FTC Announces Intent to Issue Compulsory Process Orders Regarding Marketing of Food and Beverages
In a May 25, 2010, Federal Register Notice, the Federal Trade Commission (the “FTC”) announced its intention to issue compulsory process orders to 48 food and beverage manufacturers, distributors, marketers, and quick service restaurant companies. The proposed orders seek information concerning the companies’ marketing expenditures targeted toward children and adolescents, and nutritional information about the companies’ food and beverage products marketed to children and adolescents.
The proposed orders, issued under Section 6(b) of the Federal Trade Commission Act, 15 U.S.C. § 46(b), will seek information in six categories, including:
• The categories of foods marketed to children (ages 2-11 years) and adolescents (ages 12-17 years);
• The types of measured and unmeasured media techniques used to market food products
to children and adolescents;
• The amount spent to communicate marketing messages about food products to children and adolescents;
• The nature of the marketing activities used to market food products to children and adolescents;
• Marketing to children and adolescents of a specific gender, race, ethnicity, or income level; and
• Marketing policies, initiatives, or research in effect or undertaken relating to the marketing of food and beverage products to children and adolescents.
By procuring this information, the FTC will be able to evaluate the impact of self-regulatory efforts on the nutritional profiles of foods marketed to children and adolescents. In addition, the FTC seeks to determine and analyze how companies allocate their promotional activities and expenditures among various media and for different food products. Interested parties may submit comments on or before June 24, 2010.
This FTC action is a follow-up to its July 2008 report entitled, Marketing Food to Children and Adolescents: A Review of Industry Expenditures, Activities, and Self-Regulation. That report represented the findings of a 2006 FTC study of promotional activities related to food and food products targeted toward children and adolescents. It found that, while room for improvement existed, the food and beverage industries had made significant progress on this front since the FTC and the Department of Health and Human Services co-sponsored a Workshop on Marketing, Self-Regulation & Childhood Obesity in 2005. As everyone from the First Lady to the World Health Organization is focused on the impact of marketing on childhood obesity, the results of this FTC action will bear monitoring.
Five Tips for "Green" Advertising
By Guest Blogger David Pacheco
This post also appears on the Essential Nutrition Law Blog
Yesterday, Stoel Rives' Salt Lake City office hosted a seminar on Advertising Law with Catherine Lake, Josh Gigger, and myself presenting. As part of the seminar, I offered some tips on avoiding legal problems when advertising the environmental friendliness of your goods or services. Here is a summary of those tips:
Continue Reading...USDA and DOJ Scrutinize the Meat Packing Industry
Competition in the meat packing industry is currently a central focus of the Antitrust Division of the Department of Justice (“DOJ”) and the USDA.
In 2008, the DOJ and 16 states challenged the merger of JBS and the National Beef Packing Company, leading the parties to abandon the deal. In its amended complaint filed against the transaction, the DOJ opposed the merger, claiming that it would have combined two of the four largest beef packing companies in the U.S. (“Post merger, over 80% of the nation’s fed cattle packing capacity would be controlled by a three-firm oligopoly. . . .”).
The DOJ’s concern about concentration in the meat packing industry apparently continues. As is often the case, a merger investigation educates regulators, and after the investigation concludes, the government’s lawyers maintain an interest in the industry. In March, the DOJ Assistant Attorney General for the Antitrust Division, Christine Varney, declared that in the near future we will see “unprecedented cooperation and collaboration between [the DOJ] and the USDA,” in her remarks at the first DOJ/USDA competition workshop, held in Ankeny Iowa. Varney noted that collaboration will include “taking full advantage of the authority that’s delegated to us in the Packer[s] and Stockyard[s] Act,” a 1921 statute that specifically addresses competition in the meat packing industry.
