In a unanimous decision authored by Justice Kennedy, the United States Supreme Court held that competitors can bring Lanham Act claims for misleading food and beverage labels, allowing POM Wonderful LLC's ("POM") false advertising claim against the Coca-Cola Co. ("Coca-Cola"). The decision reverses the Ninth Circuit, rejects the argument that food and beverage labeling claims fall within the exclusive jurisdiction of the FDA, and finds that the Federal Food, Drug, and Cosmetic Act ("FDCA") leaves room—in the context of Lanham Act claims—for private actions that seek to police the truthfulness of label claims. The Court's decision opens the door for competitors to challenge the content of labels outside the bounds of FDA regulations, giving food and beverage companies a reason to scrutinize product labeling even more closely than in the past.
Coca-Cola's "Pomegranate Blueberry" Blend
POM produces, markets, and sells a variety of pomegranate products through its POM Wonderful brand, including a pomegranate-blueberry juice blend. Coca-Cola offers a competing pomegranate-blueberry juice blend under its Minute Maid brand. POM brought a false advertising claim under § 43(a) of the Lanham Act, 15. U.S.C. § 1125, in the Central District of California alleging that Coca-Cola's "pomegranate blueberry" label on a drink with 0.3 percent pomegranate and 0.2 percent blueberry juice is deceptive and misleading to consumers, and causes injury to POM as a competitor in the form of lost sales.
Coca-Cola defended against that claim on the basis that its label complied with the Nutrition Labeling and Education Act of 1990 and implementing regulations, in particular 21 CFR § 102.33, which requires companies to indicate that less-predominant juices are present as a "flavor" or "flavoring." The phrase "flavored blend of 5 juices" appeared in smaller type beneath the "POMEGRANATE BLUEBERRY" label. Coca-Cola argued that the FDA regulates the juice field and that private Lanham Act actions by a competitor should be barred by the FDCA.
Lower Courts: Leave Labeling to the FDA
Both lower courts sided with Coca-Cola. The District Court for the Central District of California granted partial summary judgment to Coca-Cola, holding that naming and labeling particulars were for the FDA rather than the court to decide and that Coca-Cola's juice label comported with federal law and regulations. 727 F. Supp. 2d 849 (2010). The Ninth Circuit similarly held POM's claim barred insofar as FDA regulations authorize Coca-Cola's "naming" of its drink, and it deferred to the FDA on other "labeling" issues despite acknowledging that "the FDA has apparently not taken a view on" other potentially misleading aspects of the drink label. 679 F.3d 1170 (2012). The Ninth Circuit respected what it perceived to be the intent of Congress to "entrust matters of juice beverage labeling to the FDA" and its "comprehensive regulation." Id. at 1178.
Supreme Court: The Lanham Act and FDCA are "Complementary"
Instead of assuming that the FDCA overrides the Lanham Act, as the lower courts had done, the Supreme Court relied on the statutes' text and statutory interpretation principles to find them "complementary."The Supreme Court did not agree that Congress intended the FDCA to be the exclusive means for ensuring proper labeling of food and beverages. In particular, the Supreme Court noted that neither the Lanham Act nor the FDCA, in its express terms, forbids or limits Lanham Act claims challenging labels regulated by the FDCA, and that each statute had a distinct purpose. The Lanham Act protects commercial interests against unfair competition, and the FDCA protects public health and safety. Given that the statutes had coexisted for approximately 70 years without congressional comment, the Supreme Court found that allowing Lanham Act suits realized congressional intent for multiple methods of regulation. Thus, in this case the two statutes could be implemented at the same time, and the FDCA did not as a general matter act as a ceiling on the regulation of food and beverage labeling.
The Supreme Court was not persuaded by Coca-Cola's argument that allowing a Lanham Act claim undermined congressional intent for national uniformity in food and beverage labeling. While the Lanham Act is not "uniform" in that it allows private, case-by-case enforcement in various industries, the Supreme Court concluded that this variability in the means of enforcement is aimed at a uniform policy: prohibiting unfair competition in the marketplace. Although many decisions express deference to the expertise of administrative agencies, the Supreme Court held that in the context presented here, competitors are better situated to call attention to deceptive marketing practices.
The government's amicus argument that a Lanham Act claim should be precluded to the extent the FDCA or FDA regulations require or authorize the challenged aspects of a label was also rejected by the Supreme Court. The Court held that it would be improper for FDA rulemaking to trump a federal statute that it did not mention. Furthermore, allowing this Lanham Act claim to go forward did not undermine the agency's judgment, especially because the FDA does not itself have authority to bring such a claim.
The Supreme Court did not decide whether the label was actually misleading but remanded for further proceedings.
Before this opinion, the analysis of whether a Lanham Act claim was precluded by the FDCA focused on whether the claim required direct interpretation and application of the FDCA, or whether the challenged conduct amounted to a violation of the FDCA. If the basis for the claim fell within the jurisdiction of the FDA, it was likely precluded. In the POMopinion, the Supreme Court recognized that the Lanham Act serves a distinct purpose and provides a separate remedy, and thus should not be limited by the FDCA.
This opinion allows competitors to bring actions challenging the content of food and beverage labels as deceptive or misleading, claims that had previously been reserved for FDA enforcement. Indeed, the Supreme Court was clear that the Lanham Act remedy remains even if the challenged labels comply with applicable FDA regulations. Going forward, companies should consider their food and beverage labels even more carefully. Labels that comply with the FDCA and FDA guidance could contain deceptive or misleading messages—or could contain messages that a competitor's lawyer could assert are deceptive—and deceptive label claims are now privately actionable under the Lanham Act.
The POM opinion leaves open a number of important issues. It does not directly apply to state-law claims, nor does it interpret the express preemption provisions in the FDCA, although it notes that some of the considerations overlap. The Supreme Court did not address whether a Lanham Act claim is precluded when a particular label claim is required by regulation. Furthermore, the Court distinguished the facts before it from a situation where the FDA has made a policy judgment that is inconsistent with a lawsuit, or where the lawsuit undermines an agency judgment. However, the Court did not grapple with how a Lanham Act claim should be treated if the FDA expressly finds that a label claim is not deceptive, but a Lanham Act plaintiff colorably alleges that consumers are nonetheless deceived. These will be manufacturers' next battles.