Defendant manufactured certain yarns that were labeled as containing cashmere, but their cashmere content was allegedly below that labeled or even nonexistent. Plaintiff sold defendant’s yarns until questions about their cashmere content developed, and sued defendant for false advertising.
The court found that plaintiff lacked prudential standing under the Lanham Act. The court rejected the claim that the parties were vertical competitors (manufacturer versus retailer of different yarns). There was no competitive relationship: plaintiff didn’t make its own competing yarns, nor did defendant sell directly to consumers, which would have made it a competing retailer. The harm plaintiff suffered from buying the falsely labeled yarns was not a harm to its ability to compete, just a loss of sales/profits. Rather, its harms were those suffered by a consumer of defendant’s products. Manufacturers and distributors of competing designer yarns were in a better position to vindicate the interests protected by the Lanham Act, even if they’d decided not to sue. For similar reasons, the possibility of duplicative damages weighed against standing.
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2 comments:
what about the reputational damage/harm suffered by plaintiff?
That is, from when its customers began to realize that their favorite, trusted store was (however unwittingly) carrying products that were inferior / mislabeled, etc.?
The plaintiff would certainly seem to have suffered harm to its ability to compete, especially against competitors who still had a reputation with yarn customers as selling what they claimed.
--AH
I agree, there's a risk of harm to the plaintiff's reputation. Courts have, unfortunately in my opinion, of late tended to demand that a horizontal competitor vindicate that interest on behalf of retailers.
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