Sanderson Farms, Inc. v. Tyson Foods, Inc., -- F.Supp.2d --, 2008 WL 1838719 (D. Md.)
Plaintiffs alleged that Perdue’s “Raised Without Antibiotics”/“Raised Without Antibiotics that impact antibiotic resistance in humans” (RWA and qualified RWA) claims were false advertising. Previously, the court ruled that claims against RWA ads weren’t preempted/precluded by the fact that the USDA approved, or at least failed to disapprove, the qualified RWA label. Preclusion aside, the allegation is that Tyson uses ionophores in its chicken feed and that ionophores are antibiotics. The court enjoined Tyson from all non-label advertising using both claims.
USDA, the FDA, and the American Vetinary Medical Association all agree that ionophores are antibiotics, and every single witness on both sides here agreed.
People fear that the rise of antibiotic resistance will create “superbugs.” But ionophores are not used in human drugs, so their use for chicken presents only a tiny threat—it is “as close to scientific certainty as possible” that ionophores won’t lead to antibiotic resistance in humans. The court noted in a footnote that experts used to think that fluoroquinolones have no impact on human antibiotic resistance, but were removed from the market by the FDA when—oops—it turned out that they did.
All the parties use ionophores in their chicken feed; indeed, it’s a widespread industry practice, because ionophores are effective against a common, deadly chicken disease. Tyson also injects antibiotics into its eggs 2-3 days before hatching. Tyson defines “Raised Without Antibiotics” to mean “from hatch until slaughter,” a definition it didn’t disclose to the USDA when applying for approval of its label and doesn’t give to the public either.
Among the parties’ products, only Perdue’s Harvestland does not use any antibiotics at all; Harvestland is truthfully advertised with the slogan “No Antibiotics Ever.” Harvestland chickens are more expensive to produce because, without ionophores, Perdue has to use costly alternative measures to prevent disease. This cost translates to higher retail prices, which some consumers are willing to pay for antibiotic-free chicken.
The RWA claims allowed Tyson to compete with Harvestland, misleading consumers into believing that Tyson’s mass-marketed chicken is antibiotic-free just like Perdue’s specialty chicken. Tyson executives acknowledge that the RWA claims allowed them to “price up”—charge more for RWA chicken without losing sales.
The court found that USDA erroneously approved the unqualified RWA label on May 16, 2007, while listing ionophores in the feed ingredient list. As a result, Perdue sought similar approval for the same label language. Less than four months later, in September, USDA “unambiguously” informed Tyson of its mistake and its intention to revoke the approval. Tyson requested reconsideration, which was denied. In mid-December 2007, USDA approved the “Raised Without Antibiotics that impact antibiotic resistance in humans” label. A USDA undersecretary sent a letter confirming that Tyson and the USDA “reached an agreement” on the qualified RWA claim, because that claim described “the situation in a truthful and non-misleading way.” Tyson was granted time to transition to the qualified claim.
Meanwhile, Tyson was using both qualified and unqualified RWA claims in a multimillion-dollar nationwide ad campaign: TV, radio, billboards, print, posters, and point-of-purchase. “The advertisements uniformly featured smiling children, often accompanied by a parent. Many of the advertisements included a heading in large print declaring ‘Chicken your family deserves, raised without antibiotics.’” This was designed to strengthen the Tyson brand by appealing to safety and health concerns.
Feedback, unsurprisingly, was overwhelmingly positive. Consumers took away the message that Tyson didn’t use antibiotics and that the chicken was “better” or “safer” than competing brands. Consumer reaction groups readily reported the “safer” message; one person, for example, said that Tyson’s chicken “has made me very happy as I am a cancer survivor and I believe that all the antibiotics and artificial ingredients contribute to this major disease.” Tyson’s own data found that 9 out of 10 consumers considered antibiotic-free a desireable characteristic. Indeed, it was the second most important claim consumers looked for in chicken shopping. The campaign increased sales of Tyson chicken by 35 million pounds, an effect Tyson called “dramatic.”
This success was corroborated, the court found, by the fact that Tyson continued to run the unqualified RWA claim for nearly 6 months after USDA clearly informed Tyson that it had made a mistake and revoked the label approval. “It is quite clear to this Court that it was in Tyson’s financial interest to delay the phase-out period as long as possible.” Indeed, the chairman and CEO of plaintiff Sanderson Farms received a grocery store circular using the unqualified RWA language during the week of March 9, 2008. Tyson didn’t pay for the ad, but it didn’t tell its customers to stop using the claim either.
