Posts Tagged ‘fda’
Last week’s U.S. Supreme Court decision, Pom v. Coca-Cola, is not just about juice. It has massive implications for small brewers, big distillers and all other alcohol beverage marketers. It shows that TTB rules and other agency rules set a floor, not a ceiling, on how companies need to market their products. It shows that the government is only a part of the web of review, in concert with competitors. Just as we predicted that Pom would win this case, we now predict that some alcohol beverage companies will soon take legal action against others, even though such cases, other than trademark cases, were very rare in the past 50 years.
It was bad enough for Coke when Pom called out Coke for going quite a bit too far in posing its apple juice as pomegranate juice. It got even worse when various Supreme Court Justices suggested, orally, that Coke was trying to trick people. And on June 12, 2014 it got even worse, when the Supreme Court unanimously disagreed with Coke’s position. In Pom v. Coca-Cola, the Court said, if there is trickery on food labels, and it hurts a competitor, of course they can do something about it, even if FDA (for whatever reason) does not.
Pom and the Supreme Court have made it clear that one company can go after another for dubious labeling, and the government no longer has all the authority in this area.
The Court said, rather than the Food, Drug & Cosmetic Act (FDCA) knocking out the Lanham Act, the two Acts can happily coexist, complement each other, and provide synergy. The former protects consumers as to health and safety. The latter protects competitors as to commercial interests.
We have lots more coverage of this important case, and the background, in this post from earlier this year.
Coke went astray fairly early in the multi-year litigation, trying to invent a theory under which FDA “approved” the label at issue. FDA did no such thing. To approve is an act, and FDA’s posture here was the opposite of an act. FDA did not condone, approve or disapprove the label at issue. Perhaps FDA was busy with many other pressing concerns, or it was a gray area. This is in stark contrast to how TTB handles most labels — with a rigorous, case-by-case, and explicit pre-market approval regime. To say that FDA approved the Minute Maid label is like Donald Trump getting one $500 haircut per week, every week, calling it a business expense and taking an IRS deduction for 10 years — then saying the IRS approves of his hairstyle and his deduction. The IRS would, of course, have done no such thing. Rather, it would be the case that the IRS, simply, had so far refrained from any adverse action. To use the terms in the opinion, there is a difference between approving something and merely tolerating it.
There are not a lot of juicy quotes in the opinion, but the case does have massive implications. The Court noted, in a realistic way, that:
FDA … does not have the same perspective or expertise in assessing market dynamics that day-to-day competitors possess. Competitors who manufacture or distribute products have detailed knowledge regarding how consumers rely upon certain sales and marketing strategies. Their awareness of unfair competition practices may be far more immediate and accurate than that of agency rulemakers and regulators. Lanham Act suits draw upon this market expertise by empowering private parties to sue competitors to protect their interests on a case-by-case basis.
It is very refreshing to see Washington give some credit to those who work in an industry long-term, every day. The huge implications of this case would seem to be:
- A massive shift of enforcement authority, from bureaucrats in Washington, to private parties all around the world. Professor John Duffy noted: “A second important point about POM is that the reasoning in the decision shows the Supreme Court’s increasingly ambivalent approach to administrative regulation. More than a century ago, administrative agencies were often cast in nearly heroic terms; they were thought to be wise experts who could bring intelligent, centralized regulation to remedy the abusive marketplace tactics. In yesterday’s decision, however, the Court shows just how little is left of that notion.” Duffy nails it, saying: “It is … hard not to think that some of the reasoning in this case reflects a new skepticism – or perhaps it should be described as a healthy realism – about the capabilities of administrative agencies.”
- Justice Roberts, in the oral arguments, actually said, in reference to misleading labels: “What does the FDA know about that? I mean, I would understand if it was the FTC or something like that, but I don’t know that the FDA has any expertise in terms of consumer confusion apart from any health issues.”
- The ready ability of Coke to police Pepsi’s business practices, Bud to police Coors, Gallo to police other wine companies, Bacardi to regulate Diageo — on and on. Not only can the big regulate the big, but the small can regulate the big and vice versa. It could be a free-for-all. Duffy explained that this case, along with another: “is almost certain to produce a significant expansion in competitors bringing Lanham Act claims against each other over false or misleading statements.”
- Even more, this means little craft brewers and distillers can go after big guys with a claim that: “you are BS’ing about craft, and it hurts us.”
- An advertising law expert said: “It opens the floodgates to increased litigation. The message to marketers is now that compliance with the FDA is only a first step and is by no means insurance against other types of claims.”
