false advertising in the alcohol beverage industry
TRANSCRIPT
© Husch Blackwell LLP
"False Advertising" in the Alcohol Beverage IndustryCompetitor and Consumer Claims of Misleading Labeling
Targeting Alcohol Beverage Labeling There is a trend in litigation surrounding accusations of
false or misleading advertising in the labeling and promotion of alcohol beverage products.
There are three basic types of claims – competitor claims, consumer claims and those brought by the Government.
Competitor v. Competitor: Principal Avenues of Attack
Competitor challenges to labeling and advertising in the civil court system generally focus on allegations of "false advertising" under the Lanham Act.
Competitor claims may be pursued before the National Advertising Division of the Council of Better Business Bureau (NAD).
POM Wonderful v. Coca Cola POM Wonderful brought suit against Coca Cola based
on a Minute Maid product labeled as “Pomegranate Blueberry” juice.
POM alleged that the labeling misled consumers into believing the juice consisted predominately of pomegranate and blueberryjuices.
POM Wonderful v. Coca Cola
Coca-Cola asserted that the false advertising claim was precluded by its label’s approval by the FDA.
The Supreme Court ruled otherwise, holdingthat the FDCA does not preclude Lanham Act claims: Approval from the FDA is not enough to protect producers
from claims if label is “nonetheless misleading.”
Lesson for the Alcohol Beverage industry? The Pom Wonderful decision stands for the
proposition that highly regulated goods, perhaps like alcohol beverages, are not safe-guarded by their label and advertising approvals from governmental agencies.
In short, TTB label or advertising "approval" will not likely save a label from suit.
Green Light for Deceptive Labeling Class Actions Under State Law The Pom case also served as a green light for a
number of class action lawsuits in the alcohol and beverage industry.
State consumer lawsallow similarly structuredclaims on behalf of consumers.
Consumer Claims: Class Actions
The Lanham Act does not provide standing for consumer-based claims of False Advertising.
Consumers may, however, pursue "misleading" labeling and advertising claims under state deceptive trade practice acts as well as state false advertising and unfair competition laws.
Consumer Fraud and Deceptive Trade Practices Acts Adopted in some form by all 50 States.
Regulatory and remedial statutes intended to protect consumers, borrowers and business persons against fraud, unfair methods of competition, and other unfair and deceptive business practices.
Require plaintiffs to plead and prove that the “deceptive act” proximately caused the alleged damages.
“…In some manner deceived by the misrepresentation.”
Example: The War Over “Handmade” Beam Suntory was accused of false and misleading
advertising based on the assertion that Maker’s Mark® bourbon is “handmade.” “close attention by a human being, not a high-volume,
unattended process.”
Fifth Generation, Inc. (Tito’s) was similarly accused of deceptive trade practices in using the term “handmade” on the labeling of its vodka. made by means of a “highly mechanized process devoid of
human hands” from neutral grain spirits.
What is "Handmade"? Florida federal judge Robert Hinkle tossed the
case for failure to state a claim:
“The term [“handmade”] obviously cannot be used literally to describebourbon. One can knit a sweater byhand, but one cannot make bourbon by hand…no reasonable consumercould believe otherwise.”
The Flip Side of the Coin:
Judge Miller in the SouthernDistrict of California denied a similar motion to dismiss.
The court did not find "safe-harbor" in the TTB COLA for the product:
“TTB review is peripheral and informal at most, especially given that TTB does not have standards or rules for the term 'handmade.’”
Mo' Troubles for Jim Beam
The Jim Beam brand is also under attack in the same court as Tito’s but for using the term “handcrafted.”
Plaintiffs claim the process is actually heavily mechanized, “resembling a modern day assembly line and involving little to no human supervision, assistance or involvement…”
Beam has moved to dismiss alleging "safe harbor" of TTB COLA.
Will the same court that squashed Tito’s motion allow Beam to succeed under safe harbor exclusion?
It is Not Just Limited to the Label
WhistlePig Rye Whiskey Plaintiffs are attacking web-based advertising suggesting
that product is "artisanal, craft whiskey produced on a farm in Vermont from certified organic rye grown on site."
Product is actually distilled and aged in a "massive" factory in Alberta, Canada.
"Consumers are willing to pay more for craft because they believe the quality would be higher."
Terms and Themes Like “Hand Crafted” or “Artisanal” Under FireAngel’s Envy
Plaintiffs are attacking “handcrafted”-themes Angel’s Envy claims to be a “small batch” whiskey
In fact, Angel’s Envy is distilled and aged by MGP Ingredients, Inc. in a “massive complex that produces and distills industrial-sized quantities of beverage-grade alcohol.”
Again, plaintiffs claim they were willing to pay more for the small-batch whiskey and were misled by the advertising.
What is “Craft”? MillerCoors attacked for claiming Blue Moon beer is
“Artfully Crafted®,” representing product as a craft beer from "Blue Moon Brewing Co."
Plaintiffs are relying on the American Brewers Associationdefinition of “craft.”
Deceptive because label shouldspecifically advise product is a MillerCoors product.
Is It "All Natural"?
Skinny Girl Margarita Jim Beam sued for advertising that its Skinny Girl
Margarita product is "all natural” with no preservatives. In fact, the product contains sodium benzoate, which
combined with an acid – like lime juice – produces carcinogenic compounds.
Beam has successfully blocked class certification by showing that plaintiffs were unable to prove that the class was ascertainable.
Geographic Claims: Where In The World Did It Come From? Templeton rye
Plaintiffs claim that “produced and bottled in Iowa” is deceptive, when product is actually distilled in Indiana.
Bullet bourbon Plaintiffs allege that the label erroneously advertises the
product as distilled by "Bulleit Distilling Co." in Lawrenceburg, Kentucky.
In reality, Bulleit is actually sourced fromKiren Distilling, maker of Four Roses® brands.
How to Avoid Deceptive Trade Claims: Be Crystal Clear Avoid "trigger" terms in labels and in advertising.
"All Natural" Handmade or Handcrafted "Small Batch" or Artisanal Craft
Be transparent and "scrupulously forthright" about your product’s origins. Claims of Geographic Origin
In the Early Stages: Motion to Dismiss and Block Certification Early Motion to Dismiss Failure to state a claim ("safe-harbor" exception) Rule 9 pleadings standard for fraud usually applies (Twombley/Iqbal pleading standards)
Block any of the four requirements for class certification Numerosity of class members Commonality questions of law or fact Typicality of claims or defenses Adequacy of class representation by named plaintiff
.
Post Certification Busters
Even if Class is certified, you can attack on the back end with decertification: Unascertainable class
Inability to define a reasonable method of identifying a class can block class certification, as in Skinny Girl.
Injuries/damages are not typical or common amongst the putative class members.
Federal Trade Commission Claims The FTC may also bring regulatory challenges under
Section 5 of the FTC Act to challenge unfair and deceptive acts and practices.
Remedies include legally binding cease-and-desist orders, monetary penalties, consumer refunds, corrective advertising and modificationof future advertising.
