false advertising
Playing Chicken with the USDA
** Consumer Groups allege Chicken was laced with “Special K” in False Advertising Case ** 
By: Brent E. Johnson
The “Food Court” (aka the Northern District of California) has seen many unique lawsuits over the years, some of which we have reported on. Currently pending before the court is a must-watch dispute between Sanderson Farms Inc. (the #3 poultry producer in the U.S.) and three consumer and environmental non-profits — not only because of the bitter feud between the parties, but because of the fascinating intersection between a relatively unknown USDA program and its overseers and consumer expectations of what “100% Natural” means in the advertisement of meat products.
The battle began on June 22, 2017, when Organic Consumers Association, Friends of the Earth, and Center for Food Safety filed suit, on behalf of themselves and the general public, against Sanderson claiming that testing conducted by the Food Safety and Inspection Service (“FSIS”) of the United States Department of Agriculture (“USDA”) in 2015 and 2016 under the National Residue Program showed that Sanderson’s chicken “contain[s] residues of antibiotics important for human medicine, residues of veterinary antibiotics, and other pharmaceuticals, as well as residues of hormones, steroids, and pesticides.” Organic Consumers Association et al v. Sanderson Farms, Inc., No. 3:17-cv-03592-RS (N.D. Cal. June 22, 2017) Dkt. No. 1 at ¶ 2. The consumer watchdogs alleged that these chemicals are “not natural.” Id. at ¶ 5. Moreover, the alleged presence of the chemicals in Sanderson’s chicken meat “strongly indicate[s] that the birds are raised in intensive-confinement, agro-industrial conditions where cruelty is inherent,” which runs counter to consumer expectations that “All Natural” includes the concept that the chickens are “humanely raised.” Id. at ¶ 71.
Plaintiffs did not simply file a lawsuit, however. They launched a public opinion campaign against Sanderson. This effort included approaching large commercial purchasers of Sanderson’ poultry (Darden Restaurants, Olive Garden) to educate them concerning the company’s alleged practices in an effort to dissuade them from purchasing chicken raised with antibiotics.
Sanderson struck back with a motion to dismiss asserting that Plaintiffs lacked standing and their complaint was pre-empted by the Poultry Products Inspection Act (“PPIA”) and Federal Meat Inspection Act (“FMIA”). Dkt. No. 23 (August 2, 2017); Dkt. No. 32 (September 13, 2017). On February 9, 2018, the district court denied the motion. It dispatched with Sanderson’s standing argument, holding that the diversion of Plaintiffs’ resources from their core public interest mission [i.e., to protect consumers’ right to safe, pollutant free food] to combating the alleged misrepresentations by Sanderson was sufficient injury to confer organizational standing. Dkt. No. 48 at 6 – 7. On pre-emption, the court ruled that there was no express pre-emption and implied pre-emption was not mandated because “[a]llowing plaintiffs to proceed with their advertising claims in no way undermines the PPIA’s [and FMIA’s] objectives of ensuring that poultry products are ‘wholesome, not adulterated, and properly marked, labeled, and packaged.’” Id. at 9. When Sanderson pointed out that the “100% Natural” wording on its label was specifically approved by USDA (as is true with the labels for all meat, poultry, and fish in the U.S.), the court responded that “common sense suggests even ‘language that is technically and scientifically accurate on a label can be manipulated in an advertisement to create a message that is false and misleading to the consumer.’” Id.
It’s at this point that things got nasty. A quick bit of background: the Plaintiff non-profits obtained the testing data upon which they based their complaint from USDA via multiple Freedom of Information Act (“FOIA”) requests. According to the complaint, the test data revealed that FSIS conducted 69 inspections of Sanderson’s products in 2015-2016, and in 49 cases residue of synthetic drugs, antibiotics (including antibiotics for human use), and pesticides were found. Dkt. No. 1 at ¶ 2. The chemicals in some of the poultry tested were revelatory; for example, Ketamine – a Schedule III anesthetic used legally to induce a trance-like state at the beginning of general anesthesia and illegally (as “Special K,” “Cat Valium,” and “Jet”) as an hallucinogenic and date rape drug. There is, of course, no sane reason for poultry producers to slip Special K into their chickens’ water troughs. Plaintiffs produced this FSIS test results to Sanderson at the time they filed their successful opposition to the Company’s motion to dismiss. According to Sanderson, the results showed negative levels of residue for some 40 chemicals tested – an obvious impossibility. As for chemicals with positive test results, the levels were below the FSIS’s detection limits or Minimum Levels of Applicability (“MLA”). For example, at least some poultry tested positive for Ketoprofen (an NSAID) – but at a level (less than one part per billion) far below the minimum levels of detection established by USDA in its own testing protocol —20 parts per billion (for poultry kidney screening) or 5 parts per billion (for muscle screening). Dkt. No. 49 at 8.
Sanderson was surprised that the FSIS test results were the basis of Plaintiffs’ allegations because “Sanderson has consistently passed FSIS residue testing, which has shown no antibiotic residue or other contaminants in its chicken products, including on the very test dates and locations identified by Plaintiffs in their Complaint.” Dkt. No. 49 at 12. Sanderson’s surprise turned to apoplexy when it discovered that Plaintiffs communicated extensively with USDA and FSIS regarding the test results prior to filing the complaint and were told by the agency that the test results did not reflect the presence of the identified chemicals, but were “preliminary screening data” that had not been confirmed. Id. at 5.
Based on these facts, Sanderson filed a motion for Rule 11 sanctions against Plaintiffs stating that “[t]he problem with Plaintiffs’ storyline is that [its] allegations are entirely false—and Plaintiffs and their attorneys know it.” Id. at 5. In a rare move, USDA’s Office of General Counsel approved Sanderson submitting the declarations of two FSIS officials, Dr. J. Emilio Esteban, Executive Associate for Laboratory Services, and Mark R. Brook, a Government Information Specialist for FSIS, in support of Sanderson’s sanctions motion. Dr. Esteban’s declaration stated that in a teleconference with Plaintiffs’ attorneys, he explained that, in addition to the test results being “preliminary screening data,” “all of the findings in the screening tests . . . were ultimately confirmed as ‘non-detected.’” Dkt. No. 49, Ex. 1. Mr. Brooks swore in his declaration that, upon learning of the filing of the complaint, he spoke with a deputy director at FSIS who participated in conference calls with Plaintiffs and she opined that Plaintiffs’ “seemingly intentionally ignored the explanations of the FOIA data that the USDA/FSIS scientists had provided on the recent conference calls.” Dkt. No. 49, Ex. 2.