Earlier this month, the Associated Press reported that officials from the USDA’s Grain Inspection, Packers and Stockyards Administration (”GIPSA”) are speaking to cattle ranchers about competition and pricing in the meat packing industry. CEO of the Ranchers-Cattlemen Action Legal Fund (“R-CALF”), Bill Bullard, is quoted in the article, noting that ranchers in his organization have been frequently meeting with USDA officials in recent months. Ranchers argue that the country’s four biggest meat packing companies (Tyson Foods, JBS, Cargill, and National Beef) benefit from “buyer power.” They claim that buyer power drives down prices for the cattle that they raise. Economists would argue that such buyer power ultimately benefits customers.
In any event, does all this talk mean that aggressive enforcement of the Packers and Stockyards Act (to the benefit of ranchers) is on the horizon? A USDA official quoted in the Associated Press article suggests that may be true, corroborating the Assistant Attorney General’s comments above (“[W]hat we’re doing at GIPSA now is trying to . . . enforce the Packers and Stockyards Act . . . .”).
The DOJ and USDA are spending this entire year evaluating antitrust and competition policy in the agriculture industry, starting with a series of public workshops. There will be a workshop on the poultry industry on May 21, in Normal, Alabama. On August 27, the agencies will host a workshop in Fort Collins, Colorado, addressing “concentration in livestock markets, buyer power and enforcement of the Packers and Stockyards Act.”
Raw and Uncut: Wisconsin Governor Vetoes Raw Milk Bill
“Got Milk?” The answer to that question may not be as cut and dried as you might believe, at least in Wisconsin. In a May 19 letter to the state Senate, Wisconsin Governor Jim Doyle explained his rationale behind his veto of Senate Bill 434, which would have authorized dairy farmers with a Grade A dairy farm permit to sell unpasteurized milk, buttermilk, butter, and cream directly to consumers. Sellers would have been required to post a warning sign at the site of sale stating that raw milk does not provide the protection of pasteurization and is not recommended for certain categories of consumers – including children, seniors, pregnant or nursing women, diabetics, or those with compromised immune systems.
Citing widespread opposition from the public health community (including the Wisconsin Public Health Association and the Food and Drug Administration, which has previously issued releases on the health issues related to unpasteurized milk) and numerous industry stakeholders, Governor Doyle explained that, in his view, the lack of rigor in the testing standards for pathogens, risks to public health and the state’s economic interests should an outbreak of disease linked to consumption of unpasteurized milk occur, and the ongoing work of the Wisconsin Department of Agriculture, Trade and Consumer Protection’s recently created Raw Milk Policy Working Group, which has been charged with reviewing the legal and regulatory framework surrounding the sale of unpasteurized milk to consumers in an attempt to strike a balance between market demand and public health, warranted a veto of the bill. An aide to Majority Leader Russ Decker stated that the Senate is not likely to attempt to override Governor Doyle’s veto.
This issue of the sale of unpasteurized milk to consumers is not limited to Wisconsin. In his letter to the Senate, Governor Doyle mentioned the comprehensive testing approach required for raw milk products under California law. In order for raw milk to be legally sold in California, it must meet the standards provided in the Milk and Milk Products Act of 1947. Under California Administrative Code, raw milk and raw milk products must bear a detailed warning to consumers on the principal display panel of the label. Washington State Administrative Code also requires raw milk containers to bear a warning label. As more consumers express preferences for unprocessed, “natural” foods, issues related to the sale and consumption of unpasteurized milk could find a more prominent place in the judicial system and industry marketplace.
New Legislation Seeks to Soften FDA Regulation of Nutritional Supplements
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By Guest Blogger Jonathan Stagg
This post also appears on the Essential Nutrition Law Blog
One major complaint of companies marketing nutritional supplements is that the FDA severely limits their use of scientific findings in promoting the health benefits of their products. Under current FDA regulations, use of a scientific study to advertise the health benefits of a given product can convert the product from a nutritional supplement into a drug, and therefore impose the vast array of regulations applied to drugs. As a result, nutritional supplement manufacturers have to be very careful about claiming health benefits or citing to scientific research, whether on their product labeling or even on their websites.
