Wal-Mart Slapped for Misleading Organic Consumers

May 8th, 2007

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, Codirector 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 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.

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.

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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