November 01, 2017 GPSolo

Misleading Food Labeling and Advertising under the Lanham Act and the FDCA

Gene Markin

As consumers, we rely on federal agencies, such as the Food and Drug Administration (FDA), to set standards for and police the contents, accuracy, and adequacy of food and drink labels on products offered for purchase to the general public. We expect that nutritional labels on the food products we find at grocery stores, gas stations, and chain retailers contain all the necessary disclosures required by federal guidelines, such as the Federal Food, Drug, and Cosmetic Act (FDCA). If we are misled, we may have a private cause of action against the manufacturer under state consumer protection laws.

But what happens if a product label technically complies with the FDCA yet still has the capacity to mislead and confuse consumers to the detriment of a rival competitor? According to a seminal Supreme Court decision handed down in 2014, the manufacturer of an FDCA-compliant product and label can nevertheless be liable to competitors for unfair competition arising from misleading advertising and labeling under the Lanham Act. Although both the FDCA and the Lanham Act touch on food and beverage labeling, the two statutes impose different requirements and protections, and together serve as strong incentives for manufacturers to “behave well.”

Unfair Competition Claims and the Lanham Act

The case in point is POM Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228 (2014). POM Wonderful LLC, which produces, markets, and sells, among other products, a pomegranate-blueberry juice blend, took issue with a product sold by the Coca-Cola Company, which allegedly misled consumers into believing the product consisted predominately of pomegranate and blueberry juice when in fact those juices made up a tiny fraction of the overall product. POM filed a Lanham Act suit against Coca-Cola, contending that the name, label, marketing, and advertising of its Minute Maid Pomegranate Blueberry juice blend, which consisted predominately of less expensive apple and grape juices, caused consumer confusion and resulted in POM losing sales. The District Court granted partial summary judgment to Coca-Cola, ruling that the FDCA and its regulations precluded Lanham Act challenges to the name and label of Coca-Cola’s juice blend. The Ninth Circuit affirmed in relevant part.

The Supreme Court granted certiorari and reversed. After analyzing the two federal statutes, the Court concluded that the FDCA, by its terms, does not preclude Lanham Act suits and that the two statutes complement each other with respect to misleading food and beverage labels.

The Lanham Act provides competitors with a cause of action for unfair competition as a result of misleading advertising and labeling by imposing civil liability on any person who “uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which . . . misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities” (15 U.S.C. §1125(a)(1)).

The FDCA prohibits the misbranding of food and drink and was designed primarily to protect the health and safety of the public at large (21 U.S.C. §§321(f), 331, 343). A food or drink is deemed misbranded if, among other things, “its labeling is false or misleading” (§343(a)), information required to appear on its label “is not prominently placed thereon” (§343(f)), or a label does not bear “the common or usual name of the food, if any there be” (§343(i)). To implement these provisions, the FDA promulgated regulations regarding food and beverage labeling, including the labeling of mixes of different types of juice into one juice blend (see 21 CFR §102.33 (2013)).

Unlike the Lanham Act, which provides for a private cause of action by injured competitors, the FDCA does not allow for private suits to enforce its provisions, but rather delegates exclusive enforcement authority to the FDA (21 U.S.C. §337). Notably, even though the FDA preapproves drug labels, it does not preapprove food or beverage labels, and ostensibly it takes a less extensive role in the regulation of food than in the regulation of drugs. As such, the FDA relies on enforcement actions, warning letters, and other measures to regulate food labels; however, the FDA does not necessarily pursue enforcement measures every time it encounters objectionable labels.

The Court concluded that even though the two statutes touch on food and beverage labeling, they are not mutually exclusive: The Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety. Market competitors, unlike agencies and regulators, have a keener understanding and insight into market dynamics and how consumers rely on certain sales and marketing strategies. Market participants are, therefore, far better suited than rule makers and regulators to identify unfair competition practices and to keep each other honest.

Both the Lanham Act and the FDCA provide certain safeguards and protections to the public in the realm of food and beverage labeling. Because the FDA does not preapprove food and beverage labels and does not investigate or pursue all potential violations of its many labeling regulations, precluding Lanham Act claims would leave the public at large with less effective protection in the food and beverage labeling space than in many other, less regulated industries. Accordingly, the Court held that the FDCA does not preclude Lanham Act suits such as POM’s. Market competitors injured by allegedly misleading food labels have a cognizable claim under the Lanham Act despite the applicability of FDCA regulations and standards to those food labels.

As the POM Wonderful Court noted, regardless of the fact that the FDCA and Lanham Act sometimes overlap in scope and effect, each statute nonetheless has a distinct purpose, and in carrying out its FDCA duties, the FDA is not charged with protecting the interests of its subject’s competitors. The fact that the FDA has satisfied itself that a product’s labeling is sufficiently accurate to secure FDA approval gives no assurance that the intervention of a competitor would not reveal problematic misleading messaging that is harmful to the competitor’s interests, which the federal agency either overlooked or failed to appreciate as important (see Church & Dwight Co. v. SPD Swiss Precision Diagnostics, GmbH, 843 F.3d 48, 63 (2d Cir. 2016)).

