We know what you’re thinking, and no, this has nothing to do with Red Bull giving you wings.
Last week, Red Bull reached a proposed settlement of a suit alleging that the company falsely claimed in its advertisements that Red Bull’s energy drink provided more benefits to consumers than a cup of coffee or a caffeine pill. The plaintiffs argued that these advertisements amounted to a breach of express warranty, unjust enrichment, and violations of over thirty state consumer protection acts, including New York’s Deceptive Acts and Practices Act (N.Y. Gen. Bus. Law §§ 349 and 350) and California’s Consumers Legal Remedies Act (Cal. Civ. Code § 1750) and Unfair Competition Law (Cal. Bus. & Prof Code § 17200). The plaintiffs claimed they paid a substantial price premium for Red Bull products, rather than purchasing cheaper coffee or caffeine pills (we have previously blogged about related issues here).
According to the plaintiffs’ filings, Red Bull advertisements asserted that Red Bull increases consumers’ energy, endurance, and vigilance. Red Bull’s advertisements, some of which were reproduced in plaintiffs’ filings, cite “scientific studies” of the benefits produced by the product and its individual ingredients. Plaintiffs did not take issue with this, but alleged that these studies did not support Red Bull’s claims that its energy drink provided greater endurance or concentration benefits than the average cup of coffee or caffeine pill. Plaintiffs alleged that scientific evidence actually suggested that energy drinks, such as Red Bull, offered no additional benefits when compared to standard caffeine sources.
The proposed settlement of up to $13 million will provide members of the plaintiff class with two free Red Bull products or a $10 reimbursement. Red Bull also withdrew the challenged advertisements, but maintained its claims were accurate. The settlement also anticipated attorneys’ fees and costs to be about $4,750,000. Judicial review of the settlement is pending.
This action should serve as a reminder to marketers about the risks of making comparative advertising claims. Even when, as here, the comparison is not to a competing brand, such that it might prompt a Lanham Act or NAD claim by a competitor, it could still be the basis for a consumer class action, with all the litigation costs that tend to make settlement a rational economic choice. Although the FTC encourages comparative advertising claims, the same standards of scientific substantiation apply regardless of whether such claims are against an aggressive competitor or a broad category of goods.