A unanimous United States Supreme Court (Justice Breyer took no part in the decision) held on June 12 that the Federal Food, Drug, and Cosmetic Act (“FDCA”) does not preclude Lanham Act claims based on alleged false or misleading representations on food and beverage labels. As described below in more detail, the Court held that the FDCA and the Lanham Act complement each other and, thus, competitors may sue for unfair competition under the Lanham Act even where the labeling at issue arguably complies with the FDCA.
In its complaint against The Coca-Cola Company, POM Wonderful LLC alleged that the label of a juice blend sold by Coca-Cola is deceptive and misleading because it displays the words “pomegranate blueberry” in all capital letters on the front label (along with the phrases “flavored blend of 5 juices” and “from concentrate with added ingredients and other natural flavors”) but contains 99.4% apple and grape juices, 0.3% pomegranate juice, 0.2% blueberry juice and 0.1% raspberry juice. POM sued Coca-Cola under Section 43(a) of the Lanham Act, which provides a private right of action to a party injured when a competitor “misrepresents the nature, characteristics, [or] qualities” of its goods.
The district court granted partial summary judgment to Coca-Cola on POM’s Lanham Act claim, and the Ninth Circuit affirmed in relevant part, holding that the FDCA precluded POM’s Lanham Act claim. Under the FDCA, the Food and Drug Administration (“FDA”) promulgated what the Ninth Circuit found to be “comprehensive regulation” of beverage labeling, with which Coca-Cola’s label complied. The court found that allowing the Lanham Act claim to proceed “would risk undercutting the FDA’s expert judgments and authority.”
At the outset, the Supreme Court noted that the case did not involve pre-emption, which the Court described as the question of whether a state law is pre-empted by a federal statute or federal agency action. Instead, the case involved the interaction of two federal statutes – the Lanham Act and the FDCA – and, thus, was governed by traditional rules of statutory interpretation.
The Court began its analysis by explaining that neither statute expressly forbids or limits Lanham Act claims regarding labels regulated by the FDCA. The Court found the lack of any text barring unfair competition claims particularly important, because the two statutes have coexisted for nearly 70 years. Although Congress has repeatedly amended both laws, it has not enacted any provision precluding enforcement of other federal laws that bear on food and beverage labeling. The Court described this as “powerful evidence that Congress did not intend FDA oversight to be the exclusive means of ensuring proper food and beverage labeling.” The Court pointed out that Congress has amended the FDCA to forbid state and local governments from imposing their own food and beverage labeling requirements. By mandating express pre-emption only as to certain state laws, “Congress if anything indicated it did not intend the FDCA to preclude requirements arising from other sources,” such as the Lanham Act.
The Supreme Court held that the complementary structure of the two statutes also supports the conclusion that the FDCA does not preclude Lanham Act claims concerning beverage labeling. “When two statutes complement each other, it would show disregard for the congressional design to hold that Congress nonetheless intended one federal statute to preclude the operation of the other.” The Court noted that the two statutes have distinct scopes and purposes: “the Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety.” The Court also found that the statutes’ remedies complement each other in a “more fundamental respect.” While the FDA is primarily responsible for enforcement of the FDCA, it may lack the “perspective or expertise in assessing market dynamics” that competitors have. As a result, competitors’ awareness of unfair practices “may be far more immediate and accurate than that of agency rulemakers and regulators.” Lanham Act suits that touch on matters contemplated by the FDCA “provide incentives” for manufacturers to behave well, increasing enforcement in the labeling area.
The Court also pointed out that Coca-Cola’s theory would lead to a result that, in its view, Congress likely did not intend. The FDA does not pre-approve food and beverage labels, and does not pursue enforcement measures against all objectionable labels. Thus, the Court noted that precluding Lanham Act claims in this area could result in “less effective protection in the food and beverage labeling realm than in many other, less regulated industries.”
The Court also rejected Coca-Cola’s argument that preclusion was required because Congress intended national uniformity in food and beverage labeling, finding that the lack of uniformity against which Coca-Cola warned “is no different than the variability that any industry covered by the Lanham Act faces.” The Court distinguished the potential “variation in outcome” as “quite different from the disuniformity that would arise from the multitude of state laws, state regulations, state administrative agency rulings, and state-court decisions that are partially forbidden by the FDCA’s pre-emption provision.” Although the Court recognized that the FDCA addressed food and beverage labeling with a great deal of specificity, it held that “this greater specificity would matter only if the Lanham Act and the FDCA cannot be implemented in full at the same time.”
Finally, the Court disagreed with the United States’ argument (appearing as amicus curiae) that Lanham Act claims are precluded to the extent that the FDCA or FDA regulations “specifically require or authorize the challenged aspects” of the label. The Court first noted the practical difficulties of distinguishing between regulations that “specifically authorize” an aspect of the label and regulations that “merely tolerate” it. The Court also found error in the Government’s argument because it “assumes that the FDCA and its regulations are at least in some circumstances a ceiling on the regulation of food and beverage labeling” while, as it had discussed earlier in the decision, it had determined the FDCA and Lanham Act to be complementary. More fundamentally, the Court raised concerns with the implications of the Government’s position, refusing “to prelude private parties from availing themselves of a well-established federal remedy because an agency enacted regulations that touch on similar subject matter but do not purport to displace that remedy or even implement the statute that is its source.”
The impact of the Court’s decision remains to be seen. There has been much speculation about its potential effect on state law consumer claims, but the Court repeatedly distinguished state law from the Lanham Act in its analysis. As a result, whether plaintiffs will be successful in invoking POM v. Coca-Cola to support state law consumer claims is far from certain.