Plaintiffs’ opposition to the sanctions motion spends a significant portion of its page limit suggesting some sort of “undue influence” by Sanderson Farms over USDA. (“Sanderson has admitted to contacting USDA in autumn 2017, and perplexing events began to occur around the same time.”) Dkt. No. 55 at 6 – 7. That argument (if it is an argument) is likely to go nowhere. On the merits, Plaintiffs argue that Sanderson “conflat[es] regulatory standards with scientific standards” (which is a bit frightening, if one thinks about it). Id. at 13 – 14. Relatedly, Plaintiffs contend that the issue of the interpretation of the data it received from FSIS is a question for experts — not one to be resolved by the district court on a motion for sanctions. Id. at 15 – 16. Finally, Plaintiffs assert that Sanderson’s admitted use of antibiotics belies any notion that its poultry is “100% Natural” and suggests that its chickens “are not raised as portrayed in Sanderson advertising and referenced in the [complaint].” Id. at 16.
What is it about the living conditions that Plaintiffs argue runs contrary to Sanderson’s USDA approved “100% Natural” label? For Sanderson’s answer, one can consult Bob and Dale, the Sanderson spokesmen in their “The Truth About Chicken” advertising campaign”. What Bob and Dale want you to know is that FDA has never approved the use of steroids or hormones in chickens and USDA does not allow poultry meat to be sold if it is not clear of antibiotics. Therefore, any company that labels its poultry products as “hormone free” or “antibiotic free” in the United States is akin to Ford advertising that its cars and trucks have wheels. It’s a redundancy. While Plaintiffs argue that these advertisements are false and misleading — and assuming that Sanderson and the FSIS officials who submitted declarations are correct that the company’s poultry meat does not contain the chemicals alleged in the complaint — the case seems to boil down to the claim that, for a chicken to be “100% Natural,” a veterinarian can never have administered antibiotics to it (irrespective of whether the antibiotics are present at the time of sale).
The hearing on Sanderson’s motion for sanctions is set for April 5, 2018. Rule 11 motions are notoriously difficult to win. But in this case, Plaintiffs will be arguing that not only should the USDA’s approval of the Company’s “100% Natural” label be disregarded (as the court has already determined), but the USDA’s interpretation of its own test data as well. It will be interesting to see if USDA has anything further to say on those issues.
Supreme Court Skips on Ascertainability
** High Court Won’t Weigh in on Whether “All Natural” Class Requires Ascertainability **
By: Brent E. Johnson
In federal court, Civil Procedure Rule 23 governs the question of whether a class may be certified. The rule specifically identifies four primary requirements for certification: numerosity, commonality, typicality and adequacy. But many courts have added a further requirement – whether the putative class is “ascertainable.” While the question posed by this requirement is phrased differently from court to court, it can be distilled to this: Is there a reasonable and reliable way to identify the members of the proposed class? The Ninth Circuit recently rejected the application of this standard. And, on request for certiorari, the Supreme Court has refused to weigh in on this important issue.
Many federal courts were quick to adopt the ascertainability standard after it found its way into case law, particularly some of the district courts of California, which bear the brunt of the dramatic rise in consumer class actions. See, e.g., Lukovsky v. San Francisco, No. C 05–00389 WHA, 2006 WL 140574, *2 (N.D.Cal. Jan. 17, 2006) (“‘Although there is no explicit requirement concerning the class definition in FRCP 23, courts have held that the class must be adequately defined and clearly ascertainable before a class action may proceed”) (quoting Schwartz v. Upper Deck Co., 183 F.R.D. 672, 679–80 (S.D.Cal.1999)); Thomas & Thomas Rodmakers, Inc. v. Newport Adhesives & Composites, Inc., 209 F.R.D. 159, 163 (C.D.Cal.2002) (“Prior to class certification, plaintiffs must first define an ascertainable and identifiable class. Once an ascertainable and identifiable class has been defined, plaintiffs must show that they meet the four requirements of Rule 23(a), and the two requirements of Rule 23(b)(3)” (citation and footnote omitted)). Generally speaking, a class is sufficiently defined and ascertainable if it is “administratively feasible for the court to determine whether a particular individual is a member.” O’Connor, 184 F.R.D. at 319.
The ascertainability rule appeals to common sense – particularly in consumer class actions. Courts don’t want to certify classes without some reasonable assurance that aggrieved class members will be compensated for the wrong they suffered. Equally important, courts don’t want to create vehicles for petty fraud. As the court observed in Sethavanish v. ZonePerfect Nutrition Co., No. 12–2907–SC, 2014 WL 580696, *56 (N.D.Cal. Feb. 13, 2014), “Plaintiff has yet to present any method for determining class membership, let alone an administratively feasible method. It is unclear how Plaintiff intends to determine who purchased ZonePerfect bars during the proposed class period, or how many ZonePerfect bars each of these putative class members purchased. It is also unclear how Plaintiff intends to weed out inaccurate or fraudulent claims. Without more, the Court cannot find that the proposed class is ascertainable.”
In In re ConAgra Foods, Inc., 90 F. Supp. 3d 919, 969 (C.D. Cal. 2015), consumers brought a putative class action against Con Agra, alleging that the manufacturer deceptively and misleadingly marketed its cooking oils, made from genetically-modified organisms (GMO), as “100% Natural.” A class was certified , inter alia, on the basis that the proposed class was ascertainable. The District Court held that: (i) ascertainability was the law of the Circuit; and (ii) ascertainability was satisfied because membership was governed by a single, objective, criteria – whether an individual purchased the cooking oil during the class period. Id. at 969.
ConAgra, understandably unhappy with the result, appealed the factual basis for the district court’s ascertainability determination. It argued before the Ninth Circuit that plaintiffs did not propose any way to identify class members and could not prove that an administratively feasible method existed for doing so – because, for example, consumers do not generally save grocery receipts and are unlikely to remember details about individual purchases of cooking oil. Briseno v. ConAgra Foods, Inc., 844 F.3d 1121, 1125 (9th Cir. 2017). The Ninth Circuit, however — rather than analyzing whether the plaintiffs satisfied the ascertainability standard — ruled that it has no place in certification proceedings at all. “A separate administrative feasibility prerequisite to class certification is not compatible with the language of Rule 23 . . . Rule 23’s enumerated criteria already address the policy concerns that have motivated some courts to adopt a separate administrative feasibility requirement, and do so without undermining the balance of interests struck by the Supreme Court, Congress, and the other contributors to the Rule.” In short, according to the Ninth Circuit, Rule 23 does not mandate that proposed classes be ascertainable and the lower courts are bound to apply Rule 23 as written.
