Labeling Laws for the Food and Beverage Industry – Unfair Competition and Mislabeled Products

by Polsinelli
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In a recent unanimous U.S. Supreme Court ruling, the court opened the door for private parties, including competitors, to bring false advertising and misrepresentation claims under the Lanham Act even if the product labels comply with all FDA regulations. The Supreme Court's decision in the POM v. Coca-Cola Co. case cements the idea that compliance with FDA regulations does not insulate a company from having to defend itself against false advertising and misrepresentation claims under the Lanham Act or certain other state laws. As such, producers of food and beverages will need to comply with FDA regulations, USDA regulations, the Lanham Act, and certain state laws when creating labels and advertisements.

On June 12, 2014, the U.S. Supreme Court reversed the Ninth Circuit ruling and held that following the Food, Drug, and Cosmetic Act (FDCA) does not preclude a private party from bringing a Lanham Act claim challenging as misleading a food or beverage label that is regulated by the FDCA. POM Wonderful LLC v. Coca Cola Company, 134 S. Ct. 2228 (2014). The holding affirms that private parties, including competitors, can bring false advertising and misrepresentation claims under the Lanham Act even if the labels or advertisements comply with all FDA regulations. Not only must a company now be diligent in adhering to FDA labeling and advertising regulations, it must also be aware that third parties may have a cause of action under the Lanham Act or appropriate state laws if the label or advertisement falsely advertises or misrepresents the product.

With the Supreme Court's ruling it is now more important than ever for a company to carefully review all food and beverage labels and advertising to first ensure compliance with FDA regulations but also make sure it is not deceptive or misleading to a consumer. Companies also now have the option to use this ruling offensively to challenge competitors allegedly making misleading claims which could potentially confuse a consumer, leading to unfair competition. A company must now be prepared to articulate why labeling or advertisements will not be viewed as false or misleading with the potential to cause consumer confusion, and any claims made about a product should be justifiable. Working with counsel to set guidelines for labeling and advertisement parameters will help ensure that lawsuits from competitors filed under the Lanham Act for unfair competition are minimized.

History

In 2008, POM Wonderful LLC filed a lawsuit in United States District Court for the Central District of California, with a cause of action under the Lanham Act, alleging that The Coca-Cola Co. used misleading labeling and advertising in naming and promoting its competing juice drink. POM argued that Coca-Cola's pomegranate-blueberry juice blend is misleadingly labeled because it contains less than one percent pomegranate or blueberry juice and hurt POM's sales of similar products. The product label featured the words "BLUEBERRY POMEGRANATE," but the actual beverage contained less than 1% of either blueberry or pomegranate juice (the beverage was 99% grape and apple juice with 0.3% pomegranate juice and 0.2% blueberry juice). It is important to note that under the FDA regulations for labeling juice the label was acceptable.

In a motion to dismiss, which the District Court granted, Coca-Cola successfully argued that POM's claims were pre-empted by the FDA regulation of labeling and advertising of juice drinks. The U.S. Supreme Court, however, reversed the decision based on their interpretation that there was no pre-emption issue. The Supreme Court was not worried about the label itself, but focused on the issue that "concerns the alleged preclusion of a cause of action under one federal statute by the provision of another federal statute." This led to the ruling that competitors may bring Lanham Act claims, like POM's, challenging food and beverage labels regulated by the FDCA (even when the labels meet all the FDCA guidelines). As Justice Kennedy noted the FDCA and Lanham Act are complementary not mutually exclusive. The FDA through the FDCA is tasked with overall public health and safety, whereas the Lanham Act is in place to protect unfair competition in commerce.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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