01364-CJC(AGRx), Melanie Barber was the plaintiff alleging that Nestle had violated consumer protection statutes by failing to disclose that some ingredients in their cat food products contained seafood which was sourced from forced labour. The alleged violations were brought under the California Unfair Competition Law (UCL), the California Legal Remedies Act and violations under the California False Advertising law.

Nestle applied for the motion to be dismissed.

The Plaintiffs alleged that Nestle markets and distributes the cat food ‘Fancy Feast’ which includes a variety that has seafood caught in the waters between Thailand and Indonesia. To source that seafood, Nestle works with its Thai partner Thai Union Frozen Products PLC (‘Thai Union’). Large shipments of fish are obtained from ‘motherships’ who in turn receive it from small fishing ships. Both parties acknowledged that some proportion of the small fishing ships use forced labour.

A motion to dismiss under Federal Rule of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Nestle argued that the claim should be dismissed on a number of grounds. It argued that, amongst allegations of a lack of standing that Nestle does not have a duty to disclose the desired information.

In US legislation under the UCL ‘safe harbors’ are created from liability when the ‘Legislature has permitted certain conduct or considered a situation and concluded no action should lie’. Nestle argued that a safe harbour from Plaintiff’s state law claims was created by the California Transparency in Supply Chains Act of 2010 (The Supply Chains Act) . The Supply Chains Act requires any retailer who does business in California and has annual worldwide gross receipts greater than &100 million to make specific disclosures on its website about its efforts to ‘eradicate slavery and human trafficking from its direct supply chain’.1 There are five requirements under the act (such as conducting audits, maintaining internal accountability standards and procedures for employees or contractors who fail to meet company standards regarding slavery and human trafficking) but companies are not mandated to do these five things. The simply have to say on their websites whether or not they do the same. The court held that the Plaintiffs do not allege that Nestle does not comply with the Supply Chains Act. Instead they argue that Nestle is obliged to make additional disclosures at the point of sale regarding the likelihood that a can of ‘Fancy Feast product contains seafood sourced by forced labour’.

Nestle argued that this claim is barred by the safe harbour doctrine because California Legislature already considered what disclosers large companies with forced labour in their supply chains need to make and did not elect to require the disclosure that the Plaintiffs are seeking. The Court found in favour of Nestle stating that ‘the law is not to clean up or straighten out supply chains’, but rather you have to disclose the efforts you are taking.

The Court also had to consider the claim for mis-reprentation taking into account Nestle’s online representations. The Plaintiff contended that Nestle’s online representations are misleading and false because they cannot actually verify that forced labour is not present in their supply chains. The court upheld Nestle’s contention that the statements are aspirational and that read in context they are a nuanced and correct summary of its efforts to combat forced labour. The Court stated that Nestle ‘seems to anticipate a certain level of non-compliance. It is not shy about identifying for consumers the rules and expectations for its supplies buts does not mislead them into thinking that its suppliers abide by those rules and meet those expectations in every instance’.

Why does company disclosure matter under the Modern Slavery Act?

Bearing in mind that this law was the predecessor of the UK Modern Slavery Act and has been around since 2011, UK companies that are beginning to consider what information they should be disclosing in their modern slavery statements should take into account what the court’s are saying in the US. It is clear that as neither the MSA or the California Act mandate that companies prove that they have stopped modern slavery in their supply chains, instead they have to provide information on what steps they have taken.

The fact that the court in the Nestle case was able to refer to its policies that were published online provided Nestle with a defence based on what the court deemed to be appropriate disclosure of their actions.

At a meeting at the Home Office in London on 22 March 2016 the UK government made it clear that disclosure of steps taken was going to be seen as an iterative approach. However, given the fact that there is going to be a central repository for all the statements filed by companies by the end of this year it is going to be easier to benchmark company’s disclosure and what policies and procedures sit behind the statements.

What should companies be considering in light of this case?

1. The likelihood of litigation arising as a result of forced labour/ modern slavery in companies supply chains is increasing;
2. The provision to disclose what steps are being taken in both the Supply Chains Act and the Modern Slavery Act are voluntary and do not require that companies can prove that they have eradicated modern slavery;
3. The statements companies make should form the basis of any defence in instances where misrepresentation is alleged;
4. Provided a company can underpin its statements with robust and appropriate policies and procedures it will be in a better position to defend itself.