- This will give us a bit of a taste of what libertarian-style government might look like, and a bit of relief from command-and-control government, perhaps.
- Even though there is affirmative pre-market approval for alcohol beverages, and this is not the case for most foods and other beverages, it would seem that the same basic principles apply. It would seem that the FAA Act was likewise not intended to impair or preclude the Lanham Act.
- On behalf of food clients, food lawyers now get to serve as mini-FDAs, and private TTB lawyers have been deputized to serve as mini-TTBs (on behalf of any aggrieved beverage company clients).
- This makes it easy for TTB and FDA to deflect many complaints, and remind the aggrieved that they have a ready means for self-help.
- After many decades to the contrary it may turn out that the federal food and beverage laws are a floor, rather than a ceiling. CSPI said: “The Court recognized that companies don’t have a safe haven from being sued for deception just by complying with FDA’s minimal regulations.”
It will be ironic indeed when a competing food company goes after Pom. But Pom seems more than able to protect itself and I have rarely seen a better example of a company being on the defensive, after the various FTC inquiries — and turning it into such a major victory. There should be a cliche about turning bitter fruits into profitable fruit juices.
The U.S. Supreme Court, on January 10, 2014, agreed to hear Pom’s argument that Coke’s fruit beverage labels (such as the one at right) are misleading. The excellent FDA Law Blog has good coverage of the controversy here. Coke’s Minute Maid product only has a tiny amount of pomegranate juice — less than 0.5% — and so Pom (rather than the government) argues that this is misleading especially inasmuch as the labels show pictures of pomegranates.
This is a classic false advertising case. Pom and Coca-Cola compete directly in the market for pomegranate juices. Pom sells juices that—as purchasers would naturally expect—overwhelmingly contain actual pomegranate juice, which is sought by healthconscious consumers. Pom’s products include a pomegranate-blueberry juice. Coca-Cola sells and aggressively markets its competing “POMEGRANATE BLUEBERRY” juice, which it colors a deep purple and sells with a label containing a large image of each fruit. … Coca-Cola’s misleading label causes consumers to believe that the juice actually contains significant amounts of those fruits when in fact it contains only trivial amounts: 0.3% pomegranate juice and 0.2% blueberry juice. … Pom introduced survey evidence showing that consumers are in fact seriously misled.
Pom also quotes a key part of the government’s brief: “Further, the ‘FDA does not approve juice labels, and its failure to initiate an enforcement action cannot be construed as such an approval.’” Other juicy tidbits courtesy of Pom include: FDA and the FDC Act “sets a ‘floor’—not a ceiling—on federal regulation of labels.” Pom explains the sweeping importance of this case, and why it is so ripe for review:
Even if it were limited to food products, the ruling below grants tens of thousands of food and juice producers sweeping immunity with respect to countless products from liability under the Lanham Act for even knowingly misleading consumers. … The government recognizes that the court’s “deference to FDA’s available but unexercised authority would arguably preclude a Lanham Act challenge to the label of any food,” including “the many foods that FDA’s regulations do not specifically address at all.” … As the GAO has confirmed, the FDA “generally does not address misleading food labeling because it lacks the resources to conduct the substantive, empirical research on consumer perceptions.’”
By contrast, Coke not surprisingly argues “the FDA has adequate resources to regulate the content of food and juice labels.” Coke further argues:
whether a multi-fruit juice name or label is deceptive is not only within the FDA’s expertise, but is a topic that the FDA has already addressed in detailed and specific regulations. … As the United States correctly observes, the regulation “reflect[s] the agency’s balance of competing considerations in a specific setting that could easily be upset by the intrusion of a general private remedy such as that provided under Section 43(a) of the Lanham Act.”
Getting deep into the nitty gritty of the labels at issue and the rules, Coke proudly proclaims “Here, the letters ‘FLAVORED BLEND OF 5 JUICES’ comply with this specific regulation because, as is clear from the image …, they are more than one-half the height of the words ‘POMEGRANATE BLUEBERRY.’” Coke claims it is a big (“hyperbolic”) exaggeration to say FDA lacks sufficient resources to regulate food labels.
If Pom wins this battle, it will seem to be another sign that the government, step by step, as it gains powers in some areas, continues to relinquish power in other areas, to allow large segments of statutory and agency mandates to be effectively privatized (or libertarianized). For example, as here, Pom and other Coke competitors would become the reviewers of Coke’s labels every bit as much or more compared to what FDA might have done in the past. This case could have enormous implications far beyond FDA labels, and could extend all the way over to TTB labels, TTB formulas, excise taxes, TTB permits, to almost every area that alcohol beverage regulators have firmly controlled in the past. In other news, this case provides a wonderful forum for Pom to beat up on Coke, and remind everyone that Pom has more juice, up and down the U.S. court system, year after year (since at least 2008). I wonder how the cost of this lawsuit compares to or relates to an old-fashioned ad campaign in the paid media.
