Antitrust Law Daily Wrap Up, ADVERTISING—NDCal: Frito-Lay May Be Liable for Deceptive Labeling Claims Under California’s Consumer Protection Laws , (Apr 3, 2013)

By Jody Coultas, J.D.

The federal district court in San Francisco has dismissed many of the California consumer protection law claims filed by snack food consumers against food manufacturers Frito-Lay North America, Inc. and PepsiCo, Inc. based on allegedly false and misleading labeling and advertising of its snack food products (Wilson v. Frito-Lay North America, Inc., April 1, 2013, Conti, S.). Claims based on "all natural," "0 grams trans fat," and "No MSG" labels survived.

The consumers alleged that a number of Frito-Lay products were falsely labeled and advertised as being all-natural, low sodium, and healthy, as well as containing no MSG and 0 grams trans fat. PepsiCo argued that the consumers could not show why PepsiCo could be held liable for the actions of Frito-Lay. The companies also argued that the consumers lacked standing to assert claims based on products they did not buy, no reasonable consumer would be misled by the labels at issue, and the claims failed to meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b).

PepsiCo, as the parent company of Frito-Lay, was improperly named in the case, according to the court. The consumers failed to allege more than legal conclusions that PepsiCo made false claims about their products.

Claims based on products that the consumers did not buy were dismissed. The consumers bought five specified products, but based the claims on a wider variety of products. The court held that the consumers lacked standing to assert claims based on products they did not allegedly purchase. Those claims also failed to meet the Rule 9(b) standard as there was no evidence of what products were purchased, what advertisements were viewed, where the allegedly actionable statements appeared, how the statements were misleading, and who made the statements.

The consumers’ claims based on statements made on www.fritolay.com were dismissed with leave to amend to provide evidence that the website language constituted labeling, according to the court. Labeling is defined by the Food, Drug, and Cosmetics Act (FDCA) as "all labels and other written, printed, or graphic matter upon any article or any of its containers or wrappers, or accompanying such articles." The statements on the website were not labeling because the language did not explain or supplement the individual products. The consumers could amend the claims to show that the statements accompanied the products.

The claims based on Frito-Lay’s statements that its products contained "0 grams trans fat" and "No MSG" were not preempted by the FDCA or other federal law, according to the court. Although the products at issue did not contain trans fat, the consumers argued that this was misleading because the products contained more than 13 grams of fat. The products contained ingredients that were sources of MSG, despite not technically being MSG. Because the consumer protection laws explicitly incorporated federal laws and regulations, and did not impose stricter requirements than the federal laws, the state law claims were not preempted.

The consumers’ California Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA) claims based on the "all natural" labels survived Frito-Lay’s motion to dismiss, according to the court. A number of Frito-Lay’s chip products were labeled as "made with all natural ingredients," despite containing artificial and unnatural ingredients. Frito-Lay’s argument that a reasonable consumer would not be misled into believing that the chips contained only natural ingredients failed. A reasonable consumer is not expected to look beyond misleading labeling on the front of the packaging to the ingredient list on the back to determine exactly what is in the product. The claims survived only as to Lay’s Kettle Cooked Mequite BBQ Potato Chips, because it was the only named product that was shown to contain the specified unnatural ingredients. The other named products did not appear to contain any of the unnatural or synthetic ingredients on which the claims were premised.

Frito-Lay may also be liable under the UCL, FAL, and CLRA for affixing "No MSG" labels to the named products, according to the court. The products contained ingredients that the FDA has indicated to be sources of MSG.

The consumers also stated UCL, FAL, and CLRA claims against Frito-Lay based on "0 grams trans fat" labels, according to the court. The purchasers sufficiently alleged that the labeling was deceptive to reasonable consumers that believed the labels made accurate statements about the products’ nutritional content, and that the labels were compliant with FDA regulations that require that an express nutrient content claim be accompanied by further disclosures about ingredients that may pose health risks.

The case is No. 12-1586 SC.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) for Markus Wilson. Christopher Chorba (Gibson, Dunn & Crutcher LLP) for Frito-Lay North America, Inc.

Companies: Frito-Lay North America, Inc.; PepsiCo, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews