Lanham Act claims not pre-empted by federal statute on food and beverage labelling

United States of America

Brand owners may assert Lanham Act claims against a competitor’s misleading statement on a food or beverage label according to the recent Supreme Court decision, POM Wonderful LLC v Coca-Cola Co (Case No 12-761, June 12 2014). Further, a statement’s mere compliance with Food and Drug Administration (FDA) regulations will not immunise food and beverage sellers from Lanham Act suits brought by competitors. The decision will likely lead to more robust policing against misleading statements on packaging than mere FDA action alone and therefore can be construed as a victory for consumers.

POM Wonderful is a maker of pomegranate juice and also a competitor of Coca-Cola’s Minute Maid juice brand. Minute Maid sells a five-juice blend, which displays the words 'pomegranate blueberry' more prominently on its label than any other words, even though the combined total of pomegranate and blueberry juice is 0.5%. In fact, more than 99% of Minute Maid’s 'pomegranate blueberry' five-juice blend is made of apple and grape juices.

POM alleged that Minute Maid’s use of its label was deceptive and misleading to consumers and therefore it was a violation of the Lanham Act’s Section 43 prohibition against misrepresentation of the “nature, characteristics, qualities, or geographic origin” of the goods. Coca-Cola moved to dismiss the complaint on the grounds that the Lanham Act claims were precluded by the Federal Food Drug and Cosmetic Act (FDCA) and the regulations promulgated by the FDA thereunder. Coca-Cola successfully argued to the district court and Ninth Circuit Court of Appeals that, because its label complied with the FDA’s label guidelines for juice products, a private action brought by POM under the Lanham Act should be precluded. Further, Coca-Cola argued that he FDA is the only actor under the FDCA who may take action to police false or misleading statements.

In an opinion written by Justice Kennedy, a unanimous Supreme Court ruled that the FDCA and Lanham Act provisions could both apply contemporaneously to misleading statements made on food and beverage labels and that POM’s Lanham Act claims were not pre-empted by the FDCA.

Established principles of statutory interpretation were cited as the main reason for the court’s decision. Most importantly, the court held that Lanham Act claims were not barred because no provisions in either federal act is in direct contradiction with the other (there are no references in the FDCA to the Lanham Act and no references in the Lanham Act to the FDCA), nor was any provision in either statute a bar against POM’s lawsuit. As the two statutes have coexisted since 1946, the Supreme Court reasoned that enough time had passed for Congress to act if it believed that the laws were contradictory, or to clarify that only the remedies of the FDCA apply to food and beverage labelling.

In addition, the court was not persuaded by Coca-Cola’s argument that Lanham Act claims should be excluded merely because the regulations under the FDCA applied to food and beverage labels with “more specificity”. The court reasoned that a more specific statute applies over a more general one only where there is a conflict between the two. As the court found no direct conflict between the FDCA and the Lanham Act, there was no need to apply the “specific over general” maxim to this case.

Further, the court held that its pre-emption jurisprudence did not apply because the FDCA pre-empted only analogous state and local laws and not federal laws. The court reasoned that, if Congress meant to pre-empt a federal law in enacting revisions to the FDCA, it would have said so explicitly since it the revisions did explicitly pre-empt state laws.

Generally, brand owners can take heart that the court has come down on the side of more robust Lanham Act jurisprudence for the second time this term, after its decision in Lexmark International v Static Control Components.

Specifically, as the court noted in this case, brand owners have “detailed knowledge regarding how consumers rely on sales and marking strategies” and have awareness of unfair practices by competitors which may be far more “immediate and accurate” than that of a federal agency. Thus, a brand owner is in a better position to protect consumers against the dissemination of false and misleading statements. As a result of the POM Wonderful decision, brand owners can continue to rely on the provisions of the Lanham Act to do so.

Steve Abreu, Sunstein Kann Murphy & Timbers LLP, Boston

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