In so ruling, the Ninth Circuit joined the Sixth, Seventh, and Eighth Circuits. See Sandusky Wellness Ctr., LLC, v. Medtox Sci., Inc., 821 F.3d 992, 995–96 (8th Cir. 2016); Rikos v. Procter & Gamble Co., 799 F.3d 497, 525 (6th Cir. 2015); Mullins v. Direct Digital, LLC, 795 F.3d 654, 658 (7th Cir. 2015), cert. denied, ––– U.S. ––––, 136 S.Ct. 1161, 194 L.Ed.2d 175 (2016). On the opposite side of the ascertainability issue are the Third, Fourth and Eleventh Circuits. Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 593 (3d Cir. 2012); EQT Production Co. v. Adair, 764 F.3d 347, 359 (4th Cir. 2014); Karhu v. Vital Pharm., Inc., — F. App’x —, 2015 WL 3560722 at *3 (11th Cir. June 9, 2015).
ConAgra petitioned the Supreme Court to grant a writ of certiorari on May 10, 2017. It had reason to hope with the Supreme Court recently showing willingness to rule on class action and certification issues. (See prior posts). However, on October 10, 2017, the Supreme Court denied the petition without comment. Conagra Brands, Inc. v. Briseno, No. 16-1221, 2017 WL 1365592 (U.S. Oct. 10, 2017).
With the circuit split still alive, this is not the last we’ll hear on ascertainability. And no doubt defense counsel in affected jurisdictions will find ways to re-shape the reasoning applied in their ascertainability arguments to other parts of the Rule 23 analysis. But, no doubt, with this line of defense gone (for now) in the Ninth Circuit – many more consumer class actions will have their day in California courts.
Is Coconut Oil “Healthy”?
** What are Courts Making of the Plentiful Health Claims Made About Coconut Oil? **
By: Brent E. Johnson
Coconut products are taking an increasingly prominent place in the health food aisles – the shelves are stocked with everything from coconut water to coconut milk to coconut flour. In particular, the last decade has seen the re-emergence of coconut oil (helped by a platoon of celebrity endorsers) as a health food staple. Many marketers have touted coconut oil as a “healthy alternative” to other types of cooking oils. Litigation relating to coconut oil health claims has followed in the last twelve months. The claims made in such lawsuits follow two main themes. First, that coconut oil is inherently unhealthy – and to advertise otherwise is misleading. And second, that health claims made with respect to coconut oil violate specific FDA regulations regarding the term “healthy.”
As to the first claim, it is not particularly controversial that low density lipoproteins (LDL) cholesterol — the so called “bad” cholesterol — contributes to fatty buildup in arteries raising the risk for heart attack, stroke and peripheral artery disease. There also appears to be no question that saturated fats cause the human body to produce excess LDL’s – and that coconut oil is about 90% saturated fat (which is a higher percentage than butter (about 64% saturated fat), beef fat (40%), or even lard (also 40%)). What is unclear is whether all saturated fats are equally “bad” – as some studies suggest that coconut oil’s particular type of saturated fat (medium-chain triglycerides (MCTs)) actually aids in weight loss and helps lower blood cholesterol levels. The science behind these benefits is unsettled.
As to the second question, FDA regulates “nutrient content claim[s].” As we have blogged about in the past, in order to “use the term ‘healthy’ or related words (e.g., ‘health,’ ‘healthful,’ ‘healthfully,’ ‘healthfulness,’ ‘healthier,’ ‘healthiest,’ ‘healthily,’ and ‘healthiness’)” as nutrient content claims, the food must satisfy specific “conditions for fat, saturated fat, cholesterol, and other nutrients.” 21 C.F.R § 101.65(d)(2). Specifically, under 21 C.F.R. § 101.65(d)(2)(i)(F), to make a “healthy” claim, the food must (1) be “’Low fat’ as defined in § 101.62(b)(2),” (2) be “’Low [in] saturated fat’ as defined in § 101.62(c)(2),” and (3) contain “[a]t least 10 percent of the RDI or the DRV per RA of one or more of vitamin A, vitamin C, calcium, iron, protein or fiber.” See 21 C.F.R. § 101.65(d)(2)(i)(F). Section 101.62(b)(2)(i)(B) provides the applicable definition of “low fat” for coconut oil products because it has a “Reference Amount Customarily Consumed” (RACC) of less than 30 grams. Under § 101.62(b)(2)(i)(B)’s definition, a food is low fat only if it “contains 3 g or less of fat per reference amount customarily consumed and per 50 g of food.” Under 21 C.F.R. § 101.62(c)(2), a food is “low saturated fat” only if it “contains 1 g or less of saturated fatty acids per (RACC) and not more than 15 percent of calories from saturated fatty acids.” There is very little argument that coconut oil does not meets these metrics. It is not low in fat or low in saturated fat under the FDA’s definitions. But is a general claim of healthfulness on a label a claim about its “nutrient content” – or is it a more generic statement regarding the product overall?
These claims have been made numerous times in recent class actions against coconut oil companies. The facts are not always identical — in some cases the product’s label explicitly states the product is “healthy,” in others the labels use more diffuse terms such that the product is a “superfood” or “nutritious,” and in other cases “healthfulness” is implied by the context of the advertising as a whole. In any case, to date no court has adjudicated the underlying questions raised. The first set of questions revolve around the issue of whether or not coconut oil’s saturated fats are inherently unhealthful? In answering that question, what does “healthy” even mean in the context of cooking oil? Does it mean that there is a complete absence of anything harmful? Does it mean that it is going to make you live longer – or just that it is not going to kill you? Or somewhere in between? Does context play a part here? Would a consumer be cognizant that fats, such as oils, may be healthy in limited ways, but are not if consumed in certain forms or in certain quantities? Is advertising healthy cooking oil different, say, to advertising healthy vitamin supplements? The second unresolved issue is whether claims made on a label about health benefits “nutrition” claims as that term is used in FDA regulations? In Hunter v. Nature’s Way Prod., LLC, No. 16CV532-WQH-BLM, 2016 WL 4262188, at *1 (S.D. Cal. Aug. 12, 2016), the District Court held that these questions could not be definitively answered by defendants on a motion to dismiss and so the case has continued to the class certification stage. The District Court in Jones v. Nutiva, Inc., No. 16-CV-00711-HSG (KAW), 2016 WL 5387760 (N.D. Cal. Aug. 23, 2017), held the same, noting that concepts like “health” and “nutrition” are “difficult to measure concretely” but that the court would not “give the defendant the benefit of the doubt by dismissing the statement as puffery” when the context of the advertising and labeling plays into the analysis of the health claims. This case is also headed towards a certification decision with a motion hearing set for early 2018. Likely, these same questions will raise their heads again on certification briefing, i.e., Is “healthfulness” such an amorphous concept that there is no commonality amongst the class?
