On Thursday, June 12, 2014, Justice Anthony Kennedy delivered an opinion for a unanimous United States Supreme Court in POM Wonderful LLC v. The Coca-Cola Co., No. 12-761, in which the Court ruled that the Federal Food, Drug, and Cosmetic Act (FDCA) does not preclude a private company from bringing unfair competition claims against a competitor arising from false or misleading product descriptions under §43(a) of the Lanham Act. In so ruling, the Court reversed the Ninth Circuit Court of Appeals and allowed POM to continue with its claim that Coca-Cola's pomegranate-blueberry juice blend is mislabeled. According to the Court, Congress intended the FDCA and the Lanham Act to be complementary, not in conflict as argued by both Coca-Cola and the Federal Government in its amicus brief.
The Supreme Court's decision in POM imposes an obligation on companies to ensure not only that their product labels conform to relevant agency regulations, but also that their labels are not deceptive and misleading in potential violation of the Lanham Act. As such, companies will no longer be able to rely on compliance with Food and Drug Administration (FDA) regulations as a safe harbor. Meeting FDA label requirements previously gave companies a relatively clear path to compliance. By adding the obligation that labels must also be compliant with Lanham Act precedent against false advertising, companies will be confronted with greater uncertainty and increased risk of lawsuits by private parties.
POM produces, markets and sells pomegranate-based products, including a pomegranate-blueberry juice blend. Coca-Cola's Minute Maid division also sells a product that is marketed as a pomegranate-blueberry juice blend, but consists of only 0.5% pomegranate and blueberry juices and over 99% apple and grape juices. The label on Coca-Cola's juice is FDA approved, but POM nevertheless alleges that the branding is deceptive and misleading, including the words "pomegranate blueberry" displayed prominently on the label. POM, as a competitor in the pomegranate-blueberry juice market, brought unfair competition claims against Coca-Cola under §43 of the Lanham Act.
POM claims that Coca-Cola's juice blend misleads consumers into believing that its product consists predominantly of pomegranate and blueberry juices, when in fact it consists predominantly of apple and grape juices, which are significantly less expensive. POM further alleges that this consumer confusion has resulted in Coca-Cola's juice taking sales away from POM in violation of §43(a) of the Lanham Act. The District Court, however, granted partial summary judgment in favor of Coca-Cola, ruling that the FDCA and its regulations, which prohibit the misbranding of food or drink, precluded POM's Lanham Act claims because the FDA had directly spoken on the issues relating to naming and labeling. The Ninth Circuit affirmed, reasoning that Congress had entrusted the FDA with all matters related to juice beverage labeling.
The Supreme Court, utilizing plain language statutory interpretation principles, held that there is no language in the text of the FDCA to support preclusion of a competitor's claims under the Lanham Act. As such, competitors like POM may bring Lanham Act claims that challenge food and beverage labels that are regulated by the FDCA. The Court also echoed its recent sentiment from Lexmark International, Inc. v. Static Control Components, Inc. that Lanham Act claims are for competitors, not consumers, although consumers ultimately benefit as well through a reduction in misleading marketing. The Court explained that the FDCA and Lanham Act complement each other, reasoning that "although both statutes touch on food and beverage labeling, the Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety."
Taken together with Lexmark, the POM decision affords competitors in the food and beverage industry the right to challenge FDCA-compliant labeling. The key takeaway from POM is that, although a food or beverage product's label may be approved by the FDA, compliance does not necessarily shield the maker from false advertising claims brought by competitors under §43(a) of the Lanham Act. Because Congress intended the FDCA and the Lanham Act to complement one another, labels and advertising should be evaluated under the requirements of each Act.