Supreme Court: Lanham Act False Advertising Claims Not Precluded by Food Labeling Rules | Practical Law

Supreme Court: Lanham Act False Advertising Claims Not Precluded by Food Labeling Rules | Practical Law

In Pom Wonderful LLC v. Coca-Cola Co., the US Supreme Court held that the Food, Drug and Cosmetic Act (FDCA) does not preclude commercial entities from bringing lawsuits against their competitors, under the Lanham Act, for allegedly deceptive labeling of a product, even if the challenged aspects of the labeling are specifically required or authorized by the FDCA.

Supreme Court: Lanham Act False Advertising Claims Not Precluded by Food Labeling Rules

by Practical Law Commercial
Published on 17 Jun 2014 • USA (National/Federal)
In Pom Wonderful LLC v. Coca-Cola Co., the US Supreme Court held that the Food, Drug and Cosmetic Act (FDCA) does not preclude commercial entities from bringing lawsuits against their competitors, under the Lanham Act, for allegedly deceptive labeling of a product, even if the challenged aspects of the labeling are specifically required or authorized by the FDCA.
On June 12, 2014, the US Supreme Court held in Pom Wonderful LLC v. Coca-Cola Co. that commercial entities may bring lawsuits alleging unfair competition through false or misleading advertising and labeling under section 1125(a) of the Lanham Act to challenge labels authorized by the Food, Drug and Cosmetic Act (FDCA) (No. 12-761, (S. Ct., June 12, 2014)).

Background

POM Wonderful LLC (POM) grows pomegranates and produces, markets and sells a variety of pomegranate juices, including a pomegranate-blueberry juice blend.
Coca-Cola Co. competes with POM in the pomegranate-blueberry juice blend market and sells a juice blend composed of the following percentages of juices:
  • 99.4% apple and grape.
  • 0.3% pomegranate.
  • 0.2% blueberry.
  • 0.1% raspberry.
The label of Coca-Cola's juice blend displayed the words "POMEGRANATE BLUEBERRY" in all capital letters on two separate lines, the phrase "flavored blend of 5 juices" in much smaller print and in even smaller print the phrase "from concentrate with added ingredients and other natural flavors." The label also prominently displayed a picture of various fruits, including a halved pomegranate and a halved apple.

Regulatory Environment

FDCA

The FDCA regulates food, drugs and cosmetics to protect the public's health and safety and relies solely on the US federal government for enforcement, as there are no FDCA private rights of action.
Under the FDCA, misleading labels for food and drinks are prohibited (21 U.S.C. §§321(f), 331). Food and Drug Administration (FDA) regulations enacting the FDCA specifically cover juice blend labels. If a juice blend label does not name all the juices it contains and mentions only juices not predominant in the blend, it is misleading unless it either:
  • Declares the percentage content of the named juice.
  • Indicates that the named juice is present as a flavor or flavoring.
(21 C.F.R. §102.33(d).)

Lanham Act

The Lanham Act regulates all interstate commerce by making the deceptive and misleading use of marks actionable. In addition to its prominent trademark provisions, the Lanham Act creates a federal cause of action for unfair competition arising from misleading advertising or labeling (15 U.S.C. 1125(a)). In Lexmark International, Inc. v. Static Control Components, Inc., the Supreme Court held that to have standing for claims under section 1125(a) of the Lanham Act, plaintiffs must allege that there has been an injury to its commercial interest in sales or business reputation proximately caused by the defendant's misrepresentations. (No. 12–873, (March 25, 2014).)

Lawsuit and Appeal

POM sued Coca-Cola for unfair competition under the Lanham Act, claiming that Coca-Cola's label tricked and deceived consumers, injuring POM as a competitor. POM alleged that Coca-Cola's product name, label, marketing and advertising misled consumers into believing the product consisted predominately of pomegranate and blueberry juice when it actually consisted predominantly of less expensive apple and grape juices, regardless of whether or not it was all authorized under the FDCA . POM claimed that this consumer confusion caused it to lose sales and sought damages and injunctive relief (see Regulatory Environment: Lanham Act).
The US District Court for the Central District of California granted Coca-Cola summary judgment and the US Court of Appeals for the Ninth Circuit affirmed. These courts determined that private unfair competition causes of action under the Lanham Act are precluded by the FCDA's regulation of juice blend labeling.

Outcome

The Supreme Court reversed the Ninth Circuit and held that commercial entities may bring Lanham Act claims for unfair competition through misleading labeling, even if the labeling at issue is subject to and authorized by the FDCA.
The Court found that the FDCA does not preclude Lanham Act unfair competition claims against juice blend labels because:
  • The acts regulate separate areas because of their respective purposes, consumer protection for the Lanham Act and health and safety for the FDCA.
  • While both acts cover the same subject matter, their regulation is complementary, not conflicting.
  • The terms of neither the FDCA nor the Lanham Act preclude private lawsuits by competitors alleging unfair competition under the Lanham Act.
  • Holding that the FDCA precluded these types of Lanham Act claims would assume, without a statutory basis, that the FDCA regulation was superior to that of the Lanham Act.
Coca-Cola argued that these types of Lanham Act claims are precluded by the FDCA because Congress intended national uniformity in food and beverage labeling. The Court rejected this argument for the following reasons:
  • It is irrelevant that the FDCA and implementing regulations address food and beverage labeling more specifically than the Lanham Act because both statutory schemes can be implemented at the same time.
  • Absent specific statutory language to the contrary, the FDCA's delegating the authority to regulate labeling to the FDA does not preclude federal private rights of action, including unfair competition claims under the Lanham Act.
  • The FDCA's preemption section applies only to state law, not federal law such as the Lanham Act.
The Court also rejected the US government's argument that these types of lawsuits under the Lanham Act are precluded because the challenged aspects of the labels are specifically authorized or required by the FDCA and FDA regulations, as was the case with Coca-Cola's juice blend label. According to the Court, this argument, similar to Coca-Cola's argument, improperly assumed the FDCA was both exclusive and a ceiling to any possible food and beverage label regulation.

Practical Implications

This decision will make it easier for companies to bring lawsuits against their competitors for misleading advertising and labeling. Although the facts of the case dealt only with food labeling, the Court did not limit its holding to that scenario.
To avoid private liability under the Lanham Act, companies should accurately label their products, regardless of whether inaccurate labels are subject to, authorized by or approved under a separate regulatory scheme.
For more information on standing to bring Lanham Act unfair competition claims arising from false advertising or labeling, see Legal Update, Supreme Court Clarifies Lanham Act False Advertising Standing Rule.
For more information on product labeling, see Practice Note, Product Labeling.