Antitrust & Competition, Business Litigation, Intellectual Property Articles

If Your Product Has A Label ...
by Alan J. Haus

August 01, 2014

For the second time in three months, the U.S. Supreme Court has interpreted statutes in ways that broaden the possibilities for false advertising claims.  The latest decision is that meeting FDA standards for labeling does not automatically insulate a business from legal claims by another company that the style of presentation of information on the label amounts to false advertising.  Companies and their marketing professionals should take note for both the offensive and defensive implications of these developments.

The Lanham Act not only governs federal trademark registrations, it also provides civil legal remedies for false advertising.  The question presented in POM Wonderful LLC v. The Coca-Cola Company (Case No. 12–761, decided June 12, 2014) was whether a company that had fully complied with the Food & Drug Administration’s requirements that food labels not be misleading could nevertheless be potentially liable for false advertising in violation of the Lanham Act.  The court answered that a company must comply with both laws, and that satisfaction of FDA standards did not automatically insulate a company from a claim of false advertising.

The Coca Cola Company’s Minute Maid Division made a blended juice that, while prominently displaying the words “pomegranate blueberry,” apparently contained only 0.3 percent pomegranate juice and 0.2 percent blueberry juice.  POM sells a competing product, and sued Coke for false advertising under Section 43 of the Lanham Act, claiming that Coke’s labeling, marketing and advertising deceived consumers into thinking that Coke’s juice blend consisted predominantly of premium pomegranate and blueberry juices   -   when in fact the product consisted mostly of less expensive apple and grape juices.

Coke had a defense that seemed to have a lot of logic to it.  Coke’s pomegranate-blueberry juice label complied with the FDA’s requirements that the content of blended-juice labels not be inaccurate.  There was no dispute in the case about Coke having satisfied that requirement.

There was no gridlock in Washington in deciding this issue.  In a unanimous decision, the Supreme Court examined the Food, Drug and Cosmetic Act (FDCA) and the FDA’s role in consumer protection, and contrasted it with the purposes of the federal false advertising statute.  The purpose of the FDA is to protect public health and safety.  While the FDA is almost solely responsible for enforcing and implementing the FDCA’s food-labeling requirements and regulations, it “does not have the same perspective or expertise in assessing market dynamics that day-to-day competitors possess,” the Court wrote.

In contrast, "Lanham Act suits draw upon this market expertise by empowering private parties to sue competitors to protect their interests on a case-by-case basis.”  Moreover, the Court observed that the Lanham Act’s incentive for competitors to police the accuracy of each other’s labels enhances the FDCA’s goal of consumer protection because the FDA does not preapprove food labels for accuracy.  Thus, the scientific accuracy of a label does not mean that it is insulated from a legal claim by a competitor that the presentation on the label is so misleading that it amounts to false advertising.  Accordingly, the Supreme Court held that the FDA’s regulations, and Coke’s compliance with them, did not preclude POM’s suit under the Lanham Act.

The decision could have widespread implications in the food and beverage industry and other industries, which may have to reevaluate existing labeling practices and procedures.  The decision almost certainly applies to wine and other alcoholic beverage labels.  The POM Wonderful opinion is a reminder to producers and advertisers to consider all reasonable takeaways consumers may have from statements on a product label or in an advertisement.

As noted in John Epperson's companion article in this issue of CWC Marketing and Media Law Updates, the FDA has declined judicial invitations even to provide scientific guidance about whether products with any amount of synthetic chemicals or genetically modified organisms can be fairly described as "natural."   Such guidance would provide a baseline for whether claims are truthful  -  to which the Supreme Court has added false advertising standards as the mechanism for deciding whether truthful statements are presented in an illegally misleading manner.

Lastly, as we reported in the Spring 2014 issue of CWC Marketing and Media Law Updates, the Supreme Court very recently also unanimously decided that companies do not have to be direct competitors to bring Lanham Act false advertising claims.  Historically, challenges to product names and label descriptions have been relatively rare under the Lanham Act.  While it remains to be seen if the Supreme Court's decisions will unleash a new wave of such litigation, the combined effect of two decisions in broadening the potential federal false advertising claims means that food and beverage companies, and any other companies that use labels or advertising that are subject to special regulation need to consider the potential for such litigation.

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