The Austrian-based company, Red Bull GmbH, has agreed to pay US$13 million to settle its class action lawsuit pertaining to an alleged breach of express warranty, unjust enrichment, and violations of over 30 state consumer protection acts. The plaintiffs sought compensation primarily for false advertising, claiming that the Red Bull beverage does not provide more benefits to the consumer than a cup of coffee or caffeine pill, contrary to what the company’s global marketing “Red Bull Gives You Wings” campaign would have you believe. The case warrants a review of the concepts of brands and trade marks and the relative importance of each.

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Source: still images taken from Red Bull TV Advertisement (http://www.youtube.com/watch?v=Kw_uQUQLhwI).

A class action lawsuit was brought with Benjamin Careathers as the primary plaintiff on 16 January 2013 in the United States District Court of the Southern District of New York. The case brings into focus how a “brand” is more than just a trade mark, and how looking after the trade mark involves considerations broader than those associated with trade mark law. What exactly does the term “brand” encompass? Originally, “brand” was the term given to indicate that a product or service is from a specific source. This concept is now covered by what is referred to as a “trade mark”. This shift coincided with the realisation that there are numerous factors in branding other than simply the product name. Such factors include the consumer’s previous experience, perceptions, and expectations, all of which ultimately form what the consumer knows and feels about a company’s offering. The brand is the intangible sum of a product’s attributes, and has been shown to be the most valuable asset of a business – it is estimated that, on average, 75% of a business’ value is associated with its brand. One of the greatest challenges of becoming a successful business is establishing, and maintaining, a good brand.

Although this decision has no legal impact on the Red Bull trade mark, the question is: will this latest lawsuit damage the Red Bull brand? Regardless of whether the allegations are true, the consumer will inevitably question their previous experience of the product, how they now perceive the product, and what they expect from the product in the future.

In view of this, it is not surprising that Red Bull have denied any wrong doing, despite agreeing to the exorbitant settlement. In the class action, the plaintiffs argued that the marketing campaign, wherein the “Red Bull Gives You Wings” slogan is a predominant feature, amounted to a breach of express warranty, unjust enrichment, and violations of over 30 state consumer protection acts, including New York’s Deceptive Acts and Practices Act and California’s Consumers Legal remedies Act and Unfair Competition Law.

Apparently, guzzling a can of Red Bull does not cause the consumer to conveniently sprout wings, thereby allowing them to escape whatever distasteful situation they have somehow found themselves in – quite to the contrary of the company’s global marketing campaign. Who would have thought? Indeed, this is what Red Bull has argued; clearly, the overly sweet liquid could not generate such a spontaneous, morphological change in the consumer’s body, and as such, there was no chance of the consumer being mislead.

To be fair, this is not the central issue of the lawsuit. Rather, the real issue is whether or not Red Bull is effective in providing energy to its consumers. Many consumers of the product felt cheated, and decided to unite to sue the company for false advertisement. Mr Careathers sought an injunction for the company to stop falsely advertising its products. The suit states that “such deceptive conduct and practices mean that Red Bull’s advertising and marketing is not just ‘puffery’, but is instead deceptive and fraudulent and is therefore actionable”.

Mr Careathers claimed he had been drinking Red Bull since 2002, and accused the company of misleading consumers about the superiority of its product. The plaintiff alleged that the deception has been proliferated through print, TV and Internet marketing campaigns, which promote that the consumption of Red Bull leads to an increase in performance, concentration, and reaction speed.

Red Bull markets the product as providing more energy than a cup of coffee, despite the fact that a can of Red Bull provides roughly half the content of an equivalent sized cup of coffee. Add to this, a regular serving of Starbucks coffee costs just US$1.85, a marked difference in comparison to the exorbitant cost of a Red Bull can. The suit maintains, “even though there is a lack of genuine scientific support for a claim that Red Bull branded energy drinks provide any more benefit to a consumer than a cup of coffee, the Red Bull defendants persistently and pervasively market their product as a superior source of ‘energy’ worthy of a premium price over a cup of coffee or other sources of caffeine.” In evidence submitted by the plaintiffs, it was alleged that a 7 oz. cup of drip coffee contains approximately 115-175 milligrams of caffeine, while an 8.4 oz. can of Red Bull contains 80 milligrams of caffeine.

Red Bull has agreed to settle the lawsuit at a cost of US$13 million, but not because it has falsely advertised its product. Rather, it has merely “settled the lawsuit to avoid the cost and distraction of litigation”. A Red Bull representative stated that the company “maintains that its marketing and labelling have always been truthful and accurate, and denies any and all wrongdoing or liability”. This seems to be an attempt by Red Bull to prevent further damage to its brand. The allegations will possibly prove damaging, at least in the short term. What remains to be seen, is the long-lasting effects of this lawsuit on the consumer’s experience of the product (‘I didn’t grow wings, but did I receive anything more than what a cup of Starbucks coffee would give me?’), their evaluation of how they perceive the product (‘If I didn’t get wings, what am I actually paying for?’), and what they now expect from the product (“Well, no wings, no additional energy hit, so what?’).

Given 75% of Red Bull’s value is estimated to be associated with its brand, the lawsuit was not a matter Red Bull took lightly, as evident from the US$13 million payout to which it has agreed to. US residents, who purchased a can of Red Bull in the last ten years, may be eligible for either a US$10 refund or a US$15 Red Bull product purchase. If it were me, I’d take my refund to Starbucks.