Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Nestlé may be liable for misrepresenting the health benefits of its products, (Aug 13, 2013)

By Jody Coultas, J.D.

Purchasers of Nestlé USA food products stated, in part, claims that the company allegedly misbranded and falsely advertised the healthful nature of its products in violation of the California Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA), according to the federal district court in San Jose, California (Trazo v. Nestlé USA, Inc., August 9, 2013, Grewal, P.). The purchasers could not represent a class of Nestlé purchasers, however.

The purchasers alleged that Nestlé labeled products as “No Sugar Added” that contained concentrated fruit juice or other added sugars; labeled products as “All Natural” or “Natural” that contained artificial ingredients, flavoring, added coloring, and/or chemical preservatives; and labeled products with an antioxidant claim for a nutrient lacking a Daily Value or lacking the minimum Daily Value specified for the claim made. The products were also labeled and advertised as healthy, despite containing excess fat, saturated fat, sodium, and cholesterol.

Standing. The named purchasers had standing to bring individual consumer protection law claims based on Nestlé’s false advertising of 13 food products, according to the court. Issues of standing concerning products not actually purchased by the named purchasers were deferred to the class certification stage.

Preemption. Claims based on Nestlé’s Dark Chocolate Raisinets and Dark Chocolate Toll House Morsels were expressly preempted by the Food, Drug, and Cosmetics Act (FDCA), according to the court. The purchasers alleged that Nestlé labeled the products as a “source” of antioxidants. The FDCA requires that if antioxidant is qualified with specific words, such as “good source,” the product must meet a certain antioxidant level. The term “source” was not listed by the FDCA. Therefore, the purchasers sought to impose requirements additional to the FDCA. Accordingly, the claims were expressly preempted.

The FDCA did not impliedly preempt the claims, according to the court. The implied preemption provision of the FDCA allowed states to adopt and enforce parallel laws.

Unlawful claims. The purchasers were able to show that a number of products violated the California Sherman Food, Drug, and Cosmetic Act, and in turn were unlawful under the UCL, according to the court. However, claims that were too speculative or unclear were dismissed by the court. The purchaser’s allegations that the Nestlé products were mislabeled as “no sugar added” were merely recitals of the elements of the Sherman Law. However, the allegations that Nestlé’s “0g trans fat” labeling was an express nutrient claim that may have violated the Sherman Law, and the use of “evaporated cane juice” to describe plain sugar may be misleading.

Misleading claims. The purchasers failed to show that a reasonable consumer would have been misled by the allegedly false advertising, according to the court. To state a false advertising claim under the California consumer protection laws, the purchasers needed to show that the packaging was deceptive and that the purchasers reasonably relied on the packaging when deciding to purchase the product. The claims did not contain any allegations that a reasonable consumer would have been misled or how the named purchasers themselves read the labels and were deceived by them.

Class claims. The court granted Nestlé’s motion to strike the class allegations based on the purchasers’ failure to meet the class action requirements set forth in Federal Rule of Civil Procedure 23. Rule 23(a) requires that the named plaintiffs’ claims be typical of those of the rest of the class. In food mislabeling cases, a plaintiff may proceed to represent a class of purchasers that bought similar food products. The products must be of the same kind, comprised of mostly the same ingredients, and bear the same mislabeling.

Here, the named purchasers’ were not typical of other purchasers who bought all the products with the alleged mislabeling. The claims included all products that were labeled with certain key words and had certain attributes, but did not include a certain product line. The claims would require individualized hearings to determine the food composition and actual labels of the products at issue.

The case is No. 5:12-CV-2272 PSG.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) for Jude Trazo. Dale Joseph Giali (Mayer Brown LLP) for Nestlé USA, Inc.

Companies: Nestlé USA, Inc

Cases: Advertising StateUnfairTradePractices CaliforniaNews