Sunday, May 16, 2010

The flavor of false advertising

Pom Wonderful LLC v. Coca Cola Co., No. CV 08-06237 SJO (C.D. Cal. 2010)

Fruit juice, like headache relief and razors, could get its own chapter in a false advertising treatise.

Pom sells pomegranate juice and juice blends, including pomegranate blueberry. Coca Cola’s Minute Maid brand is a primary competitor. Coca Cola sells “Minute Maid Enhanced Pomegranate Blueberry Flavored 100% Juice Blend,” whose formal name is “Pomegranate Blueberry Flavored Blend of 5 Juices.” By volume, it’s apple juice, then grape juice, then pomegranate, then blueberry, then raspberry. The bottle has a “fruit vignette” (why the term vignette is used this way escapes me, but it is apparently not unique to the parties) depicting each of the five fruits. The parties disputed the extent to which the ads, coupons, and website for the product focused on pomegranates.

Pom’s basic point was that the Minute Maid juice is 99.4% apple and grape juice, and only 0.3% pomegranate and 0.2% blueberry juice, which Pom argued is likely to deceive consumers. (From the reviews I looked at online, there does seem to be some assumption that pomegranate makes up a more substantial amount of the product than this--plus there is apparently a price premium for the product, as there is for Pom's more pomegranate-intensive juices.)

Indeed, Coca Cola has received a number of complaints about the juice—more than about any other Minute Maid product. Example: “Today I made the mistake of buying [the] Minute Maid product that you call 'Pomegranate Blueberry[.]' What a crock. It's nothing but fancy apple grape juice. You people are scumbags for mislabeling your products. I'll never buy this product again. I'll never buy Minute Maid products again. And I'll tell all of my friends about this fraud. Thanks for wasting my time and money . . . .” Pom also submitted a survey indicating that consumers believed that the juice mainly contains pomegranate and blueberry juice, and not other types of juice. The control was a modified bottle with the words “Pomegranate Blueberry” removed from the front and back label; while 1% of the control group thought the juice mainly contained pomegranate and blueberry (now that’s a noiseless control!) 36% of the test group did (32% indicating that they believed this because of the words “pomegranate blueberry” on the label). Pom argued that elements other than the label, and Coca Cola’s ads, could be expected to have the same deceptive effects, whereas Coca Cola argued that the only thing tested was the label—this will be vital later.

Pom also argued that Coca Cola knew that the juice was misleading, citing a communication between employees: “As discussed here is a copy of the front label for the new MM Enhanced Juice Pomegrante [sic] Blueberry product. The product has a blend of apple, grape, pomegranate, blueberry & raspberry juices from conc[entrate]. We are in compliance with the FDA regs related to the naming of juice containing products. There is a risk from a misleading standpoint as the product has less than 0.5% of pomegranate and blueberry juices. [A company lawyer] is aware of this issue & is willing to assume the risk.”

The court had already granted Coca Cola’s motion to dismiss the Lanham Act and California state law claims to the extent they challenged the juice’s formal name and labeling for areas in which the FDA had promulgated regulations. However, FDA regulations didn’t bar Pom from alleging other types of false advertising. Coca Cola then moved for summary judgment, arguing that Pom’s only evidence of falsity/misleadingness came from the name and label.

The Nutrition Labeling and Education Act (NLEA) specifically addressed the issue of when consumers might be misled about juice content. Initially, the FDA suggested that a multiple-juice beverage named for a representated flavor wouldn’t necessarily be misleading if properly qualified. If a named juice isn’t the predominant juice, the label “must either state that the beverage is flavored by the named juice (e.g., ‘raspberry flavored juice drink’) or declare that the content of the named juice in a 5 percent range (e.g. ‘raspberry juice drink 2 to 7 percent raspberry juice’). Names of juices must be in descending order by volume unless the name specifically shows that the juice is used as a flavor. The FDA believed that this would address misleading uses.