In response to these concerns, Congressmen Jason Chaffetz (R-UT) and Jared Polis (D-CO), introduced what they are calling the “Free Speech About Sciences Act.” This proposed legislation seeks to soften the application of these FDA regulations to nutritional supplements. If the law were to pass, companies would be allowed to reference “legitimate scientific research” in support of claims about the health benefits of their products. In order to fall within the definition of “legitimate scientific research,” the study must have been conducted and reviewed according to certain standards, and must appear in a peer-reviewed scientific publication. Companies must also follow certain guidelines in presenting the findings, such as including an accurate and balanced summary of the research, providing consumers a citation to the study, and providing information about the entities who funded the research.
A Traceability Story: Request for Comments
Jim Prevor has an intriguing story in one of his latest Perishable Pundits, updated here and here, that frankly has me wondering. According to Jim, Freshway Foods discovered E.Coil 0145 in some romaine and, using tracking numbers, was able to trace it to a specific lot supplied by a grower in Yuma, Arizona. It then issued a recall limited to that specific lot.
But the FDA decided to be more cautious and to advise Freshways to recall all the romaine from Yuma, not just the identified lot. And the buyers of the product decided to pull anything they had on their shelves from Freshways, whether it was from Arizona, and whether, apparently, it was romaine or not.
This raises a number of questions and I am not going to purport to answer them. Rather, I'd really like to solicit comments from our very knowledgeable and resourceful readership. This is the age of Web 2.0 and beyond. We'd love to hear from you.
- Is the implication of Jim's article right, that spending money on good tracing systems may be futile because consumers and regulators will never trust the system?
- What kind of public education might work to improve the acceptance of traceability?
- As a legal matter, it's unlikely that the buyer of the non-recalled products has any recourse against the seller; in the real world, however, is the seller likely to make good in order to assure future sales?
- Ken recently wrote about a similar insurance issue; is there any kind of insurance for something taken off the shelves because of an abundance of caution when the supplier says only to recall specific items?
- In his updates, Jim suggests that the real issue is that perhaps we are providing more traceability than the market demands and others suggest that the issue is that upon discovery of an outbreak, the FDA doesn't either adequately communicate the perceived cause of the outbreak or ever issue an "all clear" after it is over. Is either step either (a) practical when things are moving in real time, or (b) really the FDA's responsiblity or even power under current laws and regulations?
In case you should come across some romaine tainted with E Coli 0145, the answer is to heat it, not wash it. Salon.com has a recipe.
Dr. Temple Grandin in Seattle, June 18 for Food Alliance Event
Register now for the Friday, June 18 Food Alliance event at the Museum of History and Industry (MOHAI) in Seattle with Dr. Temple Grandin. This is a unique opportunity to meet Dr. Grandin and leaders in sustainable food and animal welfare. The event benefits Food Alliance, where I serve on the board. It’s the first Food Alliance event in Seattle.
By way of background, Dr. Grandin was recently named one of the most influential people of 2010 by Time magazine. She has authored more than 400 articles on animal welfare, livestock handling and facility design. Her books, Animals in Translation and Animals Make Us Human, were both on the New York Times best seller list. To learn more about Dr. Grandin and her work, click here.
This event includes:
• Lecture and book signing by Dr. Temple Grandin
• Hors d'oeuvres reception featuring local Food Alliance Certified ingredients
• Panel presentation with farmers, ranchers and food businesses committed to greater sustainability in animal agriculture and the food system
• Special showing of the HBO film, Temple Grandin, starring Claire Danes, David Strathairn and Catherine O'Hara
Proceeds from this event will help ensure continual improvement of Food Alliance certification standards for healthy and humane treatment of livestock.
Will the New Health Care Law Improve Chilren's Nutrition?
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By Guest Blogger David Pacheco
This post also appears on the Essential Nutrition Law Blog
It is hard to deny that Americans are putting on the pounds and that the problem is often starting with poor nutrition during childhood. The problem has not gone unnoticed and a number of organizations, including the federal government, are trying to trim down the epidemic.
Authors Ellen-Marie Whelan , Lesley Russell, and Sonia Sekhar of the Center for American Progress recently published the report, "Confronting America's Childhood Obesity Epidemic: How the Health Care Reform Law Will Help Prevent and Reduce Obesity" (link to website introducing the report, with links to the full version and executive summary). As is clear from the title, the report analyzes the potential effect of the new health care reform laws on children's nutrition. Specifically, the authors discuss the Patient Protection and Affordable Care Act and highlight the following provisions as those with the most effective measures for combating childhood obesity:
•Improved nutrition labeling in fast food restaurants, which will list calories and provide information on other nutrients (For more information on this specific provision, take a look at Richard Goldfarb's excellent post with his thoughts on the new labeling requirement).
•The Childhood Obesity Demonstration Project, which gives grants to community-based obesity intervention programs
•Community Transformation Grants, which gives grants to community-based efforts to prevent chronic diseases
The report also analyzes a number of other aspects of the law that, while not targeted specifically at combating obesity, the authors believe will have some positive effect on the problem.
Energy Drinks and Nutrition Bars too Related to Avoid Consumer Confusion
By Guest Blogger Michael Mangelson
This post also appears on the Essential Nutrition Law Blog
The Trademark Trial and Appeal Board (TTAB) recently issued a decision that highlights the importance of not assuming that goods that fall in different international trademark classes are unrelated in a likelihood of confusion analysis. In In re Spirits of the USA, LLC (not citable 4/21/10), the TTAB held held that energy drinks (class 32) and nutrition bars (classes 5 and 30) are too related to avoid a likelihood of consumer confusion when used in connection with the mark "Runner". The TTAB concluded that energy drinks and nutrition bars both provide energy and are commercially related products that are sold in the same channels of trade to the same classes of consumers, so confusion is likely.
How can you know if the relationship between the products you plan to list in your trademark application and those in an existing third party registration are likely too close? Do what examining attorneys at the USPTO do: search for third party registrations that list both your products and the products listed in the registration in question. If a number of these third party registrations exist, the examining attorney is likely to cite them in a refusal claiming that this evidence suggests that the listed products are of a type which may emanate from a single source and therefore are likely to cause confusion in the marketplace. (See In re Albert Trostel & Sons Co., 29 USPQ2d 1783, 1785-86 (TTAB 1993)).
Court Cuts Back Claims In Great Pomegranate Dispute
By Guest Blogger Jay Eckhardt
In a dispute over product labeling and marketing, the Coca-Cola Company avoids liability as a result of its careful compliance with FDA rules. (Also, see Rick's post from last week, regarding Coca-Cola's victory in a dispute over its original formula label found on Coke® Classic.) But pomegranate champion POM Wonderful can still pursue a Lanham Act deceptive advertising claim against the company.
On May 5 the U.S. District Court for the Central District of California issued summary judgment orders that cut out two of POM's claims against Coca-Cola's "Minute Maid Enhanced Pomegranate Blueberry Flavored 100% Juice Blend." (Download a copy of the Central District of California's Order here.)
The court acknowledged that consumers have griped about the emphasis on pomegranate and blueberry in the Minute Maid product labeling and advertising. (See Ken's post about a consumer class action concerning Tropicana's pomegranate blueberry juice blend here.) Still, the court agreed with Coca-Cola that POM could not bring a Lanham Act claim challenging the product name, because the company complied with FDA labeling requirements. The Minute Maid product contains less than one-half of one percent (0.5%) pomegranate and blueberry juice, but the court determined that the name is compliant with FDA rules, which allow for product names that prominently cite ingredients that are less than prominent in volume. Because the label clearly notes that the juice is "flavored" with pomegranate and blueberry juice and that the juice is a "blend" of several juices, the court held that the name complies with applicable FDA regulations (21 C.F.R. §§ 102.33(c) and 101.22(i)(1)(i)).
