A unanimous Supreme Court (8-0, Justice Breyer recusing) ruled on June 12, 2014 in POM Wonderful v. Coca-Cola that one competitor may sue another for unfair competition under the Lanham Act for allegedly false or misleading product descriptions, notwithstanding that product labeling is regulated under the federal Food, Drug, and Cosmetic Act (FDCA).
Coca-Cola’s Minute Maid division makes and sells a juice blend that is labeled as “pomegranate blueberry,” even though the product contains just 0.3% pomegranate juice and 0.2% blueberry juice. Frustrated that the Coca-Cola product was made with predominantly less expensive apple and grape juices, yet connoted that it might have the same flavor profile as POM Wonderful’s own 85% pomegranate-15% blueberry drink, POM sued Coca-Cola under Section 43 of the Lanham Act for false or misleading product description.
The district court held that because Coca-Cola’s label conformed to FDCA regulations, POM’s Lanham Act suit was precluded, and the Ninth Circuit affirmed. After a star-studded oral argument in the Supreme Court in which Seth Waxman represented POM and Kathleen Sullivan argued for Coca-Cola, the latter being taken to task by Justice Kennedy when Sullivan suggested that POM didn’t sufficiently credit consumers’ intelligence—“Don’t make me feel bad, because I thought this was pomegranate juice”—the Court reversed.
Following its expansive view of Lanham Act standing from the Lexmark Int’l v. Static Control Components case, decided earlier this Term, the Court noted that POM was bringing suit as a competitor of Coca-Cola; “though in the end consumers also benefit from the Act’s proper enforcement, the cause of action is for competitors, not consumers.” This observation at the outset distinguished the POM Wonderful case from the flood of consumer suits that have been brought in recent years against food and beverage companies for allegedly misleading product labeling, many of which have been found to be pre-empted by the FDCA.
Turning to the statutory interpretation of the FDCA, the Court noted that the FDA apparently does not exercise significant oversight over the content of fruit juice labels; the relevant regulation only requires that a fruit juice blend label must either declare the percentage content of the named juice, or indicate that the named juice is present as a flavor or flavoring. Neither the text of the Lanham Act or the FDCA contain any provision addressing or referring to the interplay between the two.
The Court found that harmonizing the FDCA and Lanham Act did not require preclusion of POM’s Lanham Act claim. Noting that the two statutes have co-existed since the Lanham Act was passed in 1946, the Court observed that Congress could have enacted a provision expressly preempting Lanham Act claims in favor of the FDCA, and the fact that it had not served as “powerful evidence that Congress did not intend FDA oversight to be the exclusive means” of ensuring proper food and beverage labeling. Far from interfering with the proper operation of the FDCA, the Court found, competitors’ Lanham Act claims might in fact further the same objectives: “Allowing Lanham Act suits takes advantage of synergies of multiple methods of regulation,” and competitors’ “awareness of unfair competition practices may be far more immediate and accurate than that of agency rulemakers and regulators.”
The Court’s view of the Lanham Act being a complement to, rather than precluded by, FDCA labeling regulations means that competitors bringing a false labeling claim have one less procedural hurdle to overcome. Conversely, brands should carefully consider the fact that FDCA-compliant labeling is insufficient to stave off unfair competition claims.