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Point Five Percent (0.5%) of the Real Thing

With lawsuits directed at the marketing campaigns of trendy products becoming as trendy as the products themselves,1 the United States Supreme Court recently gave POM Wonderful its blessing to bring a Lanham Act claim against Coca-Cola for a potentially misleading label that is compliant with the Food, Drug, and Cosmetic Act (FDCA).

POM Wonderful produces, markets, and sells a variety of pomegranate products, including a pomegranate-blueberry juice blend.  Much to POM Wonderful’s chagrin, Coca-Cola, through its Minute Maid brand, created a product to compete with POM Wonderful’s pomegranate-blueberry juice blend.  The label of this product prominently displays the words “pomegranate blueberry” in all capital letters on two separate lines, and below those lines, in much smaller type, the phrase “flavored blend of 5 juices.”  Below that phrase, in even smaller type, is the phrase “from concentrate with added ingredients – then a line break “and other natural flavors.”  The label also displays a vignette of blueberries, grapes, and raspberries in front of a halved pomegranate and halved apple.

The problem with the aforementioned label – in POM Wonderful’s view – is that Coca-Cola’s pomegranate-blueberry juice blend consists of 99.4% apple and grape juices (which are less expensive than pomegranate and blueberry juices), and only 0.3% pomegranate juice, 0.2% blueberry juice, and 0.1% raspberry juice.  So not only is Coca-Cola competing for POM Wonderful’s pomegranate-blueberry juice market share, it is doing so with a product that consists of only 0.5% pomegranate and blueberry juice.

Based on the foregoing, POM Wonderful sued Coca-Cola under Section 43 of the Lanham Act, which allows one competitor to sue another for unfair competition arising from false or misleading product descriptions.  POM Wonderful alleged that that the use of the label in question is deceptive and misleading to consumers because it causes them to believe Coca-Cola’s juice consists predominately of pomegranate and blueberry juice, when it in fact consists predominately (99.4%) of less expensive apple and grape juices.

The district court granted partial summary judgment to Coca-Cola on POM Wonderful’s Lanham Act claim because, according to the court, the FDCA precludes challenges to the name and label of Coca-Cola’s juice blend, and in fact expressly permits some aspects of the label.  The Ninth Circuit affirmed, reasoning that Congress entrusted the Food and Drug Administration (FDA) with authority to regulate juice labels, and that for a court to interject would risk undermining the FDA’s expert judgment and authority in that area.

On appeal, the Supreme Court reversed and remanded the Ninth Circuit’s decision, holding that competitors are permitted to bring Lanham Act claims, such as POM Wonderful’s, challenging food and beverage labels regulated by the FDCA.

The Court based its decision on principles of statutory interpretation.  First, it reasoned that this was not a pre-emption case because it concerned two federal statutes – as opposed to a federal statute and state statute.  Second, the Court rejected Coca-Cola’s argument that the FDCA should control because it is more specific than the Lanham Act, and sided with POM Wonderful’s contention that a court should give full effect to both statutes unless there is an “irreconcilable conflict.”

Not only did the Court not find an irreconcilable conflict, it found that the Lanham Act and FDCA are complementary of one another.  The FDA uses the FDCA and its regulations to protect public health and safety.  The Lanham Act, on the other hand, protects commercial interests against unfair competition.  This allows competitors to utilize their market expertise, in a way the FDCA does not, to protect their interests on a case-by-case basis.  Thus, in the Court’s view, the Lanham Act and FDCA were designed to work together, each with its own mechanism to enhance protection of competitors and consumers.

The Court noted that neither the Lanham Act nor the FDCA forbids or limits Lanham Act claims challenging FDCA-regulated labels.  Because the Lanham Act and FDCA have coexisted since the Lanham Act’s passage in 1946, the Court reasoned that if Congress felt Lanham Act suits interfered with the FDCA, it would have enacted a provision addressing the issue at some point in the last 70 years.

Finally, the Court addressed the Government’s argument that POM Wonderful was not permitted to bring a Lanham Act claim challenging the name of Coca-Cola’s product because FDA regulations specifically authorize the names of juice blends.  POM Wonderful was, however, free to challenge all other aspects of the label. The Court rejected this argument because it assumes the FDCA and its regulations provide a ceiling on the regulation of food and beverage labeling, which is not the case since the Lanham Act actually complements and works with the FDCA to protect competitors and consumers.

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1 See, e.g., Stewart v. Beam Global Spirits & Wine, Inc., No, 11-5149, 2014 WL 29208086 (D.N.J. June 27, 2014) (denying class certification in lawsuit against seller of Skinnygirl Margarita for misleading marketing campaign that said the drink was “all natural” and a “healthy alternative to other commercial Margarita products.”).

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