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.