Pooja S. Nair is a partner at Ervin Cohen & Jessup. She advises food and beverage clients, startups and other businesses on a comprehensive range of issues, including employment, trade secrets, partnership disputes, contract negotiations and intellectual property.
Consumer lawsuits alleging misleading advertising in the food and beverage industry have been on the rise, targeting a wide range of food and beverage products. State consumer protection laws prohibit companies from being misleading or deceptive in advertisements to consumers.
Advertising and the Reasonable Consumer
“Claims” made in advertising or promotional materials across a wide range of platforms can give rise to allegations of false advertising by consumers, competitors or the government. In order for a lawsuit to be filed about an advertising claim, the claim must be both factual and material. Advertising claims can be proved false in several ways, including the claim being literally false; false by way of necessary implication; and literally true but misleading.
Courts have applied a reasonable consumer test, which is key to determining if a product’s advertising and labeling is potentially misleading. The reasonable consumer test is meant to be objective, and to ask the question of whether an advertisement would mislead an objectively reasonable consumer, not whether the actual plaintiff was or was not misled. The reasonable consumer standard requires a probability that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.
“All-Natural” Label Under Fire
On May 5, 2020, the Court of Appeal for the First Circuit revived a Massachusetts lawsuit in which consumers alleged that the use of a “100% Natural” label for Wesson brand vegetable oil was deceptive to consumers because the oil contained genetically modified organisms (GMOs). The plaintiff claimed that she believed the vegetable oil did not have GMOs because it was labeled as “100% Natural.”
The district court initially dismissed the case for failure to state a claim, finding that the label was not deceptive or unfair as a matter of law because it conformed to the FDA’s labeling policy. FDA regulations do not require a company to disclose the existence of GMOs in product labeling.
The First Circuit reversed the decision and allowed the lawsuit to continue. The Court held that although the FDA’s regulations permit nondisclosure of GMOs on labeling, the use of the term “100% Natural” could lead reasonable consumers to believe that the product had no GMOs. The Court found that the plaintiff had raised a threshold claim that a reasonable consumer could think that “100% Natural” meant that a product contained no GMOs, and then purchase the product based on that belief. The lawsuit will now go forward in Massachusetts.
Diet Soda Advertising Lawsuits Falter
Plaintiffs in New York and California brought a series of consumer lawsuits targeting diet soda brands. These consumers claimed that the use of the word “diet” in advertising and selling diet soda was misleading because consumption of these products did not lead to a healthier lifestyle or weight loss, and in fact could be tied to weight gain.
New York customers brought claims against diet soda brands including Coke Zero, Diet Coke, Diet Snapple and Diet Pepsi, beginning in 2017. Those cases were filed in 2017 by plaintiffs who claimed the diet soda products caused them weight gain and that the advertising was deceptive because it used fit models and suggested that use of the diet soda would contribute to health and nutrition.
The Second Circuit affirmed the dismissal of all consumer fraud cases against diet soda brands in multiple decisions in the summer of 2019. The Court held that, in the context of soft drinks, the term “diet” refers to calorie content, and it has no absolute meaning, such that in order to meet federal advertising standards, a diet soft drink need only have fewer calories than its non-diet version.
California consumers filed consumer fraud lawsuits against the Coca-Cola Company and Dr Pepper/Seven Up for false advertising in Diet Coke and Diet Dr Pepper. The case against Coca-Cola was dismissed on jurisdictional grounds in December 2019.
On December 30, 2019, the Ninth U.S. Circuit Court of Appeals dismissed the claims against Dr Pepper. Ultimately, the court held that no reasonable consumer would assume that the use of the word “diet” in Diet Dr Pepper promised weight loss or weight management. Rather, the court found that diet soft drinks were common in the marketplace and the prevalent understanding of the term in that context was simply that the “diet” version of a soft drink has fewer calories than the “regular” version of that drink.
In describing the applicable reasonable consumer test, the Ninth Circuit found that it required more than a “mere possibility” that Diet Dr Pepper’s label “might conceivably be misunderstood by some few consumers viewing it in an unreasonable manner.” Instead, the reasonable consumer standard requires a probability “that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.”
The Ninth Circuit and the Second Circuit’s clear and uniform rulings on this line of cases set a precedent that the reasonable consumer’s understanding of the term “diet” in the context of the beverage industry is related to calories rather than the overall effect of the product on a healthy diet.
Angus Steak Breakfast Sandwiches Not Misleading
Dunkin’ Donuts was sued in a class action lawsuit over its Angus steak breakfast sandwiches. Plaintiffs alleged that “through representations made in labeling and television advertisements, Dunkin' Donuts deceived consumers into believing that the products contained an 'intact' piece of meat when the products actually contained an “inferior product” with multiple additives.” Plaintiffs claimed that this advertising practice violated New York state consumer protection laws and implied to customers that the Angus steak sandwich was a superior product as compared to other Dunkin’ Donuts products.
On March 31, 2020, the U.S. Court of Appeals for the Second Circuit dismissed the lawsuit, holding that no “reasonable consumer” could have been misled by Dunkin’ Donuts advertising, which showed close-ups of the product itself. Based on the price of the sandwich and the fact that it was marketed as a “grab-and-go” breakfast item, a reasonable consumer would not have expected a piece of steak for a $3.99 breakfast sandwich. Interestingly, the company eliminated the Angus steak sandwich from the menu as the litigation was pending.
Whole Grain Cheez-Its Lawsuit Revived
In December 2018, the Kellogg Company found itself unable to dodge a lawsuit regarding “Whole Grain” labeling of Cheez-It crackers. The front of the Cheez-It box said the products were “made with whole grain” in bold letters. However, the crackers contained a small amount of whole grain and were primarily made with enriched white flour.
The district court initially found that the labels would not mislead a reasonable consumer because it was factually accurate in that there was some whole grain in the crackers. The court further found that the ingredient label was accurate, and a reasonable consumer would have reviewed that label.
The Second Circuit appellate court held that the product was likely to mislead a reasonable consumer because the product was made with significantly more enriched white flour than whole grain. The court also found that a “reasonable consumer should not be expected to consult the Nutrition Facts panel on the side of the box to correct misleading information set forth in large bold type on the front of the box.” The court held that it would be an improper precedent for companies to be able to use a tiny portion of an ingredient to justify labeling the product inaccurately.
False advertising and labeling cases are here to stay. Food and beverage brands must be aware of the reasonable consumer standard and ensure that advertisements and product labels are decipherable for an average consumer. While courts have been willing to dismiss cases early if they fail to pass the laugh test for what the reasonable consumer could expect, contradictions between how a product is marketed and what it is made of could prove extremely costly.
Product Close-Ups: Products advertised with images of the product, even if contrary to the labeling, tended to meet the reasonable consumer test, because the consumer viewing the advertising is able to see what the product looks like.
Front vs. Back of the Box: Even in cases where products were accurately labeled in the product ingredients section of the packaging, contradictory claims advertising inaccurate position that is prominently featured may violate the reasonable consumer standard.
Get Out the Dictionary: Courts have delved into the dictionary definition of words, and found that if a label or advertisement matches one common definition, then a reasonable consumer will not be deceived. For example, in the Dunkin’ Donuts breakfast sandwich case, the court found that one definition of “steak” included ground meat.
Price Matters: For products such as the Angus steak breakfast sandwich and white truffle olive oil made with no white truffles, courts were persuaded that a reasonable consumer would have expectations buoyed by the price of the product.