Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Class action alleging mislabeling of artificial ingredient in Coca-Cola proceeds, (Aug 22, 2014)

By Edward L. Puzzo, J.D.

Class claims that Coca-Cola violated state unfair competition laws by failing to identify phosphoric acid as an artificial flavor or preservative required a factual determination as to the nature of that ingredient, the federal district court in Oakland has ruled. Thus, the claims could not be dismissed at an early stage of the litigation (Engurasoff v. Coca-Cola Company, August 21, 2014, White, J.).

Plaintiffs in this putative class action brought claims against the Coca-Cola Company based on its inclusion of phosphoric acid as an ingredient in Coca-Cola (a/k/a Coke), its signature soft drink product. Plaintiffs alleged that the California’s Consumer Legal Remedies Act (CLRA), Unfair Competition Law (UCL), and False Advertising Law (FAL) were violated when phosphoric acid was not identified as an artificial flavor and/or a chemical preservative on the Coke product label. Coca-Cola moved to dismiss.

The court explained that California’s Sherman Act adopted and incorporated by reference all of the food labeling requirements of the federal Food Drug and Cosmetics Act (FDCA) and the Nutrition Labeling and Education Act of 1990 (NLEA). This formed the basis for the portion of the UCL stating that it was unlawful for a food product to contain any artificial flavoring, artificial coloring, or chemical preservative unless the product’s labeling disclosed that fact. The threshold issue was whether or not phosphoric acid was considered either an artificial flavor and/or a chemical preservative by the FDCA.

Artificial flavor. Food and Drug Administration (FDA) regulations define “artificial flavor” as any flavor-imparting substance not derived from certain named sources including fruits, vegetables, herbs, spices, meats, poultry, or dairy products. Plaintiffs alleged that phosphoric acid was added to Coke to impart tartness. Consequently, plaintiffs’ allegations appeared sufficient to show, at this procedural stage, that phosphoric acid was used to impart flavor, that it was not derived from one of the allowable sources, and thus was not labeled in accordance with the applicable regulations.

Coca-Cola argued in response that phosphoric acid is not an artificial flavor because it is not listed in FDA regulations among a list of substances considered artificial (21 CFR §§ 172.515(b) and 182.60). The court did not accept this argument because the regulations themselves stated that the list was not exhaustive, meaning that a substance’s absence from the list of artificial ingredients was not proof that the item is not artificial.

Coca-Cola also argued that phosphoric acid is not an artificial flavor because it did not impart a “characteristic flavor” (21 CFR §170.3). But since the primary recognizable flavor was not at issue, the cited regulation was inapplicable, the court stated. Instead, the Ivie v. Kraft Foods Global case (961 F. Supp. 2d 1033, N.D. Cal. 2013) ruled that a factual determination as to whether an ingredient was an artificial flavor could not be made on a motion to dismiss. Following Ivie, the court concluded that it could not make a factual determination, at this procedural stage, as to whether phosphoric acid qualified as an artificial flavor.

Chemical preservative. Coca-Cola contended that, pursuant to FDA regulations, chemical preservatives only include ingredients specifically added to food for their preservative function, and phosphoric acid was not added to Coke for this purpose. The court responded that, even if this interpretation of the regulations were accurate, it would require a factual determination not appropriate at this procedural stage.

Failure to state a claim. Coca-Cola also attempted to have the claims dismissed on the ground that plaintiffs failed to allege sufficient facts to show reliance, as required for CLRA, UCL and FAL claims. The court agreed that the claims were grounded in fraud and therefore a showing of reliance was required. However, the plaintiffs sufficiently pleaded that they did not know phosphoric acid was an artificial flavor or chemical preservative, that they would not have purchased Coke had they known so, and that they relied on the Coke product label. This pleading sufficiently alleged reliance, and thus the claims could not be dismissed on that basis, the court ruled.

The case is Civil Action No. C 13-03990 JSW.

Attorneys: Ben F. Pierce Gore (Pratt & Associates), and Bradley F. Silverman (Fleischman Law Firm) for George Engurasoff. Tammy Beth Webb (Shook Hardy & Bacon LLP) for The Coca-Cola Company.

Companies: The Coca-Cola Company.

Cases: Advertising StateUnfairTradePractices CaliforniaNews