Ruling Favors POM Wonderful Over Coke Label

Sunday, June 15, 2014
Washington — The Supreme Court served POM Wonderful a victory last week, ruling the California-based company that makes the pomegranate juice can sue Coca-Cola over an allegedly mislabeled drink.

In an 8-0 decision, the court agreed that POM Wonderful could sue its competitor under the federal Lanham Act. The law permits civil action against anyone who “misrepresents the nature, characteristics or qualities” of the goods being sold.

The decision opens the way for other companies to take competitors to court over advertising and labeling disputes, potentially reinforcing government regulators.

“Competitors who manufacture or distribute products have detailed knowledge regarding how consumers rely upon certain sales and marketing strategies,” Justice Anthony Kennedy wrote. “Their awareness of unfair competition practices may be far more immediate and accurate than that of agency rule-makers and regulators.”

Lanham Act lawsuits, Kennedy added, “draw upon this market expertise by empowering private parties to sue competitors to protect their interests on a case-by-case basis.”

In a statement, Wonderful Brands, the maker of POM Wonderful, called the ruling “a real victory for consumers.”

“The unanimous court ruling will translate into higher assurance for consumers that the labels on beverages and food are accurate,” the company said. “We believe that when people better understand what they are consuming, they can make more healthy and informed decisions about what they buy.”

Wonderful Brands is owned by Stewart and Lynda Resnick, reported by Forbes magazine to be billionaires. The couple’s agricultural ventures include major citrus, almond and pistachio orchards in addition to pomegranate operations in California’s San Joaquin Valley.

The company has carefully cultivated a healthy image for pomegranate products, sometimes in aggressive ways that have drawn skeptical assessments from the Federal Trade Commission. Those label challenges, though, were not at stake in the case decided Thursday.

In September 2007, Coca-Cola delivered a “Pomegranate Blueberry” product through its Minute Maid brand. It contains about 99.4 percent apple and grape juices, tinted with 0.3 percent pomegranate juice, 0.2 percent blueberry juice and 0.1 percent raspberry juice.

Despite what Kennedy called “the minuscule amount of pomegranate and blueberry juices in the blend,” the front label displayed the words “pomegranate blueberry” in capital letters. In much smaller type, the label included the phrase “flavored blend of 5 juices.”

The makers of POM Wonderful sued, claiming the label tricked and deceived consumers to the detriment of genuine pomegranate juice.

A lower appellate court had rejected the suit, concluding that the federal Food and Drug Administration had effectively pre-empted labeling oversight. The Supreme Court said otherwise, concluding that the Federal Food, Drug and Cosmetic Act can co-exist with the private lawsuits authorized under the Lanham Act.

“If Lanham Act claims were to be precluded, then commercial interests, and indirectly the public at large, could be left with less effective protection in the food and beverage labeling realm than in many other, less regulated industries,” Kennedy wrote.

The two federal laws provide “complementary” protections, Kennedy declared, reasoning that Congress didn’t intend to foreclose private enforcement actions. The ruling, though, also has its limits.

“While consumers will indirectly benefit from competitor Lanham Act claims regarding allegedly misleading food labels, the court makes it clear that this is not a question of state versus federal law or consumer suits,” noted Dale Giali, an attorney with the firm Mayer Brown.

Justice Stephen Breyer recused himself from the case. He did not make public the reasons for doing so.

In the separate case pending before the U.S. Court of Appeals for the District of Columbia Circuit, POM Wonderful’s makers are challenging the five-member Federal Trade Commission. The commission concluded that POM Wonderful had made “deceptive claims” in 36 advertisements and promotional materials, including claims the juice was effective against heart disease, prostate cancer and erectile dysfunction, among other ailments.

“POM’s advertisements advance accurate, truthful and carefully qualified claims about the health benefits of consuming pomegranate juice,” the company declared in a legal filing. “Those claims are based on the best science that is reasonably available.”