In a unanimous opinion of the eight justices taking part in the decision, the Supreme Court ruled today that competitors may bring unfair competition claims under the Lanham Act, 15 U.S.C. § 1125, to challenge food and beverage labels that are also regulated under the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 321(f), 331 (FDCA). The decision confirms that competitors may use the federal Lanham Act to prevent false and misleading advertising by a competitor even when the Food and Drug Administration (FDA) had regulated in the same area. The court emphasized that the decision did not address the preemption of state laws, which frequently form the basis for consumer class actions against the food and beverage industry. While the decision may be cited in favor of the limited nature of federal preemption under the FDCA, it does not materially change the law with respect to preemption of state law claims by the FDCA.
The court’s decision reversed the Ninth Circuit’s ruling that the comprehensive federal labeling regulations precluded Pom Wonderful LLC’s Lanham Act claim against Coca-Cola Co. Pom Wonderful’s complaint had alleged that Coca-Cola’s juice blend, which actually consisted of more than 99% apple and grape juice, was misleadingly named, labeled, and advertised as “pomegranate blueberry” juice. In his opinion for the court, Justice Kennedy explained that this was “not a preemption case” involving a conflict of state and federal law, but one assessing whether a federal law (the FDCA) precluded another (the Lanham Act) from operating to create a private right of action to plaintiffs like Pom Wonderful. Given the text and historical compatibility of the statutes, the court concluded that “[c]ompetitors ... may bring Lanham Act claims like Pom’s that challenge food and beverage labels that are regulated by the FDCA.”
To resolve the question of statutory preclusion, the court first looked to whether the Lanham Act or FDCA expressly forbade Lanham Act unfair competition claims challenging labels already regulated by the FDCA. Neither statute so indicated. In the absence of textual guidance, the court considered it “powerful evidence” against preclusion that the Lanham Act and the FDCA had coexisted for over 70 years. The opinion recognized that the preemption provision of the Nutrition Labeling and Education Act (NLEA) did bar states from imposing requirements “not identical to” corresponding FDCA labeling requirements for food and beverages. Given that the NLEA applied only to certain FDCA provisions and state law conflicts, however, the court concluded that Congress “did not intend the FDCA to preclude requirements arising from other sources,” such as federal law.
The court’s opinion further rested on the complementary nature of the scope, purpose, and remedies of the FDCA and the Lanham Act: “[b]oth touch on food and beverage labeling, but the Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety.” Moreover, FDCA enforcement is largely the province of the FDA, while the Lanham Act seeks to draw on the market expertise of competitors to protect business interests from practices that allegedly “mislead and trick consumers.” Allowing Lanham Act suits to proceed against the backdrop of FDCA regulation, the court concluded, “takes advantage of synergies among multiple methods of regulation” and is “consistent with the congressional design to enact two different statutes, each with its own mechanisms to enhance the protection of competitors and consumers.”
The opinion went on to reject Coca-Cola’s argument that the FDCA should preclude private Lanham Act claims in support of perceived Congressional intent to secure national uniformity in food and beverage labeling. Without agreeing with Coca-Cola’s assessment of that Congressional objective, the court explained that Coca-Cola’s focus was off the mark: regardless of its position on nationally consistent labels, Congress had evinced no intent that the FDCA operate to extinguish Lanham Act claims related to misleading labels. And the court could find no evidence to indicate that there would be any difficulty in “fully enforcing each statute according to its terms” simultaneously. In briefly addressing the government’s position in the case, the court also rejected the suggestion “that a Lanham Act claim is precluded ‘to the extent the FDCA or FDA regulations specifically require or authorize the challenged aspects of [the] label.’” The court found that this intermediate position was unconvincing where “Congress intended the Lanham Act and the FDCA to complement each other with respect to food and beverage labeling.”
Accordingly, misleading food and beverage labels, even where regulated under the FDCA, are not “off limits to Lanham Act claims” by competitors. While not directly on-point, the court’s analysis of how the two statutes were complementary and how there would be no difficulty enforcing each statute according to its terms is likely to be cited by plaintiffs bringing state law claims for false and misleading advertising in opposing arguments that their claims are preempted. However, given the court’s emphasis that its decision did not address preemption, the decision does not materially change the current state of the law on that issue. Furthermore, although the opinion secures an open door to competitor suits under the Lanham Act in the food and beverage context, it does not appear to impact the viability of consumer lawsuits.