A second claim raised by POM was thrown out by the court. POM sought restitution under California Business & Professions Code section 17200, which provides a cause of action for "Unfair Competition." The court dismissed this claim because "restitution" has been narrowly interpreted by the California Supreme Court, thus barring POM's claim for recovery of a "lost business opportunity." Among authorities cited for the decision to dismiss this claim, the court reported that POM's similar claims under California's Unfair Competition law, brought against Tropicana and Welch's, have recently been dismissed in separate actions.
A third claim survived Coca-Cola's summary judgment attack. POM may proceed under the Lanham Act to challenge the marketing and advertising for the "blueberry pomegranate" product. The court held that POM may attempt to prove at trial that advertising and marketing actually deceived customers, or that Coca-Cola willfully and intentionally misled customers with the marketing of its product.
As noted from the court's order, Coca-Cola is not the only target of POM's litigation strategy. Other juice makers, Tropicana and Welch's, have been the focus of POM's efforts to defend its niche. Ken reported on POM's challenge to Ocean Spray's pomegranate cranberry juice blend last August, when POM survived Ocean Spray's initial motion to dismiss all claims.
An inspired marketing campaign for POM's products, and its essential ingredient, helped build the pomegranate franchise. It's hard to say whether litigation against advertising and labeling practices of POM's pomegranate competitors will be effective. At the same time, there's no doubt that POM is well aware of the burdens of FDA labeling regulations – the company was one among 17 companies notified by the FDA last February that its product labeling and advertising did not pass muster. The FDA warned POM that its advertising was suspect, based on the health claims made on its web site about the benefits of pomegranate juice.
"Always Coca-Cola"? Who Knows?
On April 27, the U.S. District Court for the Southern District of Illinois dismissed the case of Kremers v. Coca-Cola Company. The case involved another of these ubiquitous claims where someone is suing saying they were fooled by labeling on a product. Unfortunately, the case was dismissed on grounds that indicate we might never really know the answer to the real gravamen to the plaintiffs’ complaint.
The claim involved the change, famous in product lore, from Coke to “new Coke” and then back to “Coca-Cola classic.” In 1985, Coca-Cola Company announced it was reformulating its flagship brand, renaming it “New Coke.” Two months later, having learned that brand loyalty may indeed trump blind taste tests, it relaunched its old formula as “Coca-Cola classic.” Eventually, New Coke was renamed “Coke II” and is, according to Coca-Cola Company itself, no longer available in the United States.
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The Kremers case involved what, at least on the can of Coke® I borrowed from my office, is a tiny legend at the bottom of the can, saying “Original Formula.” The claim was that the original formula” of Coca-Cola included sugar, not high fructose corn syrup, and therefore the phrase “Original Formula” was misleading, requiring, of course, the company to cough up damages to everyone who had been fooled by the phrase.
Unfortunately for the two named plaintiffs, fortunately for Coca-Cola Company and definitely unfortunately for anyone who wanted to find out the answer to the question of whether “Original Formula” could in fact be misleading, the two plaintiffs had different, but equally dispositive, flaws in their cases. Lead plaintiff Amanda Kremers couldn’t beat the five year Illinois statute of limitations for claims of unjust enrichment. She admitted in her deposition that she had first heard that high fructose corn syrup was in Coke® way back in the 1990s. Second named plaintiff Jason McCann admitted on deposition that he’d never read the words “Original Formula” on the can, which made it basically impossible for him to claim he was deceived. And both plaintiffs admitted to continuing to buy Coke® even after the case was brought, when they clearly could not have been deceived about the contents of the beverage, since they were already suing its manufacturer. 
The unanswered question in the case is interesting. As you can see, the type size for “Original Formula” is about the same as the type size for “High Fructose Corn Syrup” on the ingredients label. That would probably argue against anyone being reasonably misled by the one by somehow failing to look at the other.
