The U.S. Supreme Court’s unanimous ruling on June 12 in favor of Pom Wonderful has important implications for food processors. Until now, compliance with FDA labeling regulations generally meant a product was immune from a claim that its labeling is deceptive or misleading with respect to those aspects of the label sanctioned by FDA regulations.
This “safe harbor” has been decisively removed by the Supreme Court’s ruling, which held that a plaintiff, such as Pom, may bring false advertising and unfair competition claims under federal law with respect to such statements. As a result, many food processors will need to rethink their marketing and labeling practices.
The case originated in 2008 when Pom alleged that Coca-Cola was misleading consumers about its Minute Maid "Pomegranate Blueberry" juice (with “Flavored Blend of 5 Juices” in smaller font below). Pom claimed the label was misleading because, despite the name, the product contains approximately 99 percent apple and grape juice with very little of the more expensive pomegranate and blueberry juices.
Pom sells 100 percent pomegranate juice as well juice blends containing significant amounts of pomegranate juice. From Pom’s perspective, Coca-Cola was unfairly competing by selling a non-comparable product as “Pomegranate Blueberry” juice and undercutting Pom’s sales. Pom's lawsuit included claims under federal statute governing false advertising and unfair competition (the Lanham Act).
Coca-Cola responded by noting that the images on its product correctly identified the five fruits in the juice blend and that the name – “Pomegranate Blueberry-flavored blend of 5 juices” – informed consumers as much while describing that the blend tastes like pomegranate and blueberry. Most significantly, Coca-Cola said the name of the product fully complied with FDA juice-naming regulations permitting a beverage to be named after a non-predominant juice in such circumstances.
The district court and appeals court accepted Coca-Cola’s arguments and rejected Pom’s Lanham Act claims because doing otherwise would “disturb” the “comprehensive food and beverage labeling regulations under the FDCA [federal Food Drug & Cosmetic Act] which specifically considered the naming of such juices.”
But the Supreme Court unanimously sided with Pom. Rather than viewing the Lanham Act and the FDCA as conflicting, the court held that they are “complementary.” “Although both statutes touch on food and beverage labeling, the Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety.” Moreover, the FDCA’s enforcement “is largely committed to the FDA” whereas the Lanham Act empowers “private parties to sue competitors to protect their interests on a case-by-case basis.”
The Court then set forth the cornerstone of its ruling:
"Unlike other types of labels regulated by the FDA, such as drug labels …, it would appear the FDA does not preapprove food and beverage labels under its regulations and instead relies on enforcement actions, warning letters, and other measures. …. Because the FDA acknowledges that it does not necessarily pursue enforcement measures regarding all objectionable labels … if Lanham Act claims were to be precluded then commercial interests -- and indirectly the public at large -- could be left with less effective protection in the food and beverage labeling realm than in many other, less regulated industries."
In other words, the court saw no reason why aspects of a food label should be free from “policing” by competitors simply because those aspects are subject to FDA regulations. Indeed, the court found that even if an aspect of a label is specifically required or authorized by the FDCA or FDA regulations, it may be subject to a Lanham Act claim because the FDCA and its regulations are not a “ceiling on the regulation of food and beverage labeling.”
For food companies, the ruling obviously opens the door to lawsuits by competitors alleging that aspects of a label regulated by the FDA are false and misleading. The biggest impact pertains to products similar to the Minute Maid juice blend that include a name or front-of-package claim that may comply with FDA regulations but help it compete against more expensive products.
In such circumstances, companies selling the more expensive products have a motive to bring suit if they have an argument as to why this competition is “unfair.” For example, a company selling “strawberry” fruit snacks primarily made from strawberries might take offense to cheaper “strawberry” fruit snacks made with less expensive fruit and other ingredients.
Accordingly, food companies should immediately re-evaluate their labeling practices to assess whether any product might be susceptible to a competitor’s claim that a label is false or misleading based, in whole or in part, on aspects of the label regulated by the FDA. Although most food processors do an excellent job of complying with FDA labeling requirements, they sometimes fail to fully assess the market risks of combining those approved statements with other marketing statements and imagery on the product.
In this case, the Minute Maid product included the statement “Nourish Your Brain” along with large images of a pomegranate and blueberries. These aspects increased the risk that Pom would view this label, in combination with the name “Pomegranate Blueberry,” as deceptive to consumers. Simply put, food labels should be reviewed as a whole and with knowledge that mere compliance with FDA regulations does not provide any insurance against competitor lawsuits.