Supreme Court: Yes, Pom Wonderful Can Sue Coke For False Advertising
On Thursday the U.S. Supreme Court apparently ruled for common sense: yes, POM Wonderful can sue Coca-cola (NYSE: KO) for advertising its Minute Maid drinks as “pomegranate blueberry,” when the juice blend has only 0.3 percent pomegranate juice and 0.2 percent blueberry juice.
In a statement emailed to Benzinga, POM Wonderful called the ruling "a real victory for consumers" adding it "will translate into higher assurance for consumers that the labels on beverage and food are accurate."
POM Wonderful, which said it "cares deeply about the health issues that consumers face today," concluded its statement with, "We believe that when people better understand what they are consuming, they can make healthy and more informed decisions about what they buy."
What's At Stake
The Supreme Court win only means that POM Wonderful can now bring its false advertising claims to trial; it doesn't guarantee victory.
If POM Wonderful does win, the Lanham act allows it to get damages and attorneys’ fees, and allows the judge to order Coke to change its labeling and even do corrective advertising.
The damages can include any profits POM Wonderful lost, as well as any profits gained by Coke, as a result of false advertising. A successful lawsuit, therefore, should boost Pom Wonderful. How material a loss would be for the much larger Coke is less clear.
POM Wonderful sued Coke for false advertising because its labeling of the 99.4 percent apple-grape juice blend (0.1 percent is raspberry) prominently displayed the words “pomegranate” and “blueberry” in all caps, putting in much smaller type beneath them “flavored blend of five juices” and featured a picture of blueberries, grapes, and raspberries in front of a halved pomegranate and a halved apple.
Despite clearly communicating that an essentially apple-grape drink was “pomegranate blueberry”, Coke won in the trial and intermediate appeals courts. The judges were persuaded by Coke’s argument that a different federal statute, the Food, Drug and Cosmetic Act (FDCA), prevented Pom Wonderful’s Lanham Act suit.
But looking at both statutes, the Court unanimously rejected that idea in unusually stark terms:
“There is no statutory text or established interpretive principle to support the contention," it said. "Nothing in the text, history or structure of [the statutes] shows the congressional purpose or design to forbid these suits.”
"What's significant about the opinion from the consumer perspective," Scott Nelson, attorney for Public Citizen's Litigation Group told Benzinga, is that it "clarifies how narrow the FDCA's preemption provisions are, which means that it will simplify bringing consumer claims regarding similarly deceptive marketing."
Given the miniscule amount of pomegranate and blueberry juices in the product, and the prominence of the fruit on the labelling, one might imagine that settlement is the smart option for Coke. However, in a statement to CBS MoneyWatch, Coke made clear it would continue defending itself:
"We respect the Court's decision and remain committed to clear labeling that fully complies with FDA regulations," it said. "The Court has decided that even though the name and label for our product was authorized by FDA regulations, Pom is entitled to present its legal claims to a jury….We intend to defend against Pom's claims that our labeling is misleading."
Watching From The Sidelines
The case drew broad interest from the business and regulatory community as reflected by the “friend of the court” briefs filed.
Lining up on Pom’s side were Public Citizen, the International Trademarks Association, ten states including “red” stalwarts like Alaska and Tennessee and deep “blue” Massachusetts and Hawaii, and former FDA Commissioner Dr. Donald Kennedy. Coke drew support from the American Beverage Association, the Chamber of Commerce, the Voice of the Defense Bar, and former Acting FDA Commissioner and Lead Deputy Commissioner Dr. Michael Friedman.
Weighing in without picking sides were the Generic Pharmaceutical Association and the American Intellectual Property Law Association.
To see what each of these groups was concerned about, read their briefs here.
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