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Pom v. Coke, Battle of the Misleading Fruits

pomegranateThe 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.

Pom’s superfamous lawyer argued:

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.

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Tobacco Vodka

tobacco

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.

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distilled spirits specialty, flavored vodka


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FDA Not Ready For FSMA Renewals

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.”

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From IRS to ATF to TTB to What?

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.

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Old Bay Beer

I do believe this Olde Bay Saison label raises at least a few legal issues. First of all, I sure hope the brewer had permission to use this famous branding. McCormick owns the Old Bay seasoning brand and probably would not have a sense of humor about any unauthorized uses. Even if the beer is loaded up with the same seasoning, and even if the reference tends to be flattering. I can not imagine that changing one letter (from Old to Olde) is likely to help any more. The total production for this ale with spices seems to have been tiny, so that may help somewhat more to avoid problems.

A second legal issue is that, such a beer needs formula approval, before label approval and production. To get formula approval, it is usually necessary to provide a detailed ingredient list to TTB. It can be very difficult for anyone to get ingredient details (beyond what FDA typically requires on a food label’s ingredient list) about famous and protected products like Coca-Cola, Angostura Bitters, or Old Bay. TTB typically needs to check for artificial flavors, allergens, colors, and use-rate limitations, and this can be very difficult to do without a complete ingredient list of the sort that McCormick would be unlikely to provide to the brewer here (The D.O.G. Beverage Co. of Westminster, Maryland). So this raises the question of whether this beer actually contains Old Bay seasoning, or TTB did not require details about all 18 ingredients, or D.O.G. somehow got hold of the ingredient list.

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