In Zemola v. Carrington Tea Co., No. 3:17-cv-00760 (S.D. Cal), defendants have taken a different tact – they have moved for a primary jurisdiction stay of their case based on the pending FDA regulatory proceedings to redefine the term “healthy” in the labeling of food products. As discussed in a prior post, in September 2016, FDA issued a guidance document (Guidance for Industry: Use of the Term “Healthy” in the Labeling of Human Food Products) stating that FDA does not intend to enforce the regulatory requirements for products that use the term healthy if the food is not low in total fat, but has a fat profile makeup of predominantly mono and polyunsaturated fats. FDA also requested public comment on the “Use of the Term “Healthy” in the Labeling of Human Food Products.” Comments were received from consumers and industry stakeholders, reaching 1,100 before the period closed on April 26, 2017. FDA has not provided a timeline as to when revisions to the definition of “healthy” might occur following these public comments. The Zemola Court has yet to rule on the request for a stay.
A number of coconut oil cases have settled. See James Boswell et al. v. Costco Wholesale Corp., No. 8:16-cv-00278 (C.D. Cal) ($775,000 coconut oil settlement based on “healthy” labelling); Christine Cumming v. BetterBody Food & Nutrition LLC, Case No. 37-2016-00019510-CU-BT-CTL (San Diego Sup. Ct) ($1 million settlement).
No Love from FDA
**FDA Warns Bakery it Cannot Label “Love” As An Ingredient **
By: Brent E. Johnson
A warning letter published by the Food & Drug Administration and issued to Massachusetts-based Nashoba Brook Bakery highlights that FDA has little tolerance for eccentricity when it comes to labelling compliance. According to the letter, Nashoba sold granola with labeling that said that one of the ingredients was “love.” Charming as that may be, FDA was not impressed, writing that “Ingredients required to be declared on the label or labeling of food must be listed by their common or usual name . . . ‘Love’ is not a common or usual name of an ingredient, and is considered to be intervening material because it is not part of the common or usual name of the ingredient.” It is not clear whether FDA was inspired by 2016 research that found that study participants rated identical food as superior in taste and flavor if they were told it was lovingly prepared using a family-favorite recipe. We’ll see if there are any repercussions to the bakery from the FDA Love Letter – other than the free publicity it garnered.
For those who follow our blog, you’ll recall we have written in the past about KIND®, who was also on the receiving end of a not so kind letter asking the company to remove any mention of “healthy” from its packaging and website. Notably, later in 2016, the FDA had a change of heart – on April 22, 2016 emailing Kind informing the company that it could return to its “healthy” language – as long as the use of “healthy” is in relation to its “corporate philosophy,” and not a “nutrient claim” (the latter being the statutory predicate under 21 C.F.R. § 101.65). Unfortunately for Kind, the 2015 letter prompted a suite of lawsuits. A number were filed in California: Kaufer v. Kind LLC., No. 2:15-cv-02878 (C.D. Cal), Galvez v. Kind LLC., No. 2:15-cv-03082 (C.D. Cal); Illinois and New York: Cavanagh v. Kind, LLC., 1:15-cv-03699-WHP (S.D.N.Y.), Short et al v. Kind LLC, 1:15-cv-02214 (E.D.N.Y). Ultimately, a multi-district panel assigned the case to the Southern District of New York (In Re: Kind LLC “Healthy” and “All Natural” Litigation, 1:15-md-02645-WHP). The cases in large part were voluntarily withdrawn after FDA sent its April 22, 2016 “change of heart” email.
That said, plaintiffs in the MDL case also made claims that Kind Bars are not “All Natural.” The Court stayed the “All Natural” component of the action pending FDA’s consideration of the term under the primary jurisdiction doctrine. Dkt. No. 83 (see also our previous post on primary jurisdiction “all natural cases.”) Plaintiffs have recently sought to lift the stay, arguing that FDA is taking too long. Dkt. No. 109. Plaintiffs have also amended their “All Natural” claims to encompass the additional question of whether Kind’s “Non-GMO” statements comport with state GMO laws. Kind responded by arguing that such state law claims are preempted by the National Bioengineered Food Disclosure Standard, Pub. L. 114-216 (“National GMO Standard”) (7 U.S.C. § 1639i). Dkt. No. 101. The Court has heard oral argument on the GMO preemption issue and the lifting of the stay, but is yet to rule on either.
Splitting Hairs Over Milk
** Class Actions Dismissed (and Stayed) on Question of Who Can Call Their Product Milk **
By: Brent E. Johnson
As anyone who has watched “Meet the Parents” knows, “milk” has traditionally been applied to mammalian products. Recently, however, the term has been expanded to describe a wide range of non-dairy products such as liquids partially derived from almonds, oats, soy, rice, and cashews. Can these products rightly be called “milk”? Plaintiffs’ attorneys in California have decided to put that question to the test. In Kelley v. WWF Operating Co., No. 1:17-CV-117-LJO-BAM, (E.D. Cal), plaintiffs based their suit on Food and Drug Administration (FDA) regulations dealing with “imitation” foods – defined by FDA as a food which “act[s] . . . [a]s a substitute for and resembles another food but is nutritionally inferior to that food.” 21 C.F.R. § 101.3 (e)(1). Under these regulations, an imitation food must be clearly labelled (in a type of uniform size and prominence to the name of the food imitated) with the word “imitation.” 21 C.F.R. § 101.3 (e). Otherwise, the product is “misbranded” under section 403(c) of the Food, Drug, and Cosmetic Act. In Kelly, plaintiffs alleged that WWF’s Silk Almond Milk beverages should have been labelled with the “imitation” nomenclature because they are not “milk” and (in some respects) are nutritionally inferior.
Defendant responded with a motion to dismiss, arguing that no reasonable customer would be misled by the use of the term “almond milk” on its products because the consuming public knows exactly what it is getting – what Merriam-Webster Dictionary defines as “a food product produced from seeds or fruit that resembles and is used similarly to cow’s milk.”
The Kelly case follows a broader, and as yet unresolved, public debate on this definition. Indeed, there’s a war over the definition of milk. Both the House and Senate are currently contemplating versions of the Defending Against Imitations and Replacements of Yogurt, Milk and Cheese to Promote Regular Intake of Dairy Everyday (DAIRY PRIDE) Act (H.R.778 House Version) (S.130 Senate Version). The bills are sponsored by senators and congressmen from dairy rich states (Sen. Tammy Baldwin (D-WI) and Rep. Peter Welch (D-VT)). The House bill included five original co-sponsors: Rep. Michael Simpson (R-ID); Rep. Sean Duffy (R-WI); Rep. Joe Courtney (D-CT); Rep. David Valadao (R-CA); and Rep. Suzan DelBene (D-WA). If enacted, the bills would amend the Food, Drug, and Cosmetic Act to prohibit the sale of any food using the market name of a dairy product that is not the milk of a hooved animal, is not derived from such milk or does not contain such milk as a primary ingredient. As supporters of the bills have observed (summed up by a quote from the Holstein Association USA): “After milking animals for 40 years I’ve never been able to milk an almond.”
