$137.8B U.S. ad spend for top 200 advertisers
The U.S. Supreme Court said Thursday that Pom Wonderful can take Coca-Cola to court for what Pom considers a misleading label, even though that label meets Food and Drug Administration regulations.
That will have far-reaching implications for marketers, according to observers.
The court ruled in favor of the pomegranate juice brand with an 8-0 vote, with one Justice recusing himself. Justice Anthony Kennedy delivered the opinion.
"From a marketing perspective, it's a disappointing decision," said Linda Goldstein, chair of the advertising, marketing and media division at Manatt Phelps & Phillips. "It opens the floodgates to increased litigation. The message to marketers is now that compliance with the FDA is only a first step and is by no means insurance against other types of claims."
Indeed, competitors will be more likely to use the Lanham Act, the federal basis for marketers' false-advertising claims against each other, for a variety of complaints.
"Historically marketers have turned to the Lanham Act when they've had concerns with advertising," Ms. Goldstein said. "It opens up a whole new realm of possibilities for competitors to sue one another based on labeling claims. It's another tool in the arsenal of brand wars."
Both a U.S. District Court in California and an appeals court had found that Pom could not use the Lanham Act, but in reversing that finding today, the Supreme Court said that the FDA's labeling requirements, the Lanham Act and the Federal Food Drug and Cosmetic Act, which prohibits the misleading branding of food and beverages, complement each other in the federal regulations of misleading labels.
Brett Heavner, a Partner at Finnegan, said the decision could also impact ad regulation handled by other agencies, such as the Federal Communications Commission and the Federal Deposit Insurance Corporation.
"Anyone hoping or thinking those regulations would preempt a Lanham Act claim are going to have a hard time. The Lanham Act protects a different sort of interest, the competitive interest," Mr. Heavner said, noting that the FDA protects consumer safety, for example. "[The decision] could, by analogy, affect regulatory schemes elsewhere in the government."
The case stems from a 2008 complaint by Pom that Coca-Cola had misled consumers with a Minute Maid pomegranate blueberry product that contained 0.3% pomegranate juice and 0.2% blueberry juice.
"We respect the Court's decision and remain committed to clear labeling that fully complies with FDA regulations," Coca-Cola said in a statement. "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, and the evidence at trial will show that our product was not the cause of Pom's poor sales."
Pom has not made its sales figures public, though during court proceedings for the initial lawsuit, it claimed sales had dropped because of Coca-Cola's product and others like it.