Within libertarian circles no proposition is more controversial that California Proposition 37. The purpose of this measure is to force producers to add a label to food products if those products contain any Genetically Modified foods.
The libertarian argument against is very simple. This is an additional regulation. If people genuinely did not want GMO in their food then the free market would solve this problem. All other things being equal that is itself a good argument, and the libertarian instinct to be suspicious of every new law is a good instinct to have. But those who support Proposition 37 would be glad to say that all other things are not equal, which is why they support Proposition 37.
The reason so many libertarians support Proposition 37 is because of a perception that the free market is unable to function in this instance - not because there is no market for GMO free products, but because the federal government restricts that form of advertising. The label is not outright forbidden, but as is the case with modern American fascism, its use is restricted to the point where it is essentially unusable.
Consumers are not able to get the knowledge necessary for the free market to work. Those who have products that are GMO free are not able to advertise such, and those who have products that are not GMO free are not willing to advertise such. Therefore, to undo the mess created by the federal government at the behest of agribusiness, this ballot initiative seeks to force the opposite condition. Since "GMO free" is forbidden, therefore those protected by that ban must label their foods as containing GMOs.
It is not a perfect measure, it does indeed have exceptions. The big targets of wheat, corn, and soy are covered though. One of the major examples of the discrepancies in Proposition 37, that milk is not covered but soy milk is, is explained by the proposition covering the big three. Soy milk is made of soy while real milk is not made of soy. Restaurants are not covered, so if one buys a prepared meal there is no label. To buy the raw materials at a supermarket and to prepare that meal at home, those raw materials are covered.
Even with those exceptions, this proposition amounts to the State of California giving consumers the knowledge they need for the free market to work, knowledge that is being forcibly withheld by the federal government. This is not the case of the liberal fantasy of law being used to correct a flaw in the market, but is instead a case of law being used to correct law.