FDA has not stepped into the fray even though it has been petitioned to do so. In March 2017, FDA received a Citizen Petition from the Good Food Institute requesting it promulgate “regulations clarifying how foods may be named by reference to the names of other foods” and specifically requesting, among other things, that FDA issue regulations that would permit plant-based beverages to be called “milk.” On the other side, the National Milk Producers Federation (NMPF) wrote in a letter addressed to the FDA and sent on August 29th that the application of dairy-related terms like “milk” to market plant-based beverages creates consumer confusion in the marketplace.
In Kelly, the Court was not troubled by FDA’s inaction. It found that, because FDA was “poised” to consider the question raised by this suit (although it has never said as much), it was “on their radar,” and therefore FDA should have the opportunity to decide the question, itself. Under the Primary Jurisdiction Doctrine – which we have blogged about in the past – the Court stayed the matter indefinitely. Kelley v. WWF Operating Co., No. 1:17-CV-117-LJO-BAM, 2017 WL 2445836, at *6 (E.D. Cal. June 6, 2017).
In a similar case filed against Blue Diamond in California state court but transferred to the U.S. District Court for the Central District, the defendant was successful on its motion to dismiss. Painter v. Blue Diamond Growers, No. 1:17-CV-02235-SVW-AJW, (C.D. Cal. May 24, 2017). In that case, Judge Wilson held that it was completely implausible that there was consumer confusion. Judge Wilson held that “Almond milk” accurately describes defendant’s product. See Ang v. Whitewave Foods Co., No. 13-CV-1953, 2013 WL 6492353, at *3 (N.D. Cal. Dec. 10, 2013) (finding as a matter of law that no reasonable consumer would confuse soymilk or almond milk for dairy milk); Gilson v. Trader Joe’s Co., No. 13-CV-01333-WHO, 2013 WL 5513711, at *7 (N.D. Cal. Oct. 4, 20 13) (finding at the pleading stage that no reasonable consumer would believe that a product labeled Organic Soy Milk, including the explicit statement that it is “LACTOSE & DAIRY FREE”, has the same qualities as cow’s milk). Quoting from the Ang court, Judge Wilson reasoned that a reasonable consumer knows veggie bacon does not contain pork, that flourless chocolate cake does not contain flour, and that e-books are not made out of paper. Judge Wilson also held that plaintiff’s case would create a de facto labelling standard using state law that was stricter than the FDCA requirement and, therefore the case was preempted. See also Gilson v. Trader Joe’s Co., No. 13-CV-01333-VC, 2015 WL 9121232, at *2 (N.D. Cal. Dec. 1, 20 15) (finding state law claims against the use of the term “soymilk” preempted by the FDCA).
Plaintiffs in the Painter case have appealed to the Ninth Circuit. Painter v. Blue Diamond Growers, No. 17-55901 (9th. Cir. June 26, 2017). We’ll keep you updated on the progress of the case.
FYI on ECJ
** In the Wake of FDA’s Guidance, Evaporated Cane Juice Cases Continue . . . . **
By: Brent E. Johnson
As we have blogged about in the past the Food and Drug Administration (FDA) issued guidance in 2016 that it is false or misleading to describe sweeteners made from sugar cane as “evaporated cane juice” (ECJ). Guidance for Industry: Ingredients Declared as Evaporated Cane Juice.
It is common knowledge that cane sugar is made by processing sugar cane – crushing the cane to extract the juice, evaporating that juice, and crystalizing the syrup that remains. To make white sugar, the crystals undergo additional crystallization to strip out molasses. The primary difference between standard white sugar and the product known as ECJ is that the latter skips the second crystallization process. ECJ is sold as a standalone product (e.g., in health food stores) and since the early 2000’s has been introduced as a white sugar substitute in products such as yogurt and lemonade.
The plaintiffs’ bar alleges that ECJ is identical to refined sugar from a nutrient and caloric standpoint and, therefore, food labelling using the term ECJ misleads health-conscious consumers into thinking it is a better sweetener option (or not sugar at all). Defendants respond that ECJ is precisely what it says — the evaporated juice from the cane of the sugar plant — and is therefore a wholly accurate term to describe a type of sweetener that is made from sugar cane but undergoes less processing than white sugar. See e.g., Morgan v Wallaby Yogurt Company, No. CV 13-0296-CW, 2013 WL 11231160 (N.D. Cal, April 8, 2013) (Mot. to Dismiss).
FDA regulations are implicated in this controversy because they prohibit the use of an ingredient name that is not the “common or usual name” of the food. 21 CFR 101.3 (b) & (d). The common or usual name of a food or ingredient can be established by common usage or by regulation. In the case of “sugar,” FDA regulations establish that sucrose obtained by crystallizing sugar cane or sugar beet juice that has been extracted by pressing or diffusion, then clarified and evaporated, is commonly and usually called “sugar.” 21 CFR 101.4(b)(20). The question for the FDA in 2016 when it was considering its ECJ Guidelines, therefore, was whether ECJ fits under this definition and therefore should be identified by the common or usual name – sugar. This question was complicated by FDA’s heavy regulation of the term “juice,” which is also defined in the federal register. 21 CFR 101.30.
On October 7, 2009, FDA first stepped into the ECJ fray, publishing a draft guidance entitled “Guidance for Industry: Ingredients Declared as Evaporated Cane Juice” (74 FR 51610) to advise the relevant industries of FDA’s view that sweeteners derived from sugar cane syrup should not be declared on food labels as “evaporated cane juice” because that term falsely suggests the sweetener is akin to fruit juice. On March 5, 2014, FDA reopened the comment period for the draft guidance seeking further comments, data, and information (79 FR 12507). On May 25, 2016, FDA updated this guidance (81 FR 33538), superseding the 2009 version, but not changing its position that it is false or misleading to describe sweeteners made from sugar cane as ECJ. FDA reasoned that the term “cane juice”— as opposed to cane syrup or cane sugar—calls to mind vegetable or fruit juice, see 21 CFR 120.1(a), which the FDA said is misleading as sugar cane is not typically eaten as a fruit or vegetable. As such, the FDA concluded that the term “evaporated cane juice” fails to disclose that the ingredient’s “basic nature” is sugar. 2016 Guidance, Section III. As support, FDA cited the Codex Alimentarius Commission — a source for international food standards sponsored by the World Health Organization and the United Nations. FDA therefore advised that “‘evaporated cane juice’ is not the common name of any type of sweetener and should be declared on food labels as ‘sugar,’ preceded by one or more truthful, non-misleading descriptors if the manufacturer so chooses.” 2016 Guidance, Section III.
