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Opinion: Caution: This Warning May Be Useless

Wall Street Journal, January 20, 2014

By Michael L. Marlow


For more than 25 years Californians haven't been able to pump gas, go to the grocery store or even buy coffee at Starbucks SBUX +3.35% without seeing a sign with wording such as: "WARNING: This Area Contains A Chemical Known To The State of California To Cause Cancer." Environmentalists cheered when the state passed Proposition 65, which required such warnings. But has the law done any good?

Proposition 65 (the Safe Drinking Water and Toxic Enforcement Act of 1986) requires the state government to publish a list of chemicals known to cause cancer or reproductive harm and businesses to post warnings. Since Californians have been warned of possible carcinogens for more than 25 years, you'd expect to see a decline in cancer rates compared with other locations that did not adopt similar "right-to-know" laws.

However, I recently examined cancer rates and discovered no evidence that Proposition 65 has lowered cancer incidence among Californians. There isn't a single empirical study that demonstrates any public-health benefits.

Why not? For starters, the list published by the state is enormous, comprising about 860 chemicals. And while businesses are required to warn consumers whenever products carry risks of at least a 1 in 100,000 chance for any person exposed to the product over a period of 70 years contracting cancer, the law doesn't prohibit businesses from using those chemicals.

The law's "right-to-know" intent was to enable citizens to make informed decisions about protecting themselves from toxic exposure. In practice, however, Proposition 65 is a government regulation that provides little practical guidance. Californians are not provided toxic chemical names, their prevalence, means of exposure, "safe" handling guidance or importantly, told how great (or small) the risk of harm actually is.

Many businesses protect themselves by posting warnings on any product containing even trace amounts of listed chemicals. It's easy to see why. Proposition 65 has a "special" enforcement mechanism that enables "concerned" groups to bring lawsuits and collect a portion of civil penalties. Civil penalties of up to $2,500 a day for each violation are allowed, with one-quarter of the penalty going to the parties—often referred to as "bounty hunters"—bringing the lawsuits.

For these "bounty hunters," Proposition 65 has morphed into a government regulation-driven money machine. Between 2000 and 2011, there were 2,381 settlements costing $178,699,905, exclusive of plaintiffs' legal costs or court costs. Most settlement dollars today go to plaintiffs—the California government has received less than 15% of settlement costs in recent years.

Two common-sense reforms would help curtail these lawsuits and increase the effectiveness of Proposition 65. First, California lawmakers must change the burden of proof so plaintiffs must prove significant exposures. This would significantly decrease the number of frivolous lawsuits brought by "bounty hunters" counting on quick settlements by businesses seeking to avoid litigation costs.

Gov. Jerry Brown last year signed a law that gives businesses a two-week grace period and smaller $500 fine per facility. But this fix narrowly targets relief toward restaurants and bars serving alcohol, coffee shops and parking garages, and is only a baby step in the right direction.

Second, it's time to discontinue warnings for low-probability risks. By warning consumers of even a 0.001% chance of contracting cancer, it desensitizes individuals to warnings of actual threats to their health.

Proposition 65 has been rife with problems: Businesses have had to bear testing and labeling costs, as well as lost sales from consumers spooked by warning signs, reformulated products, withdrawn products or bad publicity stemming from lawsuits. Workers suffer lower income or job insecurity in affected businesses. And the California government has had to spend taxpayer money for administrative and court costs relating to the law.

The only winners from Proposition 65 are the attorneys who bring lawsuits. But their greater wealth has not improved Californians' health.

Mr. Marlow is professor of economics at California Polytechnic State University in San Luis Obispo. His paper on cancer rates and Proposition 65, "Too Much (Questionable) Information?" is forthcoming in the Cato Institute journal Regulation.