Experts advise supplement companies to carefully review labels in wake of POM ruling

The Supreme Court ruled that POM may proceed with a lawsuit against Coca-Cola for allegedly deceptive labeling and advertising of a pomegranate/blueberry juice product.  A lower court had ruled (in line with past rulings) that because the labels of the product in question were compliant with the Food Drug and Cosmetic Act and were regulated by FDA, POM had no standing to sue under the Lanham Act, which governs matters of false advertising and consumer deception.

Me-too products and pixie dusting​

Now that POM can proceed, the question is whether the ruling will bring forth a wave of lawsuits, one company suing another over alleged deceptive labeling practices.  In the POM case, POM had originally sought to sue Coca-Cola over its practice of presenting its Minute Maid Pomegranate/Blueberry product as being the juice of those fruits, when in fact it had so little (0.5%) that they contributed only coloring and flavoring. POM claimed its business was damaged because consumers were buying the competing product thinking they could get the health benefits of those juices at a lower price.

The dietary supplement business, populated as it is with a fringe of me-too products and manufacturers using less-than-efficacious doses of bioactives that are called out on labels, would seem to offer fertile ground for similar suits.  After all, if one manufacturer has spent the money to use a branded ingredient that has clinical studies backing it, isn't its business damaged if a competitor offers at a lower price a product with trace amounts of that ingredient, or with a low-quality, commodity version of the ingredient (to which the scientific evidence doesn't necessarily apply) and calls it out on the label? At least one expert believes there is a big pent-up demand for such legal actions.

Pent-up demand for legal redress​

“By an 8-0 margin the court was emphatic in saying that there is nothing in the language of the Lanham Act or the Food Drug and Cosmetic Act that would prohibit such lawsuits,”​ Loren Israelsen, president of the United Natural Products Alliance, told NutraIngredients-USA. “Meaning private lawsuits could go forward, irrespective of what FDA might say about a label’s technical compliance.​

“This opens up the magic door which up to now no one had the key to. I think the premise is really clear.  If your competitor is making false statements, you can sue them.  A lot of the criticisms we hear in our industry of competitors' labeling practices and advertising will now be the subject of civil litigation,”​ Israelsen said.

And Israelsen said in his opinion it won’t be just company vs. company.  If a manufacturer has been pixie dusting, not only does it damage a competitor’s business, but it hurts customers, too.

“Consumers of product B might say, we’ve been cheated, too. We want our money back.  I think it could open the door for a lot of class action lawsuits,” ​he said.

Diametrically opposed legal opinions​

Not everyone agrees with the view that a dam is about to burst, unleashing a flood of lawsuits.  For one thing, the opinion itself, while unanimous (a very rare thing for this particular iteration of the Supreme Court, by the way) overturns an opinion from one of the most prestigious district courts of appeals in the country.  It points to the inherent muddiness of regulating commercial speech.

“This case was decided by the Ninth District, which is one of the most prestigious courts of appeals. To become a judge on that court you have to be quite an accomplished legal scholar,” ​said Ivan Wasserman, managing partner of the Washington, DC office of the Manatt law firm.

“Everyone who has thought about this case is a brilliant legal mind. And they have come to completely different conclusions,”​ he said.

That muddiness is what makes Lanham Act cases so difficult, Wasserman said.

“Lanham Act cases don’t occur that often generally because they are so expensive and because it is so hard to prove damages,” ​Wasserman said. “Normally they don’t occur unless one company is actively claiming that their product is better than yours and is naming your product in their advertising.”​

Not a flood, but a trickle​

Indeed, the POM case, which was filed first in 2008, is still not over; what POM won is the right to continue to sue Coca-Cola for false adverting.  It could take another couple of years and millions of more dollars in legal fees before it is resolved, unless Coke decides quickly to settle. POM Wonderful and its owners, Stuart and Lynda Resnick, have shown a willingness in the past to go to the mat on matters of legal principle (witness POM’s wrangle with the Federal Trade Commission).  

“Seeing that Lanham Act cases are difficult to prove and the litigation is so expensive, I think most of these suits will be between big players like POM and Coke that have deep pockets,”​ said Bethany Kennedy, an associate in the law firm Emord and Associates. 

“While this potentially opens the door for more lawsuits, I don’t foresee an onslaught of competitor-based litigation,”​ said Rend Al-Mondhiry, regulatory counsel for the Council for Responsible Nutrition.

But all agreed that companies must now be extra vigilant on what they are saying on their labels, because competitors will be looking at them with renewed interest.

“I understood this case more for the implications of compliance with labeling. You can be in technical compliance with the federal labeling regulations but that doesn’t mean that there could not be a basis for a claim under a different statute,”​ Al-Mondhiry said.

“You really have to look at your label through your competitor’s eyes,” ​added Kennedy.  

Self regulation tool​

Kennedy said she believes that most such complaints about labeling practices will continue to be referred to the National Advertising Division, where the remedy is to make the competitor stop the practice, rather than try to recover damages.  It has been one of the tools that industry has pointed to in making its case for adequate self regulation.

The POM ruling may provide another, despite the potential costs and legal pitfalls, Israelsen said.  

“Why go to the NAD when you can go to the courts and really stick it to your competitor?  For companies in a high-science, high-quality position, the POM ruling will be good news. Low-quality companies will have cause for urgent reflection on their business practices to determine the amount of their exposure,”​ he said.