Preemption of Consumer Actions and the FDCA

With respect to consumer causes of action, the FDCA requirements are considered a floor, not a ceiling. Even if the labeling meets the floor established by federal regulations, there is nothing to indicate that it could not still be misleading and therefore actionable under various state consumer protection laws. More to the point, nothing in the applicable federal laws “expressly preempts state law claims for deceptive practices premised on an alleged failure to follow federal food labeling requirements” (Koenig v. Boulder Brands, Inc., 995 F. Supp. 2d 274, 284 (S.D.N.Y. 2014)).

In 1990 Congress amended the FDCA with the Nutrition Labeling and Education Act (NLEA), which sought “to clarify and to strengthen the [FDA’s] legal authority to require nutrition labeling on foods, and to establish the circumstances under which claims may be made about nutrients in foods” (N.Y. State Restaurant Ass’n v. New York City Bd. of Health, 556 F.3d 114, 118 (2d Cir. 2009); 21 U.S.C. § 343 et. Seq).

The NLEA includes a lengthy express preemption clause with five subparts (21 U.S.C. §343-1(a)). All five subparts, however, impose the same preemptive standard: States are prohibited from imposing “requirements” relating to food that subject to exceptions and exemptions are not “identical” to an applicable federal food labeling standard. For preemption purposes, “not identical to” “does not refer to the specific words” but instead to state obligations that either “differ” from or are “not imposed” by federal law (21 C.F.R. §100.1(c)(4)).

Therefore, “the only state requirements that are subject to preemption are those that are affirmatively different from the Federal requirements” (In re PepsiCo Inc., 588 F. Supp. 2d 527, 532 (S.D.N.Y. 2008)). A state law that applies to food, drugs, or cosmetics is preempted if it imposes a requirement that is not identical to the requirements of the FDCA and the FDA’s regulations. But this comes with a caveat: Preemption does not preclude a state law claim if the state requirement is outside the scope of the relevant federal requirements.

Essentially, the rule is that if the content of some label is expressly permitted, a state may not forbid it, as that would lead to inconsistencies in the law of food labeling. If the requirements the state seeks to impose are different from those covered by the FDCA, however, a state is not precluded from creating law on that issue.

There are, therefore, two ways consumer plaintiffs may escape the FDCA’s preemptive force: (1) if the plaintiffs’ claims seek to impose requirements that are identical to those imposed by the FDCA; or (2) if the requirements plaintiffs seek to impose are not with respect to claims of the sort described in the Act (see, e.g., Ault v. J.M. Smucker Co., 2014 U.S. Dist. LEXIS 67118, at *3 (S.D.N.Y. May 15, 2014) (holding that a state cause of action regarding the phrase “all natural” is not preempted because “no federal specifications exist here”); In re PepsiCo, Inc., Bottled Water Mktg. & Sales Practices Litig., 588 F. Supp. 2d 527, 538 (S.D.N.Y. 2008) (“Where federal requirements address the subject matter that is being challenged through state law claims, such state law claims are preempted to the extent they do not impose identical requirements”); Vt. Pure Holdings, Ltd. v. Nestle Waters N. Am., Inc., No. CIV.A.03-11465 (DPW), 2006 U.S. Dist. LEXIS 13683, 2006 WL 839486, at *6 (D. Mass. Mar. 28, 2006) (“[W]here no federal requirement exists, preemption does not occur”)).

In PepsiCo the district court addressed allegations that Pepsi had misbranded Aquafina bottled water—which, the plaintiffs alleged, was purified tap water—by including mountainous scenes on its labels, leading to the false impression that the water came from a mountainous source (PepsiCo, 588 F. Supp. 2d at 529). The FDA, according to Judge Cathy Seibel, issued specific guidance regarding the disclosure of the source of other types of bottled water—“artesian water,” “ground water,” “mineral water,” and “spring water,” 21 C.F.R. § 165.110(a), for example—but not “purified” water (PepsiCo, 588 F. Supp. 2d at 535). The court held that the claims were preempted because they imposed a non-identical requirement that was within a subject matter that the FDA had addressed. (see id. at 538, “Where federal requirements address the subject matter that is being challenged through state law claims, such state law claims are preempted to the extent they do not impose identical requirements”).

In Ault the district court addressed allegations that Smucker had misbranded Crisco shortening by labeling it “All Natural” (Ault v. J.M. Smucker Co., 2014 U.S. Dist. LEXIS 67118 (S.D.N.Y. May 15, 2014)). But the court found that this claim was not preempted (unlike the claims in PepsiCo) because “the FDA has declined to consider the specific issue of whether and under what circumstances food products containing ingredients produced using genetically engineered ingredients may or may not be labeled “natural.”