What’s most notable, from nearly 20 years after the regulations were promulgated, is that the court doesn’t discuss any consumer evidence—the FDA’s preemptive authority applies even if consumers are misled and even if the FDA didn’t actually check to see whether consumers were misled. As the FDA has now more regularly recognized, this puts a premium on actual evidence about consumer perception during the regulatory process, but I don’t think NLEA regulations were promulgated with that kind of evidence in hand. Secondarily, the regulations apparently presume that flavorings will be a greater presence in the juice than they are in the Minute Maid beverage—3% is the lowest percentage mentioned in the parts the court quoted, whereas pomegranate and blueberry are an order of magnitude less present here, and the regulations allow a 5% range of variation (e.g., a label declaring 3 to 8 percent raspberry juice). However, the FDA adopted general regulations on the meaning of “flavored,” indicating that a food may be described as “flavored” with natural flavor derived from a “characterizing” ingredient, even if little of the “characterizing” ingredient is actually present in the food.

Finally, the FDA also specifically addressed potentially misleading fruit vignettes. It concluded that a multiple-juice beverage need not depict each juice, as long as the name “adequately and appropriately describes the contribution of the pictured juice.” So a vignette depicting raspberries would “not necessarily” be misleading if the product was “raspberry juice in a blend.” The FDA decided not to require that vignettes depict the fruits/vegetables for all present juices, though encouraged it. (Query: does “not necessarily” mean that submission of further evidence could show misleadingness? Since the FDA rarely acts on individual products, should we allow Lanham Act claims when the FDA has indicated that a particular practice might or might not be misleading, depending on the circumstances?)

After discussion of the FDA-Lanham Act interface, the court turned to Lanham Act standards, the key one of which here is that willful misconduct by Coca Cola can justify a presumption of consumer deception. However, the court dismissed the California state law claims, because Pom couldn’t get restitution without having a vested interest in some money or property, and Pom has no vested share in the pomegranate juice market.

Then the court proceeded to gut most of Pom’s claims, characterizing them as an attempt to indirectly require Coca Cola to change the juice’s naming and labeling. Pom argued that the product was really “Apple Grape” juice, but was labeled “Pomegranate Blueberry” and depicted with a pomegranate in order to mislead. It argued that Coca Cola’s choice of name and label is voluntary, and thus the FDA requirements for “formal” naming and labeling aren’t in conflict. The court agreed with Coca Cola that the name “Pomegranate Blueberry Flavored Blend Of 5 Juices” couldn’t be challenged under the Lanham Act because of its compliance with FDA regulations. “The FDA has directly spoken on the issues that form the basis of Pom’s Lanham Act claim against the naming and labeling of the Juice, and has therefore, reached a conclusion as to what is permissible…. [M]anufacturers of multiple-juice beverages may identify their beverages with a non-primary, characteristic juice, as Coca Cola does here.”

The conclusion with respect to the fruit vignette was similar. Here, because the juice is identified as a blend, Coca Cola’s statement of identity adequately and appropriately identifies pomegranate and blueberry as merely characterizing flavors. By depicting all of the juices present, Coca Cola seemingly provided more information and identification for consumers than required by the FDA.

The court did not dismiss all Pom’s claims, though it evinced some skepticism. Ads apart from the formal name and label are subject to challenge under the Lanham Act, though Pom had to show actual consumer reception of a deceptive message. Pom’s consumer survey, however, focused on the name and label, not on other ads or marketing. The court agreed that this made the survey “seemingly unreliable,” but held that Daubert issues were best considered at trial. (Seems to me the survey provides at least inferential support for the ad/marketing claims, which after all are about basically the same things that are in the name and on the label; the real problem is the marginal contribution of the ads/marketing to deception, given the holding here. Perhaps there are analogies from cases finding that defendants can’t be liable for playing on consumers preexisting beliefs, even if those beliefs are false, as long as defendants do nothing else to promote those beliefs.)

The issue of willful deception played out similarly: though the evidence tending to show deceptive intent seemingly related to the name, not the ads, Pom could get the opportunity to show otherwise at trial.

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