From our perspective, working with thousands of labels and hundreds of such questions (from the trivial to the weighty) on a yearly basis (as opposed to an appellate litigator or a judge dealing with this from time to time when it flares up big) it seems clear that such tricky questions will inevitably get “litigated.” The only question is whether they will get litigated in an agency proceeding (as has been common in the past), the media, amongst lawyers battling apart from a court or agency proceeding, or in the courts (as was fairly rare in the past). To the extent that Pom wins, we can expect a huge shift from the first to the last.
Turning against the tide of a great many cake and candy flavored vodkas, this brand has cut in the direction of something rather surprising — tobacco flavored vodka. Credit to Robert Back of International Spirits (Jacksonville, Florida) for pulling this off. It probably was not easy, and it comes complete with a disclaimer that THIS PRODUCT DOES NOT CONTAIN ANY TOBACCO OR NICOTINE. The regular, flavored vodka version is here. The menthol version is here (distilled spirits specialty). The company explains:
“With over 45 million people in the United States identifying themselves as smokers, our new tobacco flavored vodkas will be sure to find a niche in the already crowded flavored vodka market,” said International Spirits’ CEO Tony Elward. “We’re also confident that non-smokers will enjoy the new tobacco flavor product as our customers are always looking for the next big thing.”
Ivanabitch Traditional Tobacco Vodka features a bold taste of smoky vanilla blended with sweet caramel. The Menthol Tobacco Vodka features the same taste as the Traditional Tobacco Vodka with a hint of mint.
A product of the Netherlands, all flavors of Ivanabitch are formulated using all-natural flavorings, are 70 proof and five times distilled and then filtered over active charcoal.
Although I don’t think anyone should hold their breath for a nicotine flavored or infused vodka, the next logical step might be something like this Perique Tobacco Liqueur (made with tobacco, unlike what is in the disclaimer above). So far, I don’t see any sign of TTB approval on Perique.
Under the new and important Food Safety Modernization Act (FSMA), FDA was supposed to commence food facility re-registrations yesterday. This was mandated by section 102 of the FSMA law, enacted in 2011.
This piece of the FSMA puzzle is not off to a propitious start. It was bad enough that there was not much guidance or clarity about how this would work, before the October 1, 2012 to December 31, 2012 re-registration period began. But it’s even worse that the brief window for required and biennial re-registration began yesterday — and yet there is still no means by which to accomplish what is required. The renewal website was briefly available last week, for a few hours, then it froze, then it disappeared, to be replaced with an oh so calm assurance that:
Biennial Registration Renewal for Food Facilities will not be available on October 1, 2012. We therefore will not be accepting food facility registration renewals at this time.
Natural Products Insider has explained:
FDA is delaying the registration renewals that are mandated under a 2011 law after the Grocery Manufacturers Association and numerous other trade associations recently sought guidance in meeting the registration requirements.
“It would be extremely inefficient and costly for companies to re-register shortly after October 1st based on the old procedures, only to find out later they have to do it all over again after FDA clarifies the new procedures in its guidance,” wrote Leon Bruner, senior vice president, science and regulatory affairs, and chief science officer of the Grocery Manufacturers Association, in a Sept. 21 letter to the Office of Management and Budget. “Thus, it will be difficult, if not impossible, for food facilities to effectively and efficiently meet FSMA’s registration renewal mandate without guidance from FDA.”
This leaves several hundred thousand food facilities around the world, plus their required agents, with a looming and ever closer deadline, but no means by which to comply with the law.
A few weeks earlier, in late summer, two groups sued FDA “for declaratory and injunctive relief regarding the failure by [FDA] to promulgate final regulations by mandatory deadlines contained in [FSMA].” The non-profit food groups said:
FDA has missed not one, not two, but seven critical deadlines, and counting, in failing to implement FSMA’s major food safety regulations. FDA has submitted several of these unlawfully delayed regulations to [OMB], where they are still awaiting approval. However, FDA has authority to promulgate the regulations without OMB approval.
Despite this bump in the road, here’s what food companies around the world can do, to avoid missing the renewal deadline. Make sure you have a reputable FDA food agent, if you are based outside the US. Make sure that agent has up-to-date information about your facility. You should be especially careful if your agent hides its true identity, or has vaguely (and confusingly, aggressively, and in many cases not so vaguely) pretended to be affiliated with FDA. Some of the agents charge as much as $900 in the first year. If your US importer, or a friend, has handled this for you in the past, it may be time to reconsider and at least make sure your agent is aware of the changed environment. The law can subject the US agent to substantial liability for the costs related to recalls and re-inspections.
