Yesterday, the U.S. Supreme Court unanimously held that a Lanham Act false advertising case may be brought even if Food and Drug Administration (FDA) beverage labeling regulations permit use of the challenged claim. Reversing the Ninth Circuit, the Court held in POM Wonderful LLC v. The Coca-Cola Company, that the Lanham Act does not expressly defer to the Food, Drug and Cosmetic Act (“FDCA”) and found no statutory or case law basis for doing so. The decision means that food and beverage producers cannot assume that compliance with FDA labeling regulations create a safe harbor immunizing them from private false advertising claims.
In the underlying case, POM Wonderful had accused Coca-Cola of false or deceptive advertising under Section 43(a) of the Lanham Act in naming and labeling a pomegranate juice blend. The District Court dismissed the Section 43(a) claim because regulations under the FDCA address the labeling of juice blend products, and do not prohibit (and in some cases expressly permit) the Coca-Cola labeling. It therefore held that any challenge under the Lanham Act was precluded. Pom Wonderful LLC v. The Coca-Cola Company, 727 F.Supp.2d 849, 871-873 (C.D. Cal. 2010). The Ninth Circuit affirmed, 679 F.3d 1170, 1178 (2012), holding that Congress had decided to “entrust matters of juice beverage labeling to the FDA,” that the FDA had promulgated “comprehensive regulation” on the subject, and that it had apparently decided not to impose the requirements sought by POM. Therefore, permitting a challenge to Coca-Cola’s labeling would risk “undercutting the FDA’s expert judgments and authority.”
The Supreme Court began its analysis by refuting the notion that this is a preemption case. The Court said that preemption is a question of whether state law is preempted by federal law or regulation. Here, the question is the interpretation of two coequal, “complementary” federal statutes, each with a different scope and purpose. “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.” The two statutes have coexisted for over 70 years, and neither contains any express preclusion of Lanham Act actions involving labels regulated by the FDA. Therefore, “it would show disregard for the congressional design to hold that Congress nonetheless intended one federal statute to preclude the operation of the other.”
The Court noted that competitors, unlike the FDA, have “detailed knowledge” about how consumers behave, and that the Lanham Act “provides incentives for manufacturers to behave well.” In the Court’s view, this creates “synergies among multiple methods of regulation” that is consistent with “congressional intent to enact different statutes with different enforcement mechanisms.”
The U.S. Government had taken a middle position, arguing that a challenge to the product name should be precluded because FDA regulations specifically authorized it, but that challenges to other parts of the label — which the FDA merely “tolerates” — could go forward. The Supreme Court rejected this distinction. Apart from the practical difficulties in determining what is “specifically authorized” and what is merely “tolerated,” there is nothing to indicate that FDA regulations constitute a “ceiling” on regulation of food and beverage labeling, given the remedies available in another federal statute. “An agency may not reorder federal statutory rights without congressional authorization,” said the Court.
In a significant caveat, the Court noted that the FDA does not preapprove food and beverage labels. By contrast, drug labels require preapproval. If Lanham Act claims were precluded, said the Court, “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." This creates the possibility that the Court might take a different view if drug labeling were at issue.
Today’s decision leaves unchanged the long-standing principle that the Lanham Act is not a vehicle for private enforcement of violations of regulations under other federal statutes. In order to be viable, a Section 43(a) action must allege that the challenged claim is false or misleading — not just that it violates a federal regulation. But the decision does suggest that compliance with an FDA health or safety regulation will not necessarily immunize a company from a false advertising claim.