A federal court judge granted summary judgment to Nestlé in a class action brought by parents claiming that the company made false and misleading ad claims about its BOOST children’s drink supplement – even though the company recently settled similar charges with the Federal Trade Commission.
In February 2011, the FTC reached a consent agreement with the company over charges of deceptive advertising.
Nestlé agreed to stop making claims that BOOST will reduce the risk of colds, flu and other upper respiratory tract infections, unless such claims were approved by the Food and Drug Administration; to stop asserting that BOOST will reduce children’s sick-day absences and the duration of acute diarrhea in children up to age 13, unless the claims are true and backed by at least two well-designed human clinical studies; and to discontinue any claims about the health benefits, performance or efficacy of any probiotic or nutritionally complete drinks, unless the claims are true and backed by competent and reliable scientific evidence. Nestlé did not admit wrongdoing.
Soon after, multiple class actions were filed against the company alleging false advertising.
In granting summary judgment to Nestlé, U.S. District Court Judge Faith S. Hochberg said that the plaintiffs’ core allegations of fraud were grounded in a prior substantiation theory of liability and that the plaintiffs failed to provide sufficient evidence for their false or misleading statement claims.
When alleging a false and misleading statement, the burden is on the plaintiff to plead and prove that a defendant lacked clinical support for the health benefits attributed to the product, the court said. But the plaintiffs merely criticized the strength of Nestlé’s scientific support – not its existence or validity.
Nestlé produced over 40 scientific articles and studies in support of its “clinically shown” advertising claims.
“Plaintiffs’ experts and its other facts all boil down to a claim that Nestlé’s scientific support underlying its claim of ‘clinically shown’ health benefits is not as strong as it should be and do not substantiate those claims,” Judge Hochberg wrote. “While plaintiffs’ experts take issue with the strength and significance of these studies, their criticisms do not satisfy plaintiffs’ burden of demonstrating that the ‘clinically shown’ advertising claims are false or misleading.” As the plaintiffs’ argument that the substantiation for the “clinically shown” claims should have been stronger was legally insufficient, she granted summary judgment for Nestlé on all the consumer protection claims.
To read the court’s opinion in Scheuerman v. Nestlé, click here.
Why it matters: Companies often face a class action on the heels of, or contemporaneous with, an FTC complaint. The court’s decision makes clear that companies will not necessarily be on the losing end of a class action lawsuit when they enter into a consent agreement with the agency. Judge Hochberg emphasized that although the plaintiffs recited the allegations from the FTC’s complaint for support, “the FTC does not come to any actual conclusions in a complaint. Plaintiffs’ attempts to characterize the FTC’s allegations as conclusions is an effort to bootstrap this action,” a fact which plaintiffs conceded.