Hedging its bets and “[f]urther evidencing the aggressiveness of its marketing campaign,” Tyson started buying ads using qualified RWA language before the qualified label was approved. As a result, many recent Tyson ads contain qualifying language differing from the approved language. In some, the qualification was signalled only by an asterisk leading to a mouseprint disclosure. The court found that this didn’t correct the deception.
Tyson’s ads harmed plaintiffs, who submitted evidence of sales lost to Tyson. Tyson’s internal documents confirmed that the RWA campaign “wrecked Perdue’s overall enterprise strategy” and that “elevating the Tyson brand with RWA has also devalued the Perdue brand.” (Who sets out to kill a king, even a chicken king, had better succeed.)
The court found plaintiffs’ survey compelling as to the deceptiveness of both qualified and unqualified RWA claims. Four cells, each of about 150 shopping mall visitors who were likely chicken purchasers, were shown an unqualified RWA ad, a qualified RWA ad using the USDA-approved language, or a control touting “chicken with great taste, high quality and unmatched variety.” The results showed that consumers largely responded to unqualified and qualified RWA claims the same way, and they understood both claims to imply that Tyson’s chicken is safer and healthier than competitors’ chicken. “In short, consumers believe that there are no antibiotics given to Tyson’s chickens.” In the unqualified RWA cells, 71.4% and 85.1% reported a “no antibiotics” claim, whereas 63.4% did so in the qualified RWA cell. More than half in the qualified RWA cell, 54.9%, didn’t mention resistance. “9.2% of respondents mentioned ‘no antibiotics’ and ‘antibiotic resistance’ as separate but related ideas.”
The qualification, to the extent that consumers perceive it, generally means to them that resistance is a reason to avoid antibiotics, not an explanation of which antibiotics Tyson’s chickens don’t get:
Quite significant to this Court is the fact that only 4.6% of respondents understood the claim to mean what the experts at the USDA understood it to mean--i.e., that Tyson uses antibiotics, but that the antibiotics it uses do not cause antibiotic resistance in humans. … Indeed … this Court finds that the qualifying language may actually serve to reinforce the false impression that Tyson’s chicken is antibiotic-free…. Taken together, participants largely misunderstood the entire qualified claim to mean that Tyson’s chicken had no antibiotics and therefore could not impact antibiotic resistance in humans. (emphasis added)
The court cited a number of specific responses illustrating this point, e.g., “[The ad means t]hat this chicken is raised and fed right, without antibiotics so that people will not become resistant to antibiotics.”
Defendant’s survey expert made no dent, opining merely that the questions should have been more open-ended. The closed-ended questions, however, made clear that respondents believed that Tyson’s chicken was safer and healthier than competitors’, regardless of whether the ads used a qualified or unqualified RWA claim. Subtracting the percentages from the control cell, the net belief that the ads were claiming superior safety and health ranged from 21.9% to 35.7% (though the net difference in “better for you” was smaller). Because all the parties use ionophores, the court concluded that all these people were being deceived.
The unqualified RWA claim is literally false. In addition, plaintiffs demonstrated that consumers are being misled by both qualified and unqualified RWA claims. (Because the USDA approved the qualified RWA claim as not “false and misleading,” the court didn’t assess its literal falsity at this stage, only its misleadingness.) The percentage of consumers who reported an unqualified “no antibiotics” message after exposure to the qualified RWA claim was much higher than the 15% or so that is usually sufficient to show likely deception.
Even in the absence of any presumption (because the ads don’t name any competitors), the evidence showed that plaintiffs would continue to suffer irreparable harm absent an injunction. Plaintiffs and defendant all agreed that Tyson’s ad campaigns caused “incalculable” loss to Perdue. Such harm to brand value is “precisely the sort of loss that the issuance of a preliminary injunction is designed to prevent.” Tyson’s aggressive campaign, ignoring the USDA’s warnings, suggests that it might well take a similarly aggressive position awaiting trial on the merits.
On the other side, there was “virtually no harm” to Tyson from enjoining non-label ads with the unqualified RWA claim. Removing ads from the marketplace undoubtedly entails substantial costs. Fourth Circuit precedent requires district courts to consider even self-inflicted irreparable harm to defendants, in order to keep the balance of harms test from always favoring the plaintiff. But Tyson could have mitigated the harm through a “less aggressive marketing position.” The evidence showed that Tyson executives were well aware of the risk, but proceeded anyway. Moreover, the extremely high likelihood of success on the merits is a factor—denying a preliminary injunction would just put off the irreparable injury to Tyson. “Raised Without Antibiotics” is literally false; the qualifications don’t work; and the ads don’t explain that Tyson injects antibiotics into eggs before they hatch. Materiality was also clearly shown.
The public interest also favored an injunction. The public is interested in avoiding false advertising, even without an immediate health or safety concern.