On June 12, 2014, the United States Supreme Court issued a unanimous decision in POM Wonderful LLC v. Coca-Cola Co., holding that competitors may bring Lanham Act claims challenging food and beverage labels regulated by the federal Food, Drug, and Cosmetics Act (“FDCA”). (For the full text of the Supreme Court’s decision, please click here.) In this landmark decision, the Supreme Court overturned the Court of Appeals for the Ninth Circuit’s decision as “incorrect,” holding that “[n]either the Lanham Act nor the FDCA, in express terms, forbids or limits Lanham Act claims challenging labels that are regulated by the FDCA.” As we discuss in greater detail below, this decision could play a significant role in changing the landscape of food labeling and marketing because it puts industry on notice that complying with FDA regulations and policies will not be enough to shield against lawsuits from competitors, and potentially even consumers.
POM Wonderful LLC (“POM”) filed a Lanham Act claim against its competitor, Coca-Cola Co. (“Coca-Cola”), for the labeling of its “pomegranate blueberry” juice blend. POM alleged that the name, label, marketing, and advertising of Coca-Cola’s juice blend misled consumers into believing that it consisted predominantly of pomegranate and blueberry juice, when in reality it only contains 0.3% and 0.2% of each juice, respectively. In response, Coca-Cola argued that its label was perfectly compliant with FDA regulations governing juice labels and therefore POM’s Lanham Act claim was precluded.
The Lanham Act was passed by Congress to regulate commerce and, among other things, to create a cause of action for unfair competition through misleading advertising or labeling. Under this provision of the Lanham Act, competitors, and not consumers, are the intended beneficiaries of enforcement. See 15 U.S.C. §1125. The FDCA, on the other hand, is intended to protect the health and safety of the public and contains specific provisions prohibiting any food or beverages in commerce from being misbranded. Under the FDCA, a food or beverage may be deemed “misbranded” if, inter alia, “its labeling is false or misleading,” information required to appear on its label “is not prominently placed thereon,” or a label does not bear the “common or usual name of the food, if any there be.” See 21 U.S.C. §§343.
After POM sued Coca-Cola in the United States District Court for the Central District of California, the court ruled that the FDCA and its regulations preclude challenges to the name and label of Coca-Cola’s juice blend. (To read the full text of this opinion, please click here.) The District Court explained that “the FDA has directly spoken on the issue” through its regulations, where the regulations “ha[ve] not prohibited any, and indeed expressly ha[ve] permitted some” aspects of Coca-Cola’s labeling. On appeal, the Ninth Circuit affirmed the District Court’s decision, reasoning that Congress decided “to entrust matters of juice beverage labeling to the FDA.” (To read the full text of the Ninth Circuit’s decision, please click here.) In its decision, the Ninth Circuit barred POM’s Lanham Act claim “[o]ut of respect for the statutory and regulatory scheme,” and to avoid the “risk [of] undercutting the FDA’s expert judgments and authority.” The Supreme Court granted certiorari to consider whether a private party may bring a Lanham Act claim challenging a food label that is regulated by the FDCA. (For additional coverage of the Supreme Court’s decision, please click here, here, here, and here.)
United States Supreme Court Decision
At the outset of its opinion, the Supreme Court framed this case as “concern[ing] the intersection and complementarity” of the Lanham Act and the FDCA. In its decision, the Supreme Court relied on traditional rules of statutory interpretation and dedicated much of its opinion to a thorough analysis of Congressional intent. The Supreme Court held that nothing in the express terms of the text, history, or structure of the Lanham Act or the FDCA forbids or limits competitors from bringing Lanham Act claims to challenge labeling regulated by the FDCA. To emphasize that Congress did not intend for Lanham Act claims to be precluded, the Supreme Court gave significant weight to the fact that Congress amended the FDCA to include an express preemption provision with respect to state laws addressing food and beverage misbranding, but did not create a similar preclusion of other federal laws. In light of the 70-year co-coexistence of the FDCA and the Lanham Act, the Supreme Court viewed Congress’s inaction as “powerful evidence that Congress did not intend FDA oversight to be the exclusive means” of ensuring proper food and beverage labeling.
