Vs.

By: Brian J. Meli

Eleven amicus briefs were filed in support of POM Wonderful and Coca-Cola, but the real argument wasn’t between the captioned parties in the case. This was a clash of laws, pitting the Federal Food Drug and Cosmetic Act (FDCA) and Nutrition Labeling and Education Act (NLEA) against Section 43 of the Lanham Act for consumer protection supremacy. This was a dispute about the authority of administrative rules to usurp the rights of private claimants seeking to recover from commercial injury. The question of first impression: whether compliance with the FDCA and NLEA regulations pertaining to food and beverage labeling requirements precluded POM’s right to bring a private action alleging unfair and deceptive trade practices against a competitor, in this case Coke, under the Lanham Act. Now that The Supreme Court has ruled, we know the answer to that question. And it’s a resounding “no.”

The winners and losers:

If you’re looking for the key takeaway from this lopsided rebuke of the Ninth Circuit Court of Appeals, it’s this: the big winners are a vindicated POM Wonderful, private claimants in general under the Lanham Act, and consumers, who will in theory benefit from stricter beverage labeling standards. The losers: Coke, obviously, and other beverage producers who lose some of the regulatory clarity that a nationally uniform labeling standard would have imposed, and who will no longer be able to consider strict compliance with those standards a complete defense to competitor or consumer deception claims. The other loser, albeit to a lesser extent, is the FDA itself, whose labeling requirements may now come to be viewed as merely the first word on the subject of truth in labeling, rather than the last.

Background:

While it took a major turn today, this legal fight began, innocuously enough, with a bottle of fruit juice. Specifically a bottle of Coke’s Minute Maid brand pomegranate blueberry juice which, as it turns out, contains very little pomegranate or blueberry juice at all. The two combine to constitute merely one half of 1% of the total contents. (Coke conceded the product contains only .3% pomegranate juice and .2% blueberry juice, with the other 99.5% being a mixture of apple, grape and raspberry juices, which, not coincidentally, are cheaper ingredients.) The product offering was Coke’s foray into the lucrative pomegranate juice market which for years has been dominated by POM, who charges a premium for its highly concentrated juices (POM’s pomegranate/blueberry offering is 85% pomegranate and 15% blueberry by comparison).

POM claimed the labeling was misleading and sued Coke under the Lanham Act, claiming it was damaged because the Minute Maid product had siphoned sales away from its own line of pomegranate products by deceiving customers into wrongfully believing the two were equivalent. The problem with that claim? The Minute Maid labeling complied to the letter with FDA/NLEA labeling requirements for juices which, based on juice content, permitted the apple and grape ingredients to be relegated to secondary elements on the label, and the pomegranate and blueberry ingredients to be given priority. Not only that, but Coke interpreted the FDCA and NLEA as precluding private claims against producers who were in compliance, which it argued vigorously, and successfully, to the District Court. 

Coke’s position was, essentially, if our bottle labels are not misleading under the FDCA, how can they be misleading under the Lanham Act? For that to be the case, there could be no uniform system of labeling requirements. POM’s counter: you can comply with all labeling regulations and still be misleading to consumers. And labeling uniformity, while it sounds like a good thing, is actually a fiction, since FDA regulations are themselves the product of rules interpreted on a case by case basis.

The Court of Appeals for the Ninth Circuit agreed with Coke, and held the Lanham Act precluded by the FDCA, initiating POM’s petition on cert and setting the FDCA and Lanham Act on a high court collision course.

The Supreme Court weighs in:

In reversing the Ninth Circuit, and finding that POM can proceed with its suit, the Court focused on the fact that neither the FDCA nor the Lanham Act, in express terms, forbids or limits Lanham Act claims that challenge labels regulated by the FDCA. And that the absence of such a textual provision, when the two laws have coexisted for more than 70 years “is powerful evidence that Congress did not intend FDA oversight to be the exclusive means of ensuring proper food and beverage labeling.” Quite the opposite in fact. The Court concluded that the two laws were complementary, and served two distinct purposes, with the Lanham Act protecting commercial interests against unfair competition, and the FDCA helping to preserve public health and safety.

The Court found Coke’s argument unpersuasive because, while the FDCA does contain an express preemption provision, that provision applies only to state, not federal law. Thus, this was not a case of state law preemption, but preclusion of federal law—something the FDCA simply does not contemplate. Also, while the FDCA does address food and beverage labeling with more specificity than the Lanham Act, that specificity “would only matter if the two Acts could not be implemented in full at the same time.” And the Court found no statutory structure or empirical evidence that this was the case.

And so it appears, at least for now, that the FDA’s labeling requirements are only minimum standards, and do not immunize food and beverage manufacturers from deceptiveness challenges under the Lanham Act. And that means that those manufacturers are going to be treading much more carefully than they were before this ruling.

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