A national manufacturer of personal hygiene products has accused a recycling company of reneging on a contract to destroy defective products made at the company’s Conway mill, resulting in more than 1 million defective tampons being diverted for resale on the “gray market,” including the Internet.
Bob Brand, a spokesman for Dallas-based Kimberly-Clark Corp., said Thursday that although the substandard tampons pose potential health and safety risks, the company isn’t aware of any health or safety issues that have occurred as a result of the illegal distribution that happened between Oct. 1, 2011 and June 28, 2012. He said that, once discovered, the company’s recall efforts, in conjunction with the U.S. Food and Drug Administration, cost the company more than $2.4 million, which it hopes to recover from Balcones Recycling, an Austin, Texas based company with a Little Rock location on Thibault Road.
“We don’t know that we’ve got it all back,”Brown said of the defective product, but he said the company believes that most of the substandard tampons were tracked down and removed from the stream of commerce.
“We regularly look at the gray market to see if our products are on it, and that’s how we found out about this,” Brand said. He said that while the “gray market,” in which goods are sold outside a manufacturer’s approved distribution channels, isn’t illegal, “it’s not part of our regular distribution channels.”
Because Kimberly-Clark had a contract with Balcones to recycle the tampons, and because Balcones represented in writing that all of the substandard tampons in the affected lot codes had been destroyed, the diversion of the tampons is illegal, Brand said.
The lawsuit accuses Balcones and unknown accomplices - for now identified as “Does 1 through 3” - of racketeering, fraud, breach of contract and violations of the Arkansas Deceptive Trade Practices Act.
It seeks compensatory damages and attorneys fees, as well as a court order requiring the defendants to gather any remaining defective tampons and deliver them to Kimberly-Clark for destruction. The suit also seeks punitive damages and whatever relief the court may deem appropriate to ensure the public knows that Kimberly-Clark didn’t authorize the distribution of defective products.
From Balcones’ headquarters in Austin, general manager Andy Andrasi said Thursday that he had just been served with a copy of the lawsuit, which was filed Tuesday in Little Rock.
“It’s meritless and we’re going to defend it,” he said.
At the company’s Little Rock branch, general manager Jay Saxton said Thursday, “It’s all news to me.” When told of the allegations made by Kimberly-Clark, he said, “I’ll certainly be giving them a call.”
The lawsuit says that Kimberly-Clark maintains high standards and that its sterling reputation is subject to being tarnished when any of its products that are considered defective make it into the public marketplace.
To buffer potential harm to the company’s reputation and mitigate any possible safety issues, the company “at significant expense, undertook to identify and purchase the affected tampons on the grey market,” and issued a consumer advisory in conjunction with the FDA to alert consumers of any remaining defective tampons that may remain on the market, the lawsuit states.
The advisory, issued Sept. 4, 2012, warns consumers that “as a result of suspected criminal activity,” certain lot numbers of regular absorbency, super absorbency and super-plus absorbency Kotex Natural Balance Security tampons sold in 18-count and 36-count boxes present a low health risk of increased levels of bacteria, presence of metallic particles or imperfect raw materials.
“These products were stolen and fraudulently distributed between Oct. 1, 2011 and June 28, 2012,” the advisory warns, listing 14 lot codes that can be found in the red box at the bottom of the carton.
The advisory encouraged all consumers to check their cartons for the listed codes, and said, “The company is strongly advising consumers that all products with these lots codes should be considered unsafe and not fit for use. Because the cases have left K-C’s authorized supply chain, the company has no knowledge of the product’s current condition.”
Branch said a report that a Texas woman found a moldy tampon in a box of Kotex Natural Balance Security tampons turned out to be unrelated to the allegations against Balcones.
The lawsuit says that Kimberly-Clark contracted with Balcones “because, among other things, Balcones utilized sustainable methods and assured Kimberly-Clark that its disposal methods were secure and not subject to interference.”
Balcones is known for recycling products into “fuel cubes” that can then be used as a source of alternative energy.
The case, filed locally by attorneys Steven Quattlebaum, Chad Pekron and Amber Davis-Tanner, working in conjunction with a Chicago law firm, was assigned to U.S. District Judge James Moody.
Additional information can be found online at kotex.com, kimberly-clark.com or fda.gov, or by calling the FDA at (800) 332-1088.