Furthermore, the Court recognized the limits on FDA’s regulatory oversight and competence on competitive practices in the marketplace. In reversing the Ninth Circuit, the Supreme Court reasoned that competitors “have detailed knowledge regarding how consumers rely upon certain sales and marketing strategies” and an “awareness of unfair completion practices [that] may be far more immediate and accurate than that of agency rulemakers and regulators.” The decision implied that competition in the marketplace and consumer safety are better preserved by allowing both Lanham Act claims and administrative regulation and enforcement under the FDCA.
The Court emphasized that “[i]t is unlikely that Congress intended the FDCA’s protection of health and safety to result in less policing of misleading food and beverage labels than in competitive markets for other products.” Therefore, to find that Lanham Act claims are precluded by the FDCA would, according to the Supreme Court, “not only ignore the distinct functional aspects of the FDCA and the Lanham Act but also would lead to a result that Congress likely did not intend.”
In addition, the Supreme Court rejected Coca-Cola’s argument that preclusion is proper because Congress intended national uniformity in food and beverage labeling. The Supreme Court explained that the centralization of FDCA enforcement authority in the Federal Government “does not indicate that Congress intended to foreclose private enforcement of other federal statutes.” Because the Lanham Act and FDCA can be implemented together, the Court concluded that the FDCA’s greater specificity with respect to food labeling does not create any more or different variability in food labeling than that of any other industry. Based on the Court’s interpretation of the two statutes, “neither the statutory structure nor the empirical evidence” presented any difficulty in fully enforcing each statute according to its terms.
What Does This Mean? What are the Implications of this Decision?
At first glance, the POM decision may appear narrow in its application to food labeling and advertising. However, the rationale used in the Supreme Court’s opinion could have a much more expansive impact on the way the courts construe the interplay of federal statutes that have overlapping applications. Furthermore, it seems possible that this opinion could be expanded to apply to other federal regulatory bodies, like the U.S. Department of Agriculture (“USDA”) and the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), which require similar labeling requirements under their respective regulatory frameworks.
For example, in a blog entry we posted prior to the Supreme Court’s POM decision, we discussed how the FTC’s regulation of advertising and promotion of FDA-regulated products can create a complex and confusing regulatory framework for industry. Because both agencies have enforcement authority over product promotion but different standards and regulations, the blurred jurisdictional lines fail to provide industry with a clear directive as to which agency’s set of standards it should comply. Under this framework, for example, a product’s labeling claim may comply with the FDCA’s regulations and still run afoul of the FTC’s policies as misleading or lacking adequate substantiation. Therefore, in the absence of clear guidance, industry is forced to guess how its products will be regulated and which standards it must meet to be compliant with both sets of federal laws and regulations. (For more information on this topic, please also read the article “Need for Regulatory Harmonization: How FDA and FTC’s Shared Jurisdiction Poses Problems for Labeling& Advertising Compliance” here.)
The Supreme Court’s POM decision seems to lead industry down a similar rabbit hole. On the one hand, the Supreme Court’s decision emphasizes the importance of compliant labeling under the FDCA. However, the same opinion informs industry that the very same FDCA-compliant labeling can be brought before a court for misleading consumers in violation of the Lanham Act. In the absence of clear guidance, however, it is unclear what, if any, compliance measures may fully immunize manufacturers under all of the applicable laws.
For these reasons, this decision will likely have a significant impact on how manufacturers will choose to label and advertise their food products in the future. In order to minimize the risk of a possible enforcement or legal action, industry should not only ensure that their product labeling complies with the FDCA’s misbranding provisions, but should also be prepared to defend against any possible challenges to the truthfulness and accuracy of any labeling or advertising claims they make. In particular, industry should be prudent in analyzing their labeling and advertising to ensure that the overall context of their claims do not rise to the level of false or misleading claims under the Lanham Act, FTC Act, and state laws governing deceptive advertising.
While it remains to be seen how courts will rule on the merits of future Lanham Act claims like POM’s, it seems evident that industry will have to take more expansive precautions to insulate themselves from advertising and labeling lawsuits in the post-POM era.