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Judge Rules in Powerade-Gatorade Court Battle, but Dispute Lives On

Court Dismisses PepsiCo Complaint Against Coca-Cola, Both Beverage Giants Declare Victory

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NEW YORK (AdAge.com) -- The bickering between beverage giants PepsiCo and Coca-Cola rages on, with each seeking to portray a federal judge's decision in a bitter and ongoing advertising dispute as a win.

Powerade is in the process of changing its labels to drop language that its product contains ingredients 'other sports drinks don't.'
Powerade is in the process of changing its labels to drop language that its product contains ingredients 'other sports drinks don't.'
The decision, issued this week by U.S. District Judge John Koeltl in New York, follows a heated courtroom hearing in June that pitted Pepsi's Gatorade brand against Coke's Powerade. At issue is a spring ad campaign from Powerade by its agency, New York-based Ammirati, that included striking billboards and print ads in ESPN The Magazine.

Coca-Cola, in that campaign, promoted Powerade Ion4 as a "complete sports drink," because it contains four electrolytes -- sodium, potassium, calcium and magnesium. Its main rival Gatorade contains only two electrolytes, sodium and potassium.

Judge Koeltl dismissed PepsiCo's request that Coca-Cola stop running the advertisements because they had already stopped running in May. In denying PepsiCo an injunction, the judge said that the beverage company had not shown "either a likelihood of irreparable injury or a likelihood of success on the merits."

Additionally, the judge ruled there was no merit to PepsiCo's complaints that Powerade's marketing slogan, "The Complete Sports Drink," implies Powerade Ion4 is more complete than Gatorade. "That is by no means a reasonable interpretation of the ads," he wrote.

Lemonade for Gatorade
Still, Pete Brace, a Gatorade spokesman, depicted the decision as a win. "We accomplished what we set out to do," he said. "When we filed our lawsuit, Powerade stopped its overtly disparaging claims against Gatorade in its advertising and told the court it is changing its labeling."

Powerade is in the process of changing its labels to drop language that its product contains ingredients "other sports drinks don't" and to clarify nutritional information to reflect that the drink is neither a significant source of calcium or magnesium. Coca-Cola stated that it expects bottles bearing the new label to begin appearing by mid-to-late August but notes that bottles of slower-selling sizes or labels might take longer to be replaced.

Powerade, meanwhile, maintains that it never intended to run the comparative phase of its campaign for longer than 60 days. A spokesman for Powerade told Ad Age the decision equates to a "home run" for Coca-Cola. While the brand will not be revisiting the comparative advertising campaign, the spokesman said the brand "will definitely continue to promote Powerade Ion4 as 'the' complete sports drink," rather than market it as merely a complete sports drink, as Pepsi had argued for.

The ad dispute isn't over yet; other claims in the case, which include unfair competition and trademark dilution, have yet to be resolved. But based on the 54-page decision Judge Koetl issued this week, sports-drink giant Gatorade has a high bar to prove its claims against underdog Powerade.

Lawyers for PepsiCo argued that their request for an injunction was not moot because of Coca-Cola's alleged record of embracing a "cheat and retreat" strategy, suggesting that its rival might revert to its comparative ad campaign.

Damage done?
Judge Koetl wrote that PepsiCo is unlikely to see success on its false-advertising claims, as it hasn't presented sufficient evidence that brand equity or sales of Gatorade have suffered or that Powerade's campaign has caused irreparable injury. He added that corrective advertising requests, such as the immediate removal of bottles with any offending labels, would cause hardship for Coca-Cola.

PepsiCo also argued that the Powerade ads have infiltrated the minds of consumers and primed them to interpret Powerade's current ads as communicating that Gatorade is incomplete, even though Gatorade is not mentioned in the current batch of ads. The judge was dismissive of that claim, saying it's not likely to succeed on its merit.

"Given [PepsiCo's] research capabilities and resources, its failure to present any concrete evidence of harm or likely harm is striking," Judge Koetl wrote.

Judge Koetl did find, however, evidence of possible misconduct on Coca-Cola's behalf when it chose to call Gatorade "incomplete" despite concerns voiced by Powerade scientist Dr. Eileen Madden. However, during the dramatic courtroom tussle earlier this summer, Dr. Madden testified that she didn't "stand on the table and shout against it, because there is no standard of identity for sports drinks like there is for something like infant formula. ... It's in the mind of the beholder whether a sports drink is complete or incomplete."

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