Judging a Juice by its Label

The U.S. Supreme Court’s Decision in POM Wonderful LLC v. The Coca-Cola Company May Open the Lid to Lanham Act Liability Even Where Another Federal Statute May Apply

In POM Wonderful LLC v. The Coca-Cola Company, the US Supreme Court resolved much of the uncertainty surrounding the intersection of unfair competition claims under the Lanham Act relating to food labels and the strictures of the Federal Food, Drug and Cosmetic Act (FDCA).  These two federal statutes cross paths in cases where a food or drink label is alleged to mislead the public.  POM, which grows pomegranates and manufactures pomegranate juices, brought unfair competition claims under the Lanham Act against Coca-Cola, alleging that one of Coke’s labels was false and misled consumers.  The label at issue named Coke’s product “Pomegranate Blueberry;” however, the drink only contained 0.3% pomegranate juice and only 0.2% blueberry juice – the majority was less-expensive apple and grape juice.  POM asserted that such labeling misled the public into buying a cheaper juice and thereby damaged POM, whose products actually contain high percentages of more expensive pomegranate juice.

The District Court in California held that POM’s Lanham Act claims were barred by the FDCA because Congress had entrusted matters of food and drink labeling to the Food and Drug Administration (FDA).  The Ninth Circuit Court of Appeals affirmed, ruling that the Court must decline to act in such an area where the FDA has explicit authority from Congress.  In a decision seemingly uncontroversial to the justices (the decision was 8-0, with Justice Breyer taking no part), the Supreme Court held that not only was there no reason to think that the FDCA precluded Lanham Act claims related to food labels, but also that the two statutes complement each other – one protecting fair competition, the other food and drink consumers – one enforced by a private right of action, the other by the federal government.  The decision is written almost as a companion to the Court’s recent Lexmark decision, which clarified the scope of the applicability of the Lanham Act in suits against competitors.  (See our post on Lexmark here.)

The POM decision has important implications for the food and beverage industry and, possibly, other regulated industries as well.  The ruling suggests that manufacturers must evaluate their labeling more carefully, as a misleading statement can expose them to civil liability from competitors as well as penalties imposed by the government.  This means that food and drink labels must not only comply with FDA regulations, but must also eschew statements that mislead consumers.  Indeed, a label that passes FDA muster may still deceive the consuming public.  Following the POM decision, it is clear that competitors may bring Lanham Act claims against each other for mislabeling.

To the chagrin of consumer advocates, the Court assiduously limited its opinion to the FDCA’s impact, or lack thereof, on federal law and stopped short of ruling on the FDCA’s preclusive impact on state laws.  Where competitors are able to rely on the Lanham Act to protect against unfair competition, this avenue of relief is not available to the consuming public, which must resort to a hodgepodge of state law claims.  Consumers’ concerns are exacerbated by the fact the Congress has, in the FDCA, explicitly preempted state statutes that address food and beverage misbranding.  In fact, the Court relied in part on the preemption provisions of the FDCA in determining that Congress did not intend to limit application of the Lanham Act – reasoning that Congress clearly wished the FDCA to block some claims, and therefore would have explicitly precluded the Lanham Act if it so desired.  Consumers and advocacy groups may posit that state laws that, like the Lanham Act, complement the FDCA should not be preempted and thereby attempt to open the door to consumer class actions against food and beverage companies.  However, while the POM opinion may provide a toe in the door for such lawsuits, the road ahead is uncertain.