The federal government regulates minimum standards for product labelling in many areas of commerce, which standards are generally meant to protect consumers. But what happens if product seller complies with the minimum standards, but still has a label that would mislead consumers? Should competitors be able to sue under the false advertising prong of the Lanham Act if they can show that the labels are misleading? Or should such enforcement solely rest with the federal government, who promulgated the regulations in the first place?
That is essentially the heart of the dispute that the Supreme Court agreed to take up last week in Pom Wonderful v. Coca Cola. Pom, who makes a line of pomegranate-based juices, sued Coca Cola for false advertising, claiming that Coca-Cola’s competing “Pomegranate Blueberry” drink contained negligible amounts of pomegranate juice, and that its labelling did not make that clear to consumers. Coca-Cola successfully moved to dismiss the claims on the basis that its product labelling was regulated by the Food and Drug Administration, and in particular that the Food, Drug and Cosmetic Act preempted any false advertising challenge.
The district court ultimately ended up agreeing with Coca-Cola, and dismissed Pom’s case. The Ninth Circuit affirmed that decision. And now the Supreme Court has agreed to take review of that decision. Ironically, just about a year ago, the Federal Trade Commission found that Pom itself engaged in false advertising regarding the health benefits of its product. Which raises the interesting issue of whether a plaintiff whose own product sales may have been spurred by false advertising can show the competitive harm necessary to sustain a false advertising complaint against another competitor whose advertising may be equally misleading . . . Unfortunately, that issue does not seem to be one on which the Supreme Court is yet ready to opine.
But we will get a rare false advertising “two-fer” this term, as the Supreme Court just heard oral argument in Lexmark v. Static Control last December. There, the question is whether only “actual” competitors have standing to sue under the false advertising prong of the Lanham Act, or whether there should be a broader basis for standing, such that those who can show some type of competitive harm (even if not actually selling a directly competing product or service) have standing to sue.
Between these two cases, the Lanham Act’s false advertising component could be weakened. If a plaintiff only has standing to bring claims against a direct competitor (even if someone at a different level of the distribution chain is maligning the plaintiff’s product or services), and areas regulated by the federal government are off-limits for a false advertising claim (even if the regulations in question do not actually require the allegedly misleading statements), the reach of the Lanham Act will have been greatly curtailed. Should make for interesting reading when both of these decisions come out.