Bear in mind that FDA guidance is not binding on courts and, in and of itself, does not create a private right of action. 21 U.S.C. § 337(a) (“[A]ll such proceedings for the enforcement, or to restrain violations, of [the FDCA] shall be by and in the name of the United States”); see POM Wonderful LLC v. Coca-Cola Co., 573 U.S. ___ (2014); Buckman Co. v. Pls.’ Legal Comm., 531 U.S. 341, 349 n.4 (2001); Turek v. Gen. Mills, Inc., 662 F.3d 423, 426 (7th Cir. 2011); see also Smith v. U.S. Dep’t of Agric., 888 F. Supp. 2d 945, 955 (S.D. Iowa 2012) (holding that there is no private right of action under USDA statute). In false advertising cases, the governing test is what consumers, themselves, think – not what FDA thinks. For example, in Mason v. Coca-Cola Co., plaintiffs alleged that “Diet Coke Plus” was misleading because the word “Plus” implied the product was “healthy” under FDA regulations. 774 F. Supp. 2d 699 (D.N.J. 2011). The court begged to differ: “At its core, the complaint is an attempt to capitalize on an apparent and somewhat arcane violation of FDA food labeling regulations . . . not every regulatory violation amounts to an act of consumer fraud . . . . It is simply not plausible that consumers would be aware of [the] FDA regulations [plaintiff relies on].” Id. at 705 n.4; see also Polk v. KV Pharm. Co., No. 4:09-CV-00588 SNLJ, 2011 WL 6257466, at *7 (E.D. Mo. Dec. 15, 2011); In re Frito-Lay N. Am., Inc. All Natural Litig., No. 12-MD-2413 RRM RLM, 2013 WL 4647512, at *15 (E.D.N.Y. Aug. 29, 2013) (“[T]he Court [cannot] conclude that a reasonable consumer, or any consumer, is aware of and understands the various federal agencies’ views on the term natural.”) That said, while FDA’s guidance is not alone dispositive – it certainly lends weight to the question of what a consumer’s state of mind would be with respect to the question of false and misleading labelling.
In the interim between FDA opening up public comment in 2014 on the ECJ question and its release of the 2016 guidance, many cases on this issue were stayed awaiting the outcome of FDA’s deliberations (based on the primary jurisdiction doctrine). Saubers v. Kashi Co., 39 F. Supp. 3d 1108 (S.D. Cal. 2014) (primary jurisdiction invoked with respect to “evaporated cane juice” labels) (collecting cases) see, e.g., Gitson, et al. v. Clover-Stornetta Farms, Inc., Case No. 3:13-cv-01517-EDL (N.D. Cal. Jan. 7, 2016); Swearingen v. Amazon Preservation Partners, Inc., Case No. 13-cv-04402-WHO (N.D. Cal. Jan. 11, 2016). With that guidance published, the stayed suits are now set to proceed. And, as to be expected, many new cases have been filed over ECJ labeling. Notably, complaints have been filed far away from the traditional “food court” in the Northern District of California. For example, more than a dozen ECJ cases have recently been filed in St. Louis – the targeted defendants include manufacturers of Pacqui Corn Chips (Dominique Morrison v. Amplify Snack Brands Inc., No. 4:17-cv-00816-RWS (E.D. Mo.) and Bakery on Main Granola (Callanan v. Garden of Light, Inc., No. 4:17-cv-01377 (E.D. Mo.)
Where are courts landing on the ECJ question?
In Swearingen v. Santa Cruz Natural, Inc., No. 13-cv-04291 (N.D. Cal.), a complaint was filed on September 16, 2013, stating that plaintiffs were health-conscious consumers who wish to avoid “added sugars” and who, after noting that “sugar” was not listed as an ingredient, were misled when they purchased Santa Cruz Lemonade Soda, Orange Mango Soda, Raspberry Lemonade Soda, and Ginger Ale Soda which contained ECJ. On July 1, 2014, the matter was stayed by Judge Illston pursuant to the primary jurisdiction doctrine. The stay was lifted in June 2016 following a status conference noting the FDA’s final guidance on ECJ – and thereafter supplemental briefing on Santa Cruz’s motion to dismiss was considered. The Court issued its order on August 17, 2016 (2016 WL 4382544), refusing to dismiss under Rule 12, noting the following:
- Products not purchased. Santa Cruz argued that plaintiffs had not claimed to have personally purchased every single beverage referred to in the complaint and therefore lacked standing as to those products. Judge Illston, however, sided with those courts that have concluded that an actual purchase is not required to establish injury-in-fact under Article III, but rather, that when “plaintiffs seek to proceed as representatives of a class . . . ‘the critical inquiry seems to be whether there is sufficient similarity between the products purchased and not purchased.” 2016 WL 4382544 at *8 (quoting Astiana v. Dreyer’s Grand Ice Cream, Inc., 2012 WL 2990766, at *11 (N.D. Cal. July 20, 2012). Because all of the fruit beverages at issue were of the same type of food product, Judge Illston concluded the plaintiffs had standing for all of them.
- Ingredient Lists. Santa Cruz also argued that plaintiffs could not meet the “reasonable consumer” test of the California consumer protection statutes because it was implausible that a consumer would read the mandatory Nutrition Facts label immediately adjacent to the impugned ingredient list – which clearly identified the product as having 29 grams of sugar — and conclude that it did not contain added sugar. Judge Illston noted that she had “some reservations as to whether a reasonable consumer would be misled as regarding added sugars in the Lemonade Soda and Ginger Ale Soda” – whose 35 grams and 32 grams of sugar, respectively, were unlikely to occur naturally in ginger root or lemon juice. She found that the other sodas were closer calls (a reasonable consumer might conclude that the 29 grams of sugar in the Orange Mango Soda, for example, occurred naturally in the orange juice and mango puree listed as ingredients). Nonetheless, she concluded the question of whether a reasonable consumer would have been misled was a question better decided by a jury and on that basis could not be dismissed under Rule 12.
The matter was thereafter voluntarily withdrawn on May 5, 2017, prior to certification. One can reasonably assume the withdrawal was the result of settlement – but because the settlement was pre-certification pursuant to Federal Rule 23(e) and was not a class action resolution — no notice or court oversight was required.
In a similar case involving Steaz flavored ice teas, Swearingen v. Healthy Beverage, LLC, No. 13-CV-04385-EMC (N.D. Cal.), the complaint was filed on September 20, 2013, and followed the same allegations of the Santa Cruz case. On June 11, 2014, Judge Chen stayed the matter pursuant to the primary jurisdiction doctrine. The stay was lifted on July 22, 2016, and on October 31, 2016, Healthy Beverage moved to dismiss. The Court ruled on the motion on May 2, 2017, finding for the defendant.
