"We are beginning an investigation that will look into signage and whether it can be considered misleading," said Jim Rabbitt, director of the department's Bureau of Consumer Protection.
The investigation will focus on whether "Wal-Mart Organics" signs and banners were placed on or above shelves containing items that are not certified organic, as has been alleged by the watchdog group The Cornucopia Institute.
In March 2006, Wal-Mart announced that it was doubling the selection of organic products in its stores. It followed up this announcement with an ad campaign in parenting and women's magazines and on television. One of the company's stated goals was to make organics more affordable to general consumers.
Typically, supermarkets charge 30 to 40 percent more for organic food than for food grown using chemicals and genetic engineering. This has made the organic industry extremely lucrative, leading it to grow 15 percent annually over the last five years.
The Cornucopia Institute claims to have first noticed labeling problems at Wal-Mart's prototype store in Plano, Texas. Subsequent investigation uncovered the same problems in at least four states: Illinois, Iowa, Minnesota and Wisconsin. In addition to filing a complaint in the state of Wisconsin, the Cornucopia Institute also filed a complaint with the U.S. Department of Agriculture. The USDA has not yet decided whether to investigate.
"We're seeking more information to determine what action should be taken," said Joan Schaffer, spokesperson for the agency's national organic program.
Randy Lee, chief financial officer of grocery co-op PCC Natural Markets, expressed concern over both Wal-Mart's practices and the USDA's lack of action. "A huge amount of work went into coming up with a standard of quality in the organic industry," he said. "If these allegations are true, then it very easily erodes those standards and comes with a significant business impact on other retailers that have higher standards."
"Where is the USDA in all this?" he asked.