Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Action to force FTC to revise egg carton labeling rules fails, (Dec 29, 2014)

By Linda O’Brien, J.D., LL.M.

The discretionary decision of the FTC and three other government agencies not to initiate rulemaking, following an animal welfare coalition’s request to impose labeling restrictions on cartons of eggs produced by caged hens, was not arbitrary and capricious, the federal district court in San Francisco has decided. Thus, the agencies’ motion for summary judgment was granted, and the coalition’s cross-motion was denied (Compassion Over Killing v. Food and Drug Administration, December 19, 2014, Chhabria, V.).

Compassion Over Killing is an animal welfare organization that focuses on the protection of agricultural animals and the promotion of vegetarianism. Between 2006 and 2013, the organization, along with the Animal Legal Defense Fund and a group of individuals, submitted petitions to the FTC, Food and Drug Administration (FDA), and two other government agencies, seeking the imposition of revised labeling requirements on egg producers to identify the method used in producing the eggs. Specifically, the plaintiffs contended that of the two egg production methods – battery cage systems or “cage free” – eggs from caged hens were nutritionally inferior and carried a greater risk of salmonella contamination. The plaintiffs also contended that the labeling on many producers’ egg carton suggested that caged hens were treated much more humanly.

After each agency denied the petitions, the plaintiffs filed suit against the agencies, alleging that the denials were arbitrary and capricious in violation of the Administrative Procedure Act (APA). The parties filed cross-motions for summary judgment.

FTC. The court found that the FTC’s denial of the plaintiffs’ petition was not arbitrary or capricious, since the decision whether to promulgate rules addressing unfair or deceptive acts was within the discretion of the agency. The FTC, under the Federal Trade Commission Act, is authorized to prescribe rules with respect to unfair or deceptive acts or practices affecting commerce.

The plaintiffs argued that the egg producers’ use of the terms “free range” and “cage free” suggested to consumers more human treatment than what the producers actually provided and that imagery used on carton labels of eggs laid by caged hens created a misleading impression that the eggs were produced under free range or cage free conditions. However, the FTC found that the evidence in the plaintiffs’ petition was insufficient to show that the use of the terms “All Natural” and “Animal Friendly” on the carton labels of eggs laid by caged hens created an impression that the eggs were produced without the use of cages. Further, the plaintiffs provided insufficient evidence that any misleading practice was prevalent.

Since the FTC determination that the issue did not warrant the exercise of its discretion to promulgate a regulation was made considering the agency’s preference to combat deceptive practices through individual enforcement actions, the court would not disturb the agency’s discretionary decision.

FDA. Additionally, the FDA’s refusal to initiate rulemaking was not arbitrary or capricious. According to the court, the FDA had broad discretion to choose how to marshal its limited resources and personnel to carry out its designated responsibilities. The agency’s denial of the plaintiffs’ petitions detailed its competing priorities given its limited resources and explained that the proposed rulemaking was not the best use of its resources. Thus, a high level of deference should be accorded its decision, the court concluded.

The case is No. 3:13-cv-01385.

Attorneys: Carter Dillard, Cheryl Leigh Leahy, and Jennifer Sara Rosen (Morgan Lewis Bockius LLP) for Compassion Over Killing and Animal Legal Defense Fund. Adrienne Elise Fowler, U.S. Department of Justice, for Food and Drug Administration, Agriculture Marketing Service, Food Safety and Inspection Service, and Federal Trade Commission.

Companies: Compassion Over Killing; Animal Legal Defense Fund

Cases: Advertising CaliforniaNews