For more information about agents and registration, go to www.food-agent.com. The site is affiliated with Lehrman Beverage Law, a law firm in the Washington, DC area that has been acting as US agent for hundreds of companies around the world, since the earliest days of the FDA agent requirement, almost 10 years ago. Unlike many other leading agents, food-agent works within traditional attorney ethics rules, has moderate fees, and tries to avoid confusing food companies about their identity or their relationship with FDA.
October 19, 2012, 9 pm Update: FDA has announced that “Biennial registration renewal for food facilities will begin at 12:01 a.m. on October 22, 2012. At that time, the system will be accepting food facility registration renewals.”
We are starting to get a lot of questions about TTB’s future. Over the years I have marveled and wondered if Bill Clinton or George W. Bush spent much time pondering the fate of ATF or TTB (and, for example, the intricacies of the label approval process). Well, the Obama Administration clearly thinks about it a lot. Late last year, Wine & Spirits Daily wrote:
Obama’s Office of Management & Budget (OMB) is considering “the impact of folding TTB’s tax enforcement and collection functions into IRS, to be proposed in the Budget and implemented in FY 2013,” reports Kane’s Beverage News Daily. The TTB has until Dec 28 to submit a proposal to the OMB “analyzing the feasibility and appropriateness of this proposal, including a discussion of how the missions and goals of these two agencies could be combined.” Furthermore, TTB is to review whether its “regulatory and health-safety functions” can be transferred to the IRS or even the FDA.
Since then, there has been almost nothing in the press about this important story. As recently as today, Google News has not much of any consequence on this issue. I don’t see much on TTB’s website or newsletters. A few days ago, however, The Gray Report set forth some new information on this topic, and it provoked a lively discussion in the comments. W. Blake Gray wrote:
The politics of this potential elimination of the TTB are fascinating, and ultimately why I don’t think it will happen even if Obama wants it. … In this climate where government austerity is seen by many as a good thing, Obama could gain some chips by trying to eliminate a federal agency. … However, the Republicans in the House seem dead-set on preventing him from achieving anything at all, and that will only intensify leading up to November. I think they’ll reflexively oppose it. … But what a conflict it poses philosophically for Republicans. Deregulation is a party tenet — but how would social conservatives react to restrictions being taken off of Demon Rum?
The 2013 Federal Budget is set to be released in a week. According to The Washington Post, “The budget is traditionally released on the first Monday in February — which is Feb. 6 — but the administration has pushed the release to Feb. 13.” Last month, Wine & Spirits Daily wrote:
The TTB has since submitted a plan analyzing the proposal to the Office of Management & Budget, but nothing is public or final at this point. … There are two current speculations as to how the reorganization would go down. One, the organization and all of its functions would be taken in one lump sum and deposited into a corner of the IRS. Two, the TTB’s tax enforcement and collection function could go to the IRS, while its regulatory and health-safety functions could go to the FDA. This is the most extreme scenario. One thing that almost everyone agreed one, however, is that an united alcohol beverage industry has enough power to squash any such proposal if it indeed made its way to Congress.
At least with the TTB the industry is the priority. With the FDA you’re with 25 or 30 other industries.” Even more problematic is that the FDA may have some anti-alcohol types, whereas the TTB is a neutral force.
One of the biggest complaints last year was the TTB’s slow response time when it came to approving labels – a result of less funding by Obama and inevitable lay-offs. As a remedy, the TTB proposed shifting its duties more towards enforcement rather than label pre-approvals, but the industry fought it. Instead, it seems the industry would rather the TTB speed up the COLA process than do away with it.
[I]t doesn’t seem likely that disbanding the TTB would save much money because theoretically it would require the same amount of people to complete the same functions now performed by the TTB, which “is pretty bare bones as it is.” Furthermore, the “TTB is one of the few revenue generating agencies in the federal government. They make a lot of money. It would be hard to split it up effectively.”
Three years ago, as part of the 2010 Budget, the Obama Administration flirted with the idea of imposing user fees for various TTB activities, and not much came of it. In our opinion, to the extent this is some kind of business school-type exercise, or thought experiment (as in, show cause why there should not be a shakeup), it could be useful. But, if any reorganization would take several hundred people from one entity and replace them with a similar number at one or more other entities, it is hard to imagine that the costs would not outweigh the benefits.