Consumers have no standing under Section 43 of the Lanham Act

Made in the USA Foundation v Phillips Foods Inc, the US Court of Appeals for the Fourth Circuit has confirmed that consumers and consumer groups do not have legal standing to bring actions for false advertisement under Section 43 of the Lanham Act. It stated that the intention behind Section 43 was to create a remedy for unfair competition to protect the interests of a purely commercial class.

The plaintiff, Made in the USA Foundation, is a non-profit consumer organization with about 60,000 members in the United States. To the extent possible, members of USA Foundation buy products that are made in the United States.

The defendant, Phillips Foods Inc, makes packaged crab cakes that it sells wholesale to grocery stores and other retailers in the United States. During the three-year period prior to the lawsuit, USA Foundation and its members bought Phillips's packaged crab cakes that were labelled 'Made in the USA'. These crab cakes, however, were made with 90% Asian crabmeat.

USA Foundation sued Phillips under Section 43 the Lanham Act, alleging that Phillips mislabelled its packaged crab cakes by falsely designating the country of origin. USA Foundation argued that it and its members were harmed by this misrepresentation because they bought Phillips's crab cakes believing them to have been made in the United States "when they were actually imported from Thailand and other nations".

Phillips moved to dismiss on the grounds that consumers do not have standing to sue under Section 43 of the Lanham Act. The US District Court for the District of Maryland ruled in Phillips's favour, noting that "the Lanham Act is [only] intended to provide a private remedy to a commercial plaintiff whose commercial interests are being harmed".

On appeal by USA Foundation, the Fourth Circuit first stated that Section 45 of the Lanham Act was also of relevance as it "identifies those 'engaged in ... commerce' as the class of persons to be protected by the act". It held that many other circuit courts, including the Second, Third, Fifth, Seventh and Tenth, have held that Section 45 bars consumers from bringing suit under the act. On this basis, the Fourth Circuit ruled that the intent of Congress in enacting Section 43 was to create a remedy for unfair competition "to protect the interests of a purely commercial class against unscrupulous commercial conduct". As a result, the Fourth Circuit affirmed the dismissal of USA Foundation's Section 43 claim on the grounds that it lacked standing.

Howard S Michael, Brinks Hofer Gilson & Lione, Chicago

Get unlimited access to all WTR content