More to the point, however, is that the history of Coca-Cola does not support the plaintiff’s case. The “formula” of Coca-Cola is proprietary and a trade secret (though how much of a secret is of course the subject of debate). Coca-Cola used to include real live cocaine, as opposed to completely decocainized coca leaves. According to Snopes, at some point in the 1920’s
glycerin was added as a preservative, cocaine was eliminated, caffeine was greatly reduced, and citric acid was replaced by phosphoric acid, to name the changes we know about.
By “Original Formula,” they quite clearly mean “not that New Coke stuff everyone complained about in 1985.” Coca-Cola Company itself admits they misunderstood their own customers then; they’re just reassuring them now.
Also according to Snopes, when New Coke was introduced in 1985, there was no sugar in Coke®. So focusing on the high fructose corn syrup, as opposed to the other changes, seems likely to be an attack on HFCS more than anything to do with being fooled by which Coca-Cola formula is in the can.
Of course, if you want Coke® with real sugar, it’s available from Mexico (Sugared Coke® is also available in the United States in some areas around Passover, because observant Ashkenazic Jews don't eat corn during the holiday).
I haven’t drunk Coke® in years, but this past winter we were visiting some Mayan ruins and on the way back had lunch in Bacalar, where we had a choice of beer, bottled water and Coke®. I chose the Coke® and after one sip I realized that this was the beverage I had grown up with. Yes, sugar in Coke® does, at least to these taste buds, make a difference. But I can also read a label.
DOJ Pursues Tomato Processors - One Executive Pushes Back
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By Guest Blogger Jay Eckhardt
On April 29, the Department of Justice (DOJ) announced that it had obtained a criminal indictment against the former CEO of SK Foods, Scott Salyer, for his participation in a conspiracy to fix prices and rig bids in the market for tomato paste. (SK Foods is now owned by Olam International, of Singapore.) This followed on the heels of a prior indictment against Mr. Salyer, obtained in February, for fraud, obstruction of justice, and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). Mr. Salyer was arrested by the FBI in February and has been held in federal custody since his arrest.
While entering a guilty plea is frequently the most prudent tactic for executives charged in criminal antitrust cases, when the stakes are high it may make more sense to fight back. In this case, Mr. Salyer has challenged the indictments against him and pleaded not guilty to the price fixing and bid rigging charges this week.
Government lawyers generally tend to prefer to shoot their fish in a barrel – which is to say, they seek cases that they think they will win. Of course juries didn’t agree with DOJ lawyers in 2008, when a hung jury refused to convict executive Gary Swanson for his role in a conspiracy to fix prices for dynamic random access memory chips (DRAM), and in 2007, when a jury found that the Stora Enso company did not conspire to fix prices for coated magazine paper. Mr. Salyer apparently hopes to join the successful minority that has avoided prosecution.
But what about the tomato processing industry? The LA Times reports that DOJ has been focused on bid rigging, corruption, and bribery investigations in the industry since 2007. With only five companies processing 95% of the tomatoes grown in the U.S., the industry is fertile ground for federal prosecutors, as the concentrated group of close competitors has turned out to be too friendly. Who are the victims? They are actually some of the largest American food companies: Kraft, Safeway, Frito-Lay, B&G Foods, and others. Government investigations have shown that these companies purchased tomato paste and other processed tomato products at inflated prices. In some cases, processors also lied about the contents of their products, mislabeling products at higher “grades” in order to get higher prices.
In the tomato investigation, Mr. Salyer is the first to fight his conviction. The first big conviction came from a broker for SK Foods who pleaded guilty in December 2008. According to the LA Times, DOJ has secured guilty pleas from at least nine individuals in the tomato processing industry. The same pattern emerged in the DOJ’s DRAM investigation. While Mr. Swanson avoided his prosecution, 14 others involved in the DRAM price fixing conspiracy pleaded guilty, and the DOJ secured fines and penalties of over $700 million from individuals and the corporations they worked for. With a little luck (and perhaps a misstep by the prosecution) Mr. Salyer may evade conviction. It appears that the industry as a whole will not be so lucky. The government, and the tomato processors’ customers, will likely pursue claims for some time.