And, in Jones v. Rath, 430 U.S. 519 (1977), the Supreme Court held that a California rule permitting certain net weight variations in meat was preempted by federal law because it did not allow for “loss of weight resulting from moisture loss during the course of good distribution practice,” which the U.S. Department of Agriculture regulations permitted. Analogously, then, state laws forbidding net weight variations that are within the range allowed by federal law ought to be preempted as well, even if those variations are intentional or systematic.

Similarly, in Carrea v. Dreyer’s Grand Ice Cream, Inc., 475 F. App’x 113, 115 (9th Cir. 2012), the Ninth Circuit concluded that a state law cause of action regarding a product labeled as containing “0g Trans Fat” that contained more than zero but less than 0.5 grams of trans fat could not survive FDCA preemption. The FDA required that a product “containing less than 0.5 grams of trans fat per serving” to “express this amount as zero.” Presumably that court considered and rejected the obvious possibility that food companies were deliberately keeping the trans fats in their foods below half a gram in order to avoid reporting that the foods contained trans fat.

In In re Anheuser-Busch Beer Labeling Mktg, 644 F. App’x 515, 516 (6th Cir. 2016), plaintiff individuals brought suit against the beer giant claiming that Anheuser-Busch used a sophisticated process-control technology to produce beverages that contained less alcohol content than the alcohol-by-volume content listed on its products’ labels. Anheuser-Busch moved to dismiss, pointing out that a federal regulation, 27 C.F.R. § 7.71(c)(1), explicitly allows the alcohol content of the malt beverages in question to diverge by up to 0.3 percent from the alcohol content stated on the beverages’ labels. And although states may impose their own labeling regulations with no tolerance or a tolerance more forgiving than that set forth in § 7.71, each of the eight states whose law was implicated adopted that federal tolerance of 0.3 percent into state law. As such, Anheuser-Busch argued that whether the deviation in alcohol content was intentional or accidental was irrelevant because its beverages were in technical compliance with both state and federal laws.

The district court and the Sixth Circuit agreed, holding that nothing in the text of § 7.71 distinguished intentional from unintentional deviations in alcohol content on beverage labels and it therefore created a safe harbor for any brewer who does not exceed the tolerance, irrespective of whether the deviation from the label was intentional.

In Fitzhenry-Russell v. Dr. Pepper Snapple Grp., No. 17-cv-00564 NC, 2017 U.S. Dist. LEXIS 155654 (N.D. Cal. Sep. 22, 2017), plaintiff consumers of Canada Dry Ginger Ale brought a litany of state fraud, consumer protection, false advertising, and unfair trade practices claims against the defendant beverage maker for advertising and labeling its ginger ale as being “Made from Real Ginger” despite the product not containing any actual ginger root.

In finding that the FDCA did not preempt plaintiffs’ claims, the court noted that plaintiffs did not seek to change the labeling on Canada Dry from describing its flavors as “natural” to “artificial,” which is governed by the FDCA, but rather plaintiffs sought to enjoin defendant from printing the “Made from Real Ginger” statement on cans of Canada Dry Ginger Ale. This was therefore a dispute about the ingredients in the can, not the flavor, and as such, plaintiffs’ claims were allowed to proceed despite FDCA labeling requirements (see Red v. Kraft Foods, Inc., 754 F. Supp. 2d 1137 (C.D. Cal. 2010) (the court found that the statement that Vegetable Thins were “made with real vegetables” appeared to refer to the products’ supposed constituent ingredients and not to flavor, and so the claims were not preempted)).

Furthermore, a consumer’s false advertising claims are not preempted if based on advertising apart from the product labeling or packaging. This is because the FDCA does not cover non-label advertising; it covers only the labeling of consumer products (see Jovel v. i-Health, Inc., No. 12 Civ. 5614 (JG), 2013 U.S. Dist. LEXIS 139661 (E.D.N.Y. Sept. 27, 2013) (holding that consumer protection claims founded on the falsity of statements made in advertising are not preempted by the FDCA)).

Conclusion

Although preemption of state law deceptive labeling claims can be a complex matter requiring juxtaposition of the applicable state and federal standards, two things remain clear: Competitors are free to maintain unfair competition claims under the Lanham Act based on misleading labels, and consumers can always bring false advertising claims based on misrepresentations in non-label advertising.

Gene Markin is an associate at Stark & Stark in Lawrenceville, New Jersey, where he concentrates his practice on complex litigation matters involving copyright protection and infringement, trademark and trade dress infringement and enforcement, trade secret litigation, false advertising, domain name disputes, unfair competition, class actions, fraud and consumer fraud, shareholder and partner disputes, and breach of contract. He represents individuals and businesses in all aspects of intellectual property litigation in federal district courts, appellate courts, and state courts.