Watch your P's and Q's...June 13, 2014 – Articles
The Supreme Court issued an 8-0 decision yesterday unanimously holding that compliance with federal labeling statutes cannot be used as a defense to lawsuits by competitors for false advertising under the Lanham Act.
In 2007, Coca-Cola released a juice drink under their Minute Maid brand called “Pomegranate Blueberry.” Despite the name, 99.4% of the beverage was made up of apple and grape juice. The actual amounts of pomegranate and blueberry juice were minimal with only 0.3% pomegranate juice and 0.2% blueberry juice.
POM Wonderful, the company behind a line of distinctively shaped pomegranate-blueberry juice drink and a direct competitor of Coca-Cola in the juice market, later sued in California for false advertising on the grounds that the name deceived customers into believing that Coca-Cola’s juice contained primarily pomegranate and blueberry (instead of apple and grape) and this confusion led to lost sales by POM Wonderful.
In its defense, Coca-Cola took a unique approach. It argued that because their Pomegranate Blueberry juice met the labeling requirements of the Federal Food, Drug, and Cosmetic Act (FDCA) and had been deemed permissible by the Food and Drug Administration (FDA), any claims under the Lanham Act were essentially preempted and should not be allowed to continue.
Justice Kennedy, writing for the Supreme Court, rejected Coca-Cola’s position noting that…
the two statutes are complementary to each other, and each provides incentives to manufacturers to “behave” in the marketplace. The Lanham Act specifically protects companies and other commercial entities against unfair competition while the FDCA protects the health and safety of consumers and the general public. These two complementary but distinct goals work together, not in place of the other. As such, the Supreme Court has allowed POM Wonderful’s lawsuit to go forward.
The full impact of the holding is yet to be seen, but food and beverage insiders have expressed concerns that the decision will lead to increased lawsuits relating to branding and labeling. Companies that want to capitalize on the latest craze in consumer products, whether the inclusion of a special vitamin or flavoring, will need to take care that the name doesn't contradict the label and complies with false advertising standards under the Lanham Act. Otherwise, they may face their own lawsuit from a competitor looking to take advantage of overly aggressive branding.