Compliance with FDA Regulations May Not Protect a Company From the Risk of Liability to Competitors via Unfair Competition Challenges

On June 12, 2014, the Supreme Court unanimously held that one competitor may sue another under the federal Lanham Act for false, misleading, or deceptive advertising and labeling of its food and beverage products even though the labeling may conform with FDA regulations.  The Supreme Court took the position that the Lanham Act and Food Drug and Cosmetic Act (“FDCA”) are complementary statutes, with the Lanham Act protecting interests against unfair competition and the FDCA protecting public health and safety.

In Pom Wonderful LLC v. Coca-Cola, Pom Wonderful alleged that its competitor, Coca-Cola, violated the Lanham Act, by labeling a Minute Maid juice blend with a label that prominently displayed the words “Pomegranate Blueberry,” although the product was a blend of five juices containing only 0.3% pomegranate juice and 0.2% blueberry juice.  Coca-Cola argued that its label was lawful under the provisions of the FDCA and that the FDCA precludes Pom Wonderful’s Lanham Act challenge.  Both the district court and Ninth Circuit agreed – in part – with Coca-Cola’s arguments.

The Supreme Court reversed and remanded.  The Court found that the FDCA does not preclude Lanham Act challenges.  In essence, the Court found the two statutes to be complementary with respect to food and beverage labeling.  Of particular concern to food and beverage companies, is the Court’s rejection of the government’s “compromise” position.  The Court rejected the government’s argument that “a Lanham Act claim is precluded ‘to the extent the FDCA or FDA regulations specifically require or authorize the challenged aspects of [the] label.’”  In this case, because FDA regulations specifically authorized the names of juice blends, the government argued there could be no challenge to the name but only to other aspects of the label.  In rejecting the government’s position, the Court implied that an FDA regulation would only preclude application of the Lanham Act if FDA so stated in the regulation or if there was other evidence that FDA considered the full scope of the interests the Lanham Act protects in adopting the regulation.  Unfortunately, nowhere in its discussion did the Court address FDA’s obligation to prevent false and misleading labeling.

Following the Pom Wonderful decision, food and beverage companies should be aware that meeting the requirements of the FDCA and its regulations does not extinguish the risk of liability to competitors via unfair competition challenges under the Lanham Act.  Furthermore, we can anticipate that plaintiffs’ consumer class action counsel will rely on this decision to challenge any defense that compliance with FDA regulations prevents suit under state consumer protection laws, except in instances where preclusion is clearly provided for in the FDCA or in the regulation.

For more information on the Pom Wonderful decision and FDCA or Lanham Act compliance, please contact Keller and Heckman LLP Partners, Douglas J. Behr, behr@khlaw.com, or Melvin S. Drozen, drozen@khlaw.com.