Labels subject in your consumers and competition

Are your food products’ health and nutrient
claims accurate and well-documented? 

Although
properly-documented health and nutrient content claims may promote food product
sales, consumers and competitors may sue your company for false advertising and
unfair competition if it exaggerates those claims. The Food and Drug
Administration may also issue a warning letter that may require costly remedial
measures.  Proactively determining that
your product’s claims are truthful, accurate, and well-documented may help your
company promote its product while reducing the risk (and expense) of litigation
and government investigation.

Consumers
read product labeling and health/nutrient claims

Some
studies have found that
72% of consumers “often” or “sometimes” rely on food labeling
nutrient claims

like “low fat” when deciding whether to buy a product.  Similarly,
a recent
poll found that almost 70% of consumers read product nutrition facts and
ingredients .

Consumers
and competitors can sue companies for falsely advertising health/nutrient
claims

The
California Supreme Court recently held that plaintiffs who can truthfully
allege that a product’s label deceived them into buying a product they would
not have otherwise purchased can sue that product’s manufacturer for false
advertising and unfair competition. 
(Kwikset v. Sup. Ct.
(Benson) (2011) 51 Cal.4th 310, 316 [“Kwikset”].)  In Kwikset, the plaintiffs alleged the
Kwikset Corporation falsely labeled and advertised its locksets as “Made in U.S.A.,”
although it manufactured some parts in other countries.  (Id.)  These alleged false representations
purportedly violated country of origin labeling laws.  (Id.)  Plaintiffs claimed they relied on the
company’s alleged misrepresentations in choosing to buy the locksets.  (Id. at p. 319.)

The
California Supreme Court noted the state’s Unfair Competition Law (Cal. Bus.
& Prof., sec. 17200 et seq.) promoted “fair” competition by protecting
consumers and competitors from false advertising claims.  One who alleged he or she lost even a
“trifle” of money due to a company’s alleged false advertising had standing to
sue that company. Consumers who paid more for a misrepresented product, and
competing companies that were deprived of a sale due to false advertising,
demonstrated economic harm sufficient to confer standing to sue.

The
court’s ruling rested on a simple premise: “labels matter.”  Advertising differentiates “functionally
identical” products from the competition. Consumers choose between competing
products, in part, based on labels and “various tangible and intangible
qualities they may come to associate with” specific products.

The
court cited multiple examples of food labeling claims to support its contention
that labels are critical to consumer buying decisions.  Some wine drinkers will pay more for a
product made from grapes grown in specific regions or years, and persons who
follow religious dietary laws will pay more for Kosher- or Halal-certified
foods.

Consumer
class actions for food labeling false advertising are increasing

Food
labeling false advertising litigation is increasing. In recent years, courts in
several states have certified class actions against several manufacturers. The
maker of Campbell’s
Soup was sued for allegedly falsely advertising that some of its soups had
significantly less salt than its regular soups. Nutella’s manufacturer
allegedly deceptively advertises that its product is healthy. Vitamin Water’s
name is allegedly misleading, because it allegedly contains too much sugar to
be allegedly promoted as a healthy beverage.

Labels
Matter to the FDA

The
FDA can issue warning letters to companies that exaggerate product labeling
health or nutrient claims and publish those letters on its website.  These letters usually request a response
within a matter of days, requiring immediate action to avoid further
enforcement measures, such as product seizure.

Labels
matter to your bottom line

Individual
plaintiffs may only incur nominal economic damages, but defending against a class
action lawsuit may expose your company to substantial costs.  Attorneys’ fees may be cognizable, and your
insurance may not cover false advertising claims, which may be excluded from
coverage.

FDA
warning letters may result in a variety of direct and indirect costs.  Relabeling or reprinting labels can be
expensive. Seized product is unsold product. The FDA letter and your company’s
response can be posted on the FDA website and become the subject of media
reports; your customers may choose to work with a competitor that is not under
such scrutiny. 

Proactively
determining that your product labeling health and nutrient claims are truthful,
accurate, and well-documented may grow sales while reducing the risk that your
company will be sued or subjected to heightened FDA scrutiny.

Steven
Kronenberg is an attorney Murphy, Pearson, Bradley & Feeney, where he
offers outside general counsel services for the food processing and retail
foodservice industries. He is also the author of FoodLawBlog.com
and can be reached at 415-788-1900 or via e-mail at SKronenberg@MPBF.com.