Supreme Court Holds Lanham Act Is Not Pre-empted by FDA Regulation in Pom Wonderful Decision

On June 12, 2014, the Supreme Court issued its decision in Pom Wonderful LLC v. Coca-Cola Co., No. 12-761, holding that Lanham Act false-advertising claims are not pre-empted by the Federal Food, Drug, and Cosmetic Act (“FDCA”) or related Food and Drug Administration (“FDA”) regulations. In that case, POM Wonderful LLC (“POM”), a pomegranate-juice beverage producer, sued its competitor, Coca-Cola Company (“Coca-Cola”), under § 43(a) of the Lanham Act, claiming that Coca-Cola’s “Pomegranate Blueberry” juice beverage was falsely labeled because, in reality, the beverage contained about “99.4% apple and grape juices,” and only “0.3% pomegranate juice” and “0.2% blueberry juice.” Slip op. at 5-6. In proceedings below, Coca-Cola successfully argued that POM’s Lanham Act claim should be dismissed because it was pre-empted by the FDCA and FDA regulations, which permitted Coca-Cola’s type of beverage labeling. Specifically, the FDA allows beverage labels to list flavoring juices that are not the predominant juice contained in the beverage.

The Supreme Court was not persuaded by Coca-Cola’s argument on several levels. First, the pre-emption provision of the FDCA, 21 U.S.C. § 343-1, forbids a “State or political subdivision of a State” from imposing labeling requirements that are of the type (though not identical) to the FDCA’s labeling requirements. Slip op. at 10. The Court determined that this language on its face was directed solely to state laws and did not encompass other federal laws such as the Lanham Act. Pre-emption of some state laws does not suggest that Congress intended to preclude a cause of action embodied in another federal statute. If Congress had wanted the FDCA to pre-empt other federal laws, it would have specified this.

Second, the Court noted that the FDCA’s and the Lanham Act’s false-advertising provisions complement each other. Each has its own separate scope and purpose. The FDCA and FDA regulations focus on consumer safety, while the Lanham Act protects competitors from misleading or unfair marketing strategies. Unlike the purely administrative role of the FDCA, the Lanham Act motivates businesses to behave well by subjecting them to liability to competitors injured by unfair marketing. In short, Congress enacted two different statutes, each with its own mechanisms, to enhance protection of both competitors and consumers.

Third, as a practical matter, precluding Lanham Act liability for false advertising would actually create a less effective enforcement scheme for food and beverage labeling. The FDA does not preapprove food and beverage labeling, and does not necessarily pursue enforcement measures against all problem labels. If Lanham Act claims were precluded, false labels that the FDA did not take action against would be immune from any consequences. Congress could not have intended the FDCA to result in less protection for the public from misleading labels.

Coca-Cola also argued that subjecting beverage labels to Lanham Act liability would undermine Congress’s goal of national uniformity in labeling requirements. The Court, however, rejected this argument. While Congress did not want disuniformity arising from a multitude of state regulations, that is completely different from imposing case-by-case liability in individual circumstances where labels are manifestly false or misleading. This false advertising “variability” is something that all industries face. It would not create an unmanageable patchwork of regulations, as Coca-Cola had suggested.

The Supreme Court’s decision was not surprising. At its most basic level, Coca-Cola was arguing that food manufacturers should be immune from liability as long as the FDA did not object to their beverage label, even when evidence showed that consumers were misled or confused by those labels. During the oral argument, the justices were clearly skeptical of this argument. Justice Kennedy himself suggested that the Minute Maid label “cheated” consumers and further indicated that he himself was confused by the label. Under these circumstances, it would be hard for the justices to swallow the idea that Congress intended to protect this type of labeling from liability.

The FDA, through the U.S. Solicitor General, also argued for a narrow preclusion of private Lanham Act claims, namely, when FDA regulations “require or authorize” the challenged aspects of the label. Id. at 15 (citation omitted). In this case, the FDA argued that POM was precluded from bringing a false-advertising claim based on the name of the Coca-Cola product, “Pomegranate Blueberry,” but was not precluded from challenging other aspects of the label that were possibly false or misleading. The Court rejected the FDA’s argument as well. As an initial matter, the Court expressed concern about how, as a practical matter, it could determine whether the FDA had actually authorized the name of the beverage or merely tolerated it. The FDA’s after-the-fact claim to have carefully considered beverage naming generally when it promulgated its regulations was insufficient to justify wholly precluding private parties from availing themselves of a well-established federal remedy. Furthermore, the FDA could cite nothing to indicate that Congress intended for FDA regulation to preclude private Lanham Act false-advertising claims. Because the Lanham Act and FDCA are complementary in their regulation of misleading labeling, POM’s claim should be allowed to proceed.

The Court’s decision may have implications beyond beverage labeling. Other federal agencies have some say over advertising in the particular industries that they regulate. For example, the Federal Deposit Insurance Corporation (“FDIC”) and the Federal Reserve have some say in banking advertisements, and the Federal Communications Commission (“FCC”) has at times had some say in telecommunications advertising. While each case would need to be decided on its own facts, the Pom Wonderful decision would likely make it harder for a Lanham Act defendant in the banking industry or telecommunications industry to persuade a court that it is protected from false-advertising suits because its particular advertising practice had not been specifically prohibited by FDIC banking regulations or FCC telecommunications regulations.