Supreme Court approves private Lanham Act Challenges to FDA-regulated food and beverage labels

In a much-anticipated decision, the Supreme Court weighed in last week on the relationship between the Lanham Act and the Food, Drug & Cosmetic Act (FDCA)—two federal laws that govern food and beverage labeling. POM Wonderful LLC v. The Coca- Cola Co., No. 12-761 (U.S. June 12, 2014). In a unanimous opinion (8-0 with Justice Breyer abstaining), the Court held that competitors and other private parties may use the Lanham Act to challenge FDA-regulated food and beverage labels as deceptive. In so doing the Court endorsed a role for private enforcement actions in an important area of federal regulation and rejected the interpretative approach that led several lower courts to conclude that the suits in issue would impermissibly “undermine FDA authority.”

The Lanham Act penalizes the use of deceptive and misleading labels to promote consumer products. The FDCA prohibits the misbranding of food, beverages, and other consumer goods. But the Lanham Act is enforced primarily through private lawsuits, whereas the FDCA lacks a private cause of action and may be enforced only by the Food and Drug Administration (FDA). Lower courts presented with Lanham Act suits challenging FDCA-regulated labels routinely held such suits improper, concluding that the Lanham Act should not be “used as a vehicle to usurp, preempt, or undermine FDA authority.” In POM, the Supreme Court considered—and rejected—this view of the statutes’ relationship.

The case arose when POM Wonderful, a maker of pomegranate juice, alleged that Coca-Cola’s Minute Maid brand used labels that misled consumers to believe that its “pomegranate blueberry” flavored juice blend consisted principally of pomegranate and blueberries when it in fact consisted of 99.4% apple and grape juices. According to POM Wonderful, this alleged deception caused the company to lose sales and thus incur damages actionable under the Lanham Act.

Coca-Cola countered that the contested label was consistent with FDA regulations under the FDCA and thus could not be subjected to additional restrictions or liability under the Lanham Act. The district court and Ninth Circuit agreed, holding that Congress “entrust[ed] matters of juice beverage labeling to the FDA” and that allowing POM’s suit would “risk undercutting the FDA’s expert judgment and authority” in this heavily regulated area.

The Supreme Court reversed. Guided by “traditional rules of statutory interpreta-tion,” Justice Kennedy’s opinion for the Court held that “food and beverage labels regulated by the FDCA are not, under the terms of either statute, off limits from Lanham Act claims.” Noting that “each [statute] has its own scope and purpose”—and that the Acts have coexisted for decades—the Court explained that the laws “complement each other with respect to remedies.” The Court further observed that the FDCA provisions expressly prohibiting State food and beverage labeling requirements without addressing federal laws such as the Lanham Act were “powerful evidence that Congress did not intend FDA oversight to be the exclusive means” of policing food and beverage labels.

The Court rejected Coca-Cola’s argument that Lanham Act suits would lead to piecemeal enforcement and undercut “national uniformity in food and beverage labeling.” By incenting private parties to police one another, the Lanham Act actually offers “a means to implement a uniform policy to prohibit unfair competition.” Emphasizing that commercial competitors have an “awareness of unfair competition practices [that] may be far more immediate and accurate than that of agency rulemakers and regulators,” the Court concluded that allowing Lanham Act suits in addition to FDCA enforcement actions “takes advantage of synergies among multiple methods of regulation.”

POM’s impact on the interplay between private enforcement actions and administrative primacy in areas beyond food and beverage labeling remains to be seen, because the Court’s holding is confined to the FDCA provisions at issue in the case.   For example,  the Court stressed that drug labels are “unlike” food and beverage labels because drug labels require the FDA’s prior approval before they can be used for product marketing. But the opinion is clear that food and beverage labelers cannot rely on the mere fact of FDA regulation to avoid competitor or other Lanham Acts suits for deceptive labeling. Nor can they rely on the Government’s argument that the Lanham Act claim is precluded “to the extent the FDCA or FDA regulations specifically require or authorize the challenged aspects of [the] label.” As the Court declared in rejecting this argument, current FDCA regulations are “at best inconclusive as to” their “interaction” with the Lanham Act and thus would not bar POM’s suit “even on the assumption that a federal regulation in some instances might preclude application of a federal statute.”