NEW YORK (AdAge.com) -- A federal court has ruled the maker of baby formula Enfamil, Mead Johnson Nutrition, must pay $13.5 million in damages to competitor PBM Products for misleading consumers with a comparative ad campaign. The award is one of the largest to date for a false-advertising case.
PBM's suit, which was brought this past April, marks the third time the Gordonsville, Va., company -- which supplies store-brand infant formulas to major retailers like Walmart and Target -- has sued Mead Johnson for false-advertising claims.
In his decision, U.S. District Court Judge James Spencer wrote that the outcome of the case was the result of Mead Johnson choosing to run an attack ad campaign due to waning sales.
At issue were promotional materials Mead Johnson ran that stated things such as "There are plenty of other ways to save on baby expenses without cutting back on nutrition," and "It may be temping to try a less expensive store brand, but only Enfamil Lipil is clinically prove to improve brain and eye development." Also at issue was a direct mailer that went out to more than 1 million people showing a blurry picture of a cartoon duck juxtaposed with a clear picture of the same image to get across the idea that products not containing Enfamil's blend of ingredients are inferior and could cause poor eye and brain development.
"Mead Johnson consciously decided that its marketing should be more aggressive and risky as it witnessed a decrease in its sales and an increase in store-brand sales," Mr. Spencer wrote. The court order requires Mead Johnson to pull any ads or promotional material making claims about PBM's infant formula, and the company is enjoined from marketing in the future that suggest that PBM's infant formula is inferior.
A Mead Johnson spokesman didn't immediately respond to a request for comment.
"Mead Johnson's ads have been false in suggesting that there is a nutritional difference between our store-brand formula products and their products, when in fact the only major difference is price," PBM's CEO, Paul Manning, said in a statement. "This jury verdict should send a significant and clear message to Mead Johnson about the way it conducts marketing and advertising for its brands."
Publicis Groupe's Saatchi & Saatchi has long handled advertising for Mead Johnson Nutrition in several markets in Asia and Latin America, and recently it was awarded U.S. ad duties for Enfamil baby formula after a lengthy pitch.
Mead Johnson, which is in the process of splitting from parent Bristol Myers Squibb, has slightly increased its ad budget during the recession, to $283 million for the first nine months of 2009, from $276 million in the same period last year. Much of the spending increase was invested in the Asian and Latin American markets. The global market for infant formula is estimated at nearly $8 billion.
The PBM suit isn't the only problem Enfamil has run into with its advertising. Comparative claims that Enfamil contains certain nutrients for babies that other formulas don't resulted in action by the National Advertising Division of the Council of Better Business Bureaus, which took the matter to the Federal Trade Commission earlier this year for review. Other competitors, such as Abbott Laboratories, which markets its formula under the Similac brand, have also filed claims against the company.
Michael J. McSunas, a lawyer at Chambliss, Bahner & Stophel, in Chattanooga, Tenn., who isn't affiliated with the case, said the $13.5 million damages sum is "really high but understandable considering it was a jury award."
"Any issue that involves babies and possible harm to them is going to cause a strong visceral response from any jury," Mr. McSunas said. "I have a feeling that if we had the same jury but the advertisements were about hot dogs or beer, the verdict would be a lot lower. The lesson here is that it is usually better to settle than to roll the dice with a jury."