Regulators Slap Wal-Mart for Misleading
Organic Consumers
CORNUCOPIA, WI: Consumer fraud investigators
in the state of Wisconsin released their
findings this week after a three-month long
investigation into allegations that Wal-Mart
stores throughout the state of Wisconsin
had misled consumers by misidentifying conventional
food items as organic.
In a letter to Wal-Mart Stores, Inc., based
in Bentonville, Arkansas, the Wisconsin
Department of Agriculture, Trade and Consumer
Protection stated they'd found numerous
instances of conventional food products
improperly labeled as organic by the retail
chain. Specifically, Wisconsin authorities
told Wal-Mart's legal counsel that use of
the term "Wal-Mart Organics" in
combination with reference to a specific
non-organic product may be considered to
be a misrepresentation and therefore a violation?
of Wisconsin state statutes.
The Cornucopia Institute, a governmental
and corporate organic industry watchdog,
had filed complaints with Wisconsin regulators
and the USDA after finding numerous incidents
of fraudulent organic labeling in Wal-Mart
stores in five states from Texas to Minnesota.
Although Wisconsin regulators opted to send
only a formal warning concerning the retail
giant's organic marketing practices they
said that they had reached an agreement
with the company under which steps would
be taken to prevent future organic food
misrepresentations. Wisconsin officials
also said they would be continuing their
surveillance of the company's stores.
"This finding is a victory for consumers
who care about the integrity of organic
food and farming" said Mark Kastel,
Co director of The Cornucopia Institute.
"Wal-Mart cannot be allowed to sell
organic food "on the cheap" because
they lack the commitment to recruit qualified
management or are unwilling to properly
train their store personnel," Kastel
added. "Such practices place ethical
retailers, their suppliers, and organic
farmers at a competitive disadvantage."
The Cornucopia web page (www.cornucopia.org)
contains a photo gallery of conventional
food products that were both priced and
labeled with Wal-Mart's unique in-store
point of purchase signage as organic foods.
The photos were gathered during an investigation
by Cornucopia of Wal-Mart's organic practices.
While Wisconsin regulators have completed
their investigation, the USDA has yet to
formally weigh in on the matter, despite
being notified of the food fraud problem
last November, two months before Wisconsin
officials were contacted about the same
situation.
"A six-month period without any federal
enforcement action is absolutely inexcusable
when the largest corporation in the country
is accused of defrauding organic consumers,"
Kastel stated. "Last November, we supplied
photographic evidence and documentation
to the USDA investigators who contacted
us about our complaint. But their inaction,
and our confirmation of ongoing violations
in Wisconsin earlier this year, prompted
us to forward these continuing problems
to Wisconsin state regulatory authorities."
The USDA's National Organic Program has
long been criticized as being too cozy with
corporate agribusiness, understaffed and
lacking strong management and effective
organizational direction to protect and
promote the organic industry. Two independent
audits of the program, conducted by the
American National Standards Institute and
the USDA's own Inspector General's office,
were harshly critical of the federal government's
oversight of the organic certification program.
"The State of Wisconsin should be applauded
for doing the thorough research necessary
to protect the interests of consumers,"
Kastel said. "Their letter to Wal-Mart's
lawyers should serve as a warning to any
retailer: if you are going to engage in
organic commerce you better have management
in place to oversee the integrity of your
program," added Kastel.
Cornucopia stated that spot checks of other
major organic stores in the natural foods
industry, especially the country's consumer-owned
cooperatives, indicated that retailers were
investing in strong management oversight
and employee training and had excellent
records of assuring compliance with the
federal organic laws and state consumer
protection statutes. "Wal-Mart's model
of top-down management and investing as
little as possible in wages and training
for local employees just doesn't work in
organics," Kastel said.
MORE:
In early 2006, Wal-Mart made a media splash
by stating that they would introduce 400
organic products at prices just 10% over
the cost of conventional food. The pronouncement
left many organic and retail industry observers
questioning the feasibility of their initiative.
The Cornucopia Institute subsequently published
a report, Wal-Mart: The Nation's Largest
Grocer Rolls-Out Organic Products Market
Expansion or Market Delusion (available
at www.cornucopia.org).
The report found that Wal-Mart was aiming
to lower organic food prices by selling
a "different kind of organic product"
depending on cheap foreign imports from
China, large factory dairy farms milking
thousands of cows, and partnering with corporate
agribusinesses lacking prior experience
in organic production.
According to the Wall Street Journal and
other authoritative business analysis, Wal-Mart's
organic initiative, as part of a larger
integrated approach to attract upscale consumers,
has been a failure and is causing the corporation
to now reduce the number of organic food
offerings.
"Although they might be pretty good
at cutting prices and selling cheap widgets
from China their expertise has not transferred
well to organic food," Kastel stated.
"If they had applied their economy
of scale and logistic prowess to organics
it would have been good news for both organic
consumers and farmers undoubtedly resulting
in improved availability and an expanded
market. Instead they have discredited their
organization and injured some in the organic
industry along the way."
In addition to Wal-Mart's inappropriate
and fraudulent signage/labeling of organic
food products, studies by the University
of Illinois as well as regulators in other
states have found that Wal-Mart's management
control of signs indicating pricing are
often inaccurate or deceptive.
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