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Federal False Advertising Lawsuits Permitted to Proceed Notwithstanding Compliance with Government Rules and Regulations




by:
Barry M. Benjamin
Theodore H. Davis
Kilpatrick Townsend Stockton LLP - Atlanta Office

 
June 17, 2014

Previously published on June 12, 2014

In a closely watched case involving allegations of false advertising by competitors, the U.S. Supreme Court handed a victory to POM Wonderful by accepting that company’s argument that mere compliance with governmental regulations does not preclude or preempt false advertising claims under the Lanham Act.

The label for Coca-Cola’s “Pomegranate Blueberry” drink product featured a prominent picture of a large pomegranate set among other fruits. POM Wonderful, the maker of its own competing pomegranate juice drink, complained that, as Coca-Cola’s drink actually contained only 0.3 percent pomegranate and 0.2 percent blueberry juice, the label for it constituted false advertising. POM Wonderful therefore commenced an action under Section 43(a) of the Lanham Act, which provides that a company affected by allegedly false marketing claims may bring a civil action against the competitor or company which “misrepresents the nature, characteristics or qualities” of goods being sold.

Coca-Cola responded by noting that the product’s proper name was “Pomegranate Blueberry Flavored Blend of 5 Juices,” and arguing that the product and its label fully complied with the Food and Drug Administration’s laws and regulations. Thus, POM Wonderful’s Lanham Act false advertising claim must fail. Lower courts agreed, dismissing POM Wonderful’s action as a matter of law.

Undeterred, POM Wonderful appealed to the U.S. Supreme Court, which ultimately agreed. In an 8-0 decision (Justice Breyer recused himself), the Court reversed the lower courts’ dismissal of POM Wonderful’s false advertising suit, holding that while Coca-Cola’s juice label may technically comply with FDA rules, it may still be misleading to consumers for different reasons. Therefore, companies in regulated industries and fields are just as entitled to bring false advertising actions to stop competitors’ deceptive claims as are companies in unregulated industries.

In general, the Court’s decision is a potential boon for consumers by allowing challenges to deceptive advertising by competitors. The Court recognized that competitors often have greater awareness of unfair or deceptive trade practices, and, as held by Justice Kennedy, their perception thus “may be far more immediate and accurate than that of agency rulemakers and regulators.” By permitting competitors to bring Lanham Act false advertising claims, the opinion continued, consumers and markets benefit by “empowering private parties to sue competitors to protect their interests on a case-by-case basis.”

Going forward, advertisers should not complacently assume that they can avoid false advertising claims just because their products, labeling, and advertising comply with applicable government rules and regulations. All advertising and product claims, both explicit and implicit, must have proper substantiation before publication.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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Theodore H. Davis
 
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