The Supreme Court has been on a tear over the past several weeks, putting to bed some of the most pressing cases that cropped up in the last session. In addition to answering big questions surrounding securities class actions and intellectual property suits, the Court has also weighed in on POM Wonderful’s ongoing battle with Coca-Cola, giving more direction about when labeling claims are protected by federal regulations. While the decision from SCOTUS is only a few weeks old, the months and years to come will be a true testament to how impactful this case will be to the food industry.
At the heart of the issue is POM's assertion that Coke’s Minute Maid Pomegranate Blueberry flavored drink carried an intentionally misleading name because the juice blend contained only 0.3 percent pomegranate and 0.2 percent blueberry juice. POM claimed this allegedly misleading name could lure customers away from its drinks despite Coke’s compliance with Food and Drug Administration (FDA) labeling standards.
“Under FDA labeling laws, Coke was permitted to label the juice blend as blueberry and pomegranate flavored, even though there was not a significant component of either in the product,” says Linda Goldstein, chair of the Advertising, Marketing & Media division at Manatt Phelps & Phillips LLP. “Coke argued that because the labeling of the product complied with FDA regulations, this preempted any claim under the Lanham Act, which is a statute under which false advertising claims are brought by competitors.”
On June 12, the Supreme Court sided with POM, saying that compliance with the FDA does not preempt additional suits from competitors under the Lanham Act. While this decision does not give POM the win in this particular case just yet, it does give them the right to continue their suit, and is likely to have wide-ranging implications for competitive challenges to labeling claims in the future.
“The ruling itself was very specific in its application,” says Goldstein. “The court made it very clear that this ruling was limited to preemption of the Lanham Act by FDA law. However, the same principles could easily apply to labeling regulations of other government agencies. For example, the EPA regulates the claims made on packaging for products such as household cleaners, and also sets standards for when certain types of claims can be made.”
Perhaps more important to keep an eye on, says Goldstein, is the impact this ruling will likely have on competitive challenges or brand wars in the future. This decision gives competitors another very powerful weapon by allowing competitors to challenge not only claims made in advertising, but claims made on packaging and labeling as well.
“I think this could potentially open the floodgates to more brand war litigation and raises the stakes significantly,” says Goldstein. “Historically, advertisers have used the Lanham Act to challenge claims made by competitors in their advertising materials. So even if a company lost, the result was that they would have to discontinue or modify their advertising. Now, however, if a company’s labeling claims are found to be misleading, it’s not just a question of changing the advertising or removing the offending advertising from the marketplace, but the product itself will have to be removed from the shelves with nothing to replace it. The consequences to the company could be devastating.”
Goldstein says that companies in the food and beverage space will now want to make sure that their packaging not only complies with FDA regulations, but also that the claims made do not open them up to risk from competitor lawsuits. “This will necessitate an additional layer of review. In addition to review by an expert in FDA regulations, companies would be well advised to also have their labels reviewed by those with expertise in advertising law.”