by Laura Gaudreau
With a 8-0 decision on June 12, the Supreme Court welcomed another player to question the legality of food and beverage labels: competitors. In Pom Wonderful, LLC v. The Coca-Cola Company, the Court unanimously held that competitors may bring federal Lanham Act claims alleging unfair competition from false or misleading food product labels, even if those labels comply with FDA regulations.
POM Wonderful, a marketer of pomegranate juice products, sued a competitor, Coca-Cola, alleging that the labeling of Coke’s pomegranate blueberry flavored juice blend was deceptive and misleading under §43 of the Lanham Act and hurt POM’s sales. Coke’s product label prominently featured the words “Blueberry Pomegranate” even though the beverage consisted of 99% grape and apple juice, and was only about 0.2% blueberry juice and 0.3% pomegranate juice. Significantly, Coke’s labeling was permissible under the extensive FDA rules governing juice product names.
The issue before the Supreme Court was not the label itself, but the intersection between the Food, Drug, and Cosmetic Act (FDCA) and the Lanham Act. The FDCA prohibits the misbranding of food through false or misleading labels. Private parties may not bring enforcement suits under the FDCA, so the FDA has nearly exclusive enforcement authority. In contrast, the Lanham Act confers private rights of action, allowing business to sue competitors for unfair competition and false advertising. The Court evaluated whether FDA’s extensive regulation of food labeling under the FDCA precludes private claims challenging food labels under the Lanham Act.
The lower courts sided with Coca-Cola, which claimed the FDCA precludes a Lanham Act claim because the Lanham Act may not be used to preempt or undermine the FDA’s authority. Essentially, Coca-Cola claimed if the juice label satisfied the rules of the FDA, it had the stamp of approval for sale, and could not be challenged through private action via other statutes.
The Supreme Court disagreed with the lower courts, holding that competitors are allowed to bring Lanham Act claims alleging unfair competition from false or misleading food product labels. Justice Kennedy wrote the opinion, noting the two statutes are complementary. The FDCA is concerned primarily with public health and safety, while the Lanham Act protects commercial interests from unfair competition.
This decision potentially opens the door for a high volume of litigation over food labels, and puts substantial power in the hands of competitors. In his decision, Kennedy noted that competitors’ “awareness of unfair competition practices may be far more immediate and accurate than that of agency rule makers and regulators” due to their knowledge of how “consumers rely upon certain sales and marketing strategies.” Likewise, competitors have a financial incentive and possibly greater resources than FDA to challenge deceptive food labeling. Moving forward, food manufacturers must now be concerned not only with whether their labeling complies with FDA regulations, but also with whether it may invite lawsuits from competitors.