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Compliance with FDA Rules No Bar to Suits over Misleading Labels, High Court Says

Tuesday, June 17, 2014
Sandler, Travis & Rosenberg Trade Report

The Supreme Court ruled June 12 that companies can be sued over allegedly misleading food and beverage labels even if those labels comply with applicable Food and Drug Administration regulations. Businesses say the decision allowing a juice company to proceed with its Lanham Act case against a major beverage manufacturer creates uncertainty and increases their vulnerability to litigation, while consumer groups say it offers a potent weapon in their efforts to protect public health.

The case centers on the fact that one of the beverage company’s juice products is labeled as “pomegranate blueberry” even though the juice of those two fruits combined makes up only 0.5% of the product as a whole. The juice company, which produces a similarly named product that contains only those two juices, argued that the label is therefore misleading. The defendant countered that the Federal Food, Drug and Cosmetic Act allows beverages to be named according to the juice that provides the flavor, if not the volume, of a juice product and that FDA approval of a product’s label precludes false advertising claims under the Lanham Act.

In an 8-0 decision the Supreme Court disagreed, pointing out that the FDCA and the Lanham Act “complement each other in the federal regulation of misleading food and beverage labels.” The FDCA protects the public health and is largely utilized by the government on the public’s behalf, while the Lanham Act is primarily used by companies to combat unfair competition. Neither law “forbids or limits Lanham Act claims challenging labels that are regulated by the FDCA,” the court said, and any congressional intent to impose such a restriction would have manifested itself before now because the two laws have coexisted for nearly 70 years.

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