Pepsi has agreed to eliminate leaded labels on bottled soft drinks imported from Mexico to resolve California's allegations that Pepsi violated the state's Proposition 65 by failing to warn consumers the bottles' labels contained lead, a toxic substance that can cause birth defects, learning disabilities and cancer.

Prop. 65 and other state food safety laws would be pre-empted by a bill recently passed by the U.S. House and currently awaiting a vote in the Senate -- H.R. 4167, "The National Uniformity for Food Act of 2005." If the federal legislation had been law, Pepsi could have continued to sell Mexican sodas in bottles with leaded labels until the federal government took action.

"This settlement is a classic example of why California's Proposition 65 is a law that works," said state Attorney General Bill Lockyer. "Not only does the law require manufacturers to warn the public about the risk of exposure to harmful chemicals, it gives companies incentive to make their products safer. I congratulate Pepsi for meeting that challenge, taking the path of responsible corporate conduct and helping reduce Californians' exposure to this extremely dangerous substance."

"Lead is dangerous, and, sadly, lead is everywhere in our poor minority communities," said Los Angeles City Attorney Rocky Delgadillo. "This landmark agreement means that we have put an end to one source of lead in our neighborhoods. Let this be a warning to those companies who sell products containing lead -- we will be vigilant in protecting the health of our residents."

Under the settlement, filed today in Los Angeles County Superior Court, Pepsi will immediately shift to lead-free labels on new bottles for products from Mexico. Additionally, Pepsi will eliminate existing lead-painted bottles for Mexican sodas within 10 years, with a target of eliminating 95 percent of such bottles within seven years.

Under the settlement, Pepsi will pay a $1 million civil penalty and could face an additional $4.25 million in civil penalties if it fails to meet the 95 percent phase-out target for existing bottles with leaded labels.

In addition to the civil penalties, the settlement requires Pepsi to pay $500,000 to fund: surveillance activities to keep old Mexican Pepsi bottles out of California; voluntary independent environmental audits of small Mexican food companies that export products to the United States; projects to eliminate lead from food products, including candy; and education and outreach programs on exposure to lead. Pepsi also will pay $750,000 in reimbursement for investigative costs and attorneys' fees.

A joint investigation by Delgadillo's and Lockyer's offices found that painted labels on bottles of Pepsi and other beverages manufactured in Mexico and imported into the United States contain up to 45 percent lead.

Testing results showed the lead from the label could rub off onto hands, creating a "hand-to-mouth" pathway for exposure. In addition, lead from the labels sometimes made its way into the beverage during the washing process. Bottles with lead on the labels are imported and sold throughout the state of California. Investigation of other companies that use lead-labeled bottles is ongoing.

Lead has been listed since 1987 on the state's list of substances known to cause reproductive harm and birth defects, and since 1992 has been on the list of substances known to cause cancer. Exposure to lead occurs chiefly from ingestion, such as eating or putting objects into the mouth, which puts young children particularly at risk.

Impacts include lowered intelligence (as measured by IQ tests), learning disabilities, hearing loss, reduced attention span and behavioral abnormalities. Teenagers also can suffer adverse effects, including brain damage, kidney damage, hearing loss and impaired growth.

No level of lead consumption, no matter how small, is deemed safe by the scientific community.

In addition to phasing out leaded glass in its Mexican-bottled product, Pepsi has agreed to hire a food processing auditor to monitor its 13 returnable bottling plants to help eliminate the risk of lead integration into bottles. The company also will survey at least 200 retail outlets in California to ensure that sales of Mexican-manufactured Pepsi are discontinued. Letters will be sent to California retailers and distributors known by Pepsi to have sold Mexican Pepsi in the last two years.

Passed overwhelmingly by California voters, Proposition 65, the Safe Drinking Water and Toxic Enforcement Act of 1986, is a powerful tool in state and local agencies' efforts to protect the public from toxic chemicals present in food and other products.