Website Disclosure. Judge Chen found (in some respects) the opposite of Judge Illston in the Santa Cruz case on this issue of whether disclosure of the sugar content in the product negates whatever confusion may arise from ECJ labelling. Healthy Beverage argued that, because it stated on its website [but not on its packaging] that “cane juice is natural sugar,” and plaintiffs’ counsel acknowledged that the plaintiffs “may have looked” at the website, , plaintiffs could not have been under any illusions that ECJ is anything but sugar. Plaintiffs’ counsel at the motion hearing answered that plaintiffs “did not focus” on that information on the website. Judge Chen did not consider this qualification sufficient,, finding that whether or not the plaintiffs “focused” on Healthy Beverage’s disclosure, they conceded that they read it and, therefore, reliance on the packagaging’s ECJ label was not reasonable.
Reese v. Odwalla, Inc., No. 13-CV-00947-YGR (N.D. Cal.) followed the same path as the previous two cases – a Complaint filed in 2013, stayed in 2014, and revived in 2016 after FDA released its ECJ guidance. The product is Coca-Cola’s Odwalla brand smoothies and juices labelled with ECJ. On October 10, 2016, a motion to dismiss was filed by Odwalla that the Court ruled on in February of 2017:
Premption: The crux of Odwalla’s motion to dismiss was express federal preemption. Odwalla argued that, where the FDCA provides that “no State . . . may directly or indirectly establish under any authority . . . any requirement for a food . . . that is not identical to such standard of [the FDCA]” (21 U.S.C. § 343-1(a)(1)) and the FDA’s guidance on the use of the term ECJ only became final in August 2016, there were no laws prohibiting the use of ECJ prior to the issuance of the 2016 Final Guidance. Thus, the retroactive imposition of such prohibition would amount to an imposition of non-identical labeling requirements and would therefore be preempted (citing to Wilson v. Frito-Lay N. Am., Inc., 961 F. Supp. 2d 1134, 1146 (N.D. Cal. 2013) (finding that retroactive application of FDA’s clarification of an ambiguous regulation would offend due process); Peterson v. ConAgra Foods, Inc., No. 13-CV-3158-L, 2014 WL 3741853, at *4 (S.D. Cal. July 29, 2014) (finding that federal law preempted state claims based on labels prior to FDA’s clarification of labeling requirements). Judge Rogers rejected this argument, noting that neither the 2009 Draft Guidance nor the 2016 Final Guidance announced a new policy or departure from previously established law. Judge Rogers reasoned that FDA merely confirmed that ECJ fits the definition of sucrose under the regulations, and, therefore, needs to be labeled as “sugar.” Thus, the Court found that the State law claims did not contradict Federal law and were not preempted. This same preemption argument was also rejected in Swearingen v. Late July Snacks LLC, No. 13-CV-04324-EMC, 2017 WL 1806483, at *8 (N.D. Cal. May 5, 2017).
Healthy Conscious
** FDA Updating Requirements for “Healthy” Claims on Food Labeling **
By: Brent E. Johnson
One of the trending areas we have blogged about last year was “healthy” claims in food labelling becoming the new “all natural” target; see Hunter v. Nature’s Way Prod., LLC, No. 16CV532-WQH-BLM, 2016 WL 4262188, at *1 (S.D. Cal. Aug. 12, 2016) (Coconut Oil); Campbell v. Campbell Soup Co., No 3:16-cv-01005 (S.D. Cal. August 8, 2016) (Dkt 18) (Healthy Request® canned soups); Lanovaz v. Twinings N. Am., Inc., No. 5:12-CV-02646-RMW (N.D. Cal. September 6, 2016) (Twinings bagged tea). It is a lucrative area for the plaintiff’s bar. James Boswell et al. v. Costco Wholesale Corp., No. 8:16-cv-00278 (C.D. Cal) (recent $750,000 coconut oil settlement based on “healthy” labeling).
In many respects this trend was kicked off in 2015 by the Food & Drug Administration (FDA) who issued the KIND® company a not so kind letter asking the company, pursuant to 21 U.S.C. § 343(r)(1)(A) to remove any mention of the term “healthy” from its packaging and website. See our prior blog post. The basis for the FDA’s action is that the term “healthy” has specifically defined meanings under 21 CFR 101.65(d)(2) which includes objective measures such as saturated fat content (must be > 1 g) (see 21 CFR 101.62(c)(2)). Later in 2016 the FDA seemingly had a change of heart – emailing Kind and stating that the company can return the “healthy” language – as long use “healthy” is used in relation to its “corporate philosophy,” not as a nutrient claim.
Notably, this sparked a wider public health debate about the meaning of “healthy” and whether the focus, for example on the type of fat rather than the total amount of fat consumed, should be reconsidered in light of evolving science on the topic. In September 2016 the FDA issued a guidance document (Guidance for Industry: Use of the Term “Healthy” in the Labeling of Human Food Products) stating that FDA does not intend to enforce the regulatory requirements for products that use the term healthy if the food is not low in total fat, but has a fat profile makeup of predominantly mono and polyunsaturated fats.
The FDA also requested public comment on the “Use of the Term “Healthy” in the Labeling of Human Food Products” – which comment period ended this week. Comments poured in from consumers and industry stakeholders, reaching 1,100 before the period closed on April 26, 2017. The FDA has not provided a timeline as to when revisions to the definition of “healthy” might occur following these public comments – and it is not clear if President Donald Trump’s January executive order, requiring that two regulations be nixed for every new rule that is passed, will hinder the FDA’s ability to issue a rulemaking on the term “healthy” in the near future. It is also not clear whether the FDA will combine the rulemaking with its current musing of use of the term “natural” – as the terms are sometimes used synonymously. Industry groups (and the defense bar) are hopeful though that some clarity will come sooner rather than later.
Sugar in Missouri
** Do we have a new “sue-me” State for Food and Class Litigators? **
By: Brent E. Johnson
As we blogged about in the past the Food and Drug Administration (FDA) issued guidance in 2016 that it is false or misleading to describe sweeteners made from sugar cane as “evaporated cane juice” (ECJ). Guidance for Industry: Ingredients Declared as Evaporated Cane Juice. As anticipated this has opened the way forward for cases against companies using the ECJ term, including of course those cases where the matter had been stayed under the primary jurisdiction doctrine. Much of this ECJ litigation continues to be focused in state and federal courts in California.
