Why the Supreme Court’s Decision in POM v. Coca-Cola Could Have Been Worse for Industry

June 25, 2014

Companies can apparently sue over labels that are FDA compliant. But it could be worse.

Now that the Supreme Court ruled POM Wonderful can sue Coke over Coke’s Minute Maid Pomegranate Blueberry 100% Fruit Juice Blend label, what does this mean for the food industry? Will more companies now starting suing over food labels that already meet FDA regulations?

“There’s a really important barrier removed here that may have been holding back some competitors from challenging each other,” says August T. Horvath, a partner in the New York office of law firm Kelley Drye & Warren LLP. Horvath wrote about this case previously in Nutritional Outlook.

Until POM v. Coca-Cola, food companies likely considered themselves safe from lawsuits if their labels complied with FDA’s Food Drug and Cosmetic Act (FD&C Act). And can you blame them? But June’s Supreme Court decision shakes that assumption. FDA compliance is not a safe harbor against Lanham Act suits. (The Lanham Act is the federal statute that allows companies to sue others over false advertising that creates unfair competition.)

The Supreme Court ruling creates uncertainty for the food industry. “The industry doesn’t consider the Supreme Court’s decision good news because the industry likes clarity. It likes to know what it has to do or what it can’t do. And it liked it when it thought that the federal regulations were clear and that you were safe as long as you did what they said it was okay to do. That was clear,” says Horvath. “They’re sorry to see that go. Now they have to worry about lawsuits,” even if their labels are perfectly compliant.

This sounds bad. But it could have been worse.

In its opinion, the Supreme Court made it quite clear that the court’s decision in POM v. Coca-Cola strictly concerned the synergy of two federal statutes-the FD&C Act and the Lanham Act-specifically, whether one federal statute can preclude the other federal statute.

“The Court took pains to draw a line around this decision, to not let the impact of it get out too far beyond the collision of these two particular statutes-the FD&C Act and the Lanham Act,” Horvath says. “They were very clear at several points to say that this is not about the preemption of state lawsuits-which is what the food industry is very concerned about because that’s where the class action lawsuits [happens].” The court ruled that both statutes can coexist and complement each other, so POM can move ahead in suing Coke if it believes that Coke’s product label under the FD&C Act is still unfairly misleading.

The court’s wording does leave some room for opportunistic lawyers, however. For instance, Horvath says, the court’s opinion includes some “sound bites” that could tempt class action-namely, such statements as, “’Congress did not intend FDA oversight to be the exclusive means’ of ensuring proper food and beverage labeling.”

Still, he says, the Court’s opinion “could have been written much more carelessly and had a lot broader damage implications for industry.”

Will a case like POM v. Coca-Cola happen again? “Most players within an industry are not going to challenge other players in a way that would weaken those regulations [the FD&C Act, in this case] because the whole industry relies on them. The whole industry seeks safe harbor there for what they can do,” Horvath says. “So, as you look around at industries where these advertising disputes take place, that situation doesn’t arise all that often. But there may certainly be some others out there.”

POM v. Coca-Cola now heads back to court where a jury will have to decide whether Coke’s label is misleading. One can see both sides of the case. Is it misleading to name a drink “Pomegranate Blueberry” if it contains minute traces of pomegranate and blueberry? Many consumers probably think so. But if you think about why the FD&C Act’s flavoring/naming rule exists, it makes sense, too. “Say you buy two different flavors of granola cereal,” Horvath explains. “One of them might be called ‘Macadamia Nut,’ and the other might be called ‘Cranberry.’ That doesn’t mean the granola consists mostly of macadamia nuts or cranberry; it means those are the ingredients that give the products their flavor.”

Just scan your kitchen pantry to see how many companies currently take advantage of the FD&C Act’s flavoring rule. Whether all of those products spark lawsuits remains to be seen.

 

Jennifer Grebow
Editor-in-Chief
Nutritional Outlook magazine jennifer.grebow@ubm.com