That said, plaintiffs are also filing in other venues. Missouri for one is becoming increasingly well-known as a plaintiff-friendly jurisdiction following full throated verdicts in product liability cases, such as the $70 million talcum powder case. And food labeling suits are increasingly being filed as well in this new “sue me” State (in particular, St. Louis City – the 22nd Judicial Circuit, has been called one of “worst places in the nation for a corporation to be sued” and “the new hot spot for litigation tourists.”) In a recent win for the Plaintiff’s bar with respect to food litigation and labeling claims, a Missouri state court of appeals recently issued an opinion rejecting defenses successful in sister courts. In Murphy v. Stonewall Kitchen, LLC, 503 S.W.3d 308, 310 (Mo. Ct. App. 2016) brought under the Missouri Merchandising Practices Act (MMPA) the plaintiff (and putative class representative) alleged Stonewall Kitchen misrepresented that its cupcake mix was “all natural” when it contained leavening agent sodium acid pyrophosphate (SAPP). The trial court, relying on the decision in Kelly v. Cape Cod Potato Chip Co., 81 F.Supp.3d 754 (W.D. Mo. 2015), granted the motion reasoning that because the ingredient label clearly disclosed the presence of SAPP, it was not plausible that a consumer would believe the “all natural” representation on the product including the SAPP. The Court of Appeals reversed, expressly rejecting the ingredient list defense.
Since Murphy, at least 16 cases have recently been filed in St. Louis on the topic of evaporated cane juice alone. The targeted defendants include manufacturers of Pacqui Corn Chips (Dominique Morrison v. Amplify Snack Brands Inc., No. 4:17-cv-00816-RWS (E.D. Mo.), Jelly Belly jelly beans(Jason Allen v. Jelly Belly Candy Company, No. 4:17-cv-00588 (E.D. Mo.), and Bakery on Main granola (Callanan v. Garden of Light, Inc., No. 4:17-cv-01377 (E.D. Mo.). The cases do appear connected, many having the same plaintiff’s counsel. It is likely too early to call St. Louis the new “food court” – we’ll monitor it throughout the year though to see if it is a “flash in the pan” or not.
How Not To Advertise Your Supplement
** FTC Claims Major Scalp in Fake News Case **
By: Brent E. Johnson
The recent political season has contributed new words to our lexicon — “alternative facts” (Thanks, Kellyanne!) and “fake news.” While these terms may sound novel to us, the Federal Trade Commission has long taken action to curb such practices in commercial advertising under its mandate to enforce prohibitions on unfair or deceptive acts or practices (15 U.S.C. § 45(a)) and specifically false advertisements for food, drugs, devices, services, or cosmetics (15 U.S.C. § 52).
Recently, the FTC obtained a $29+ million personal judgment (ouch!) against a Tampa Bay businessman based on advertising the FTC claimed lacked scientific substantiation and misled consumers by using a fake news site and article. Fed. Trade Comm’n v. NPB Advert., Inc., No. 8:14-CV-1155-T-23TGW, 2016 WL 6493923, at *9 (M.D. Fla. Nov. 2, 2016). The case centered around one Nicholas Congleton, who — inspired by a clip from The Dr. Oz Show discussing a clinical study of the weight loss effects of green coffee extract (the Vinson Study) — founded Pure Green Coffee. The business was largely operated online, relying on search engine and other digital advertisements (click bait) to the tune of $9.5 million. This advertising investment proved to be money well spent. From 2012 to 2014, Pure Green Coffee generated gross receipts just shy of $34 million.
Much of Pure Green Coffee’s advertising practices are standard grist for the FTC mill – inadequate substantiation for efficacy claims, unsupported establishment claims, and customer testimonials. Pure Green Coffee promised consumers fabulous results – twenty-eight pounds in nine weeks or ten pounds and one-to-two inches of belly-fat in a month. Although Mr. Congleton admitted in his deposition that he had no scientific basis for Pure Green Coffee’s weight loss claims, in opposition to the FTC’s motion for summary judgment he cited to “news articles, blog entries, and manufacturers’ brochures” (non-starters) as well as nine studies – chief among them, the Vinson Study Dr. Oz discussed on TV. Unfortunately, most of the studies either did not involve green coffee extract or weight loss. The Vinson Study was debunked by the FTC’s expert on several bases – but primarily because Dr. Vinson, himself, withdrew it.
The FTC based its argument that Pure Green Coffee made establishment claims in its ads in part on a photo — a man wearing a white doctor’s coat and stethoscope holding a pill. The Court found that this image implied that a physician or scientist had established Pure Green Coffee’s efficacy. As for testimonials, Pure Green Coffee’s online ads committed the cardinal sin – they did not disclose that the participants were compensated.
Which brings us to fake news. Pure Green Coffee purchased the domain “dailyconsumeralert.org” and loaded the page with a spoof banner for “Women’s Health Journal,” a list of several health- or fitness-related categories, and a fake article by a non-existent columnist that offered a purportedly unbiased test of the efficacy of green coffee extract that Mr. Congleton copied and pasted from another website. The online ad also employed the ever popular “AS SEEN ON” advertising device next to the logos of CBS, ABC, MSNBC, and CNN – creating the impression that these networks reported favorably on Pure Green Coffee. The court found that the webpage appeared as a bona fide news outlet and thus misled consumers — despite Mr. Congleton placing the word, “Advertorial” at the top.
Mr. Congleton’s case was not a particularly difficult one for the FTC. But it nevertheless presents a cautionary tale to supplement sellers. First, the more specific the claim, the closer the FTC will scrutinize the substantiation. Depending on the nature of the claim the F.T.C. will require the study to include randomized clinical trials, human as opposed to animal proxy trials, and will take a hard look at the methodology and controls in the testing. Second, images of folks in white coats or hospital scrubs in supplement ads are sure to grab the FTC’s attention. Third, paid endorsers must be identified as such. And finally, supplement makers must guard against intentionally or inadvertently creating fake news.
On this last point, it is critical that supplement companies (and any company engaged in internet marketing for that matter) familiarize themselves with the FTC’s December 2015 Native Advertising Guidelines. These guidelines were developed to advise businesses on how to advertise online without running afoul of the FTC’s prohibition of fake news. While a business might believe its online advertisement clearly appears as such when a consumer views it and, therefore, is not deceptive, the FTC’s position is that “advertisers cannot use ‘deceptive door openers’ to induce consumers to view advertising content. Thus, advertisers are responsible for ensuring that native ads are identifiable as advertising before consumers arrive at the main advertising page.” (Emphasis added.) This is no easy task — as shown by the Guidelines, themselves — which contain 17 different examples of online advertisements and how each should be treated. Suffice it to say, native advertising is a hot button issue for the FTC, and enforcement actions against businesses who ignore the Agency’s guidelines are a growth industry for advertising defense lawyers.