Food & Beverage Manufacturers: 
Eschew Compositional Obfuscation


Portland is a vibrant city. As a frequent visitor, I always look forward to the chance to sample the new and exciting restaurants or food trucks that have popped up since my last visit — or to sip the most recent craft beer or signature cocktail. From a foodie’s perspective, Portland is a bit of a paradise.

Every dynamic industry carries the potential for risk, however, and the food industry is no exception. Often these risks arise in the context of food safety (e.g., Chipotle’s seemingly constant battle with incidents of foodborne illness) or more mundane issues like labor concerns (e.g., the exacerbation of worker shortages in agriculture that may result from federal immigration policies). But when major lawsuits come to a boil against food companies, most arise under state-law theories of consumer fraud, unfair competition or unfair trade practices. More often than not, these cases hinge on ambiguities in labeling.
 
For example, in a long-running series of lawsuits involving the Chobani brand of yogurt, plaintiffs alleged that Chobani’s description of its products’ sweetener as “evaporated cane juice” was false and misleading. Ultimately, the Food and Drug Administration (FDA) — while not deciding whether Chobani specifically had misled consumers — declared that it too considered “evaporated cane juice” to be a false and misleading phrase, and issued guidance suggesting that food manufacturers should replace that phrase with a single word: sugar. This was an example of a food manufacturer intentionally obfuscating the identity of an ingredient for marketing purposes.

Other cases seem less nefarious — and more humorous. In 2009, for example, a disgruntled California consumer brought suit against PepsiCo, the parent company of Quaker Oats.  The object of her suit? Captain Horatio Magellan Crunch. Confusingly — at least to the plaintiff — Cap’n Crunch’s signature “Crunch Berries” cereal does not contain any actual fruit. Unfortunately for this same plaintiff, the judge was perhaps a bigger fan of the cereal than he was of her argument, stating “[t]his Court is not aware of, nor has Plaintiff alleged the existence of, any actual fruit referred to as a ‘crunchberry.’ … there is no such fruit growing in the wild or occurring naturally in any part of the world.” With crunchberries being so rare in the world outside of the cereal box, the judge found the plaintiff’s confusion hard to swallow, and her suit was dismissed. One might be tempted to believe that this was the last we will hear of silly suits relating to fruit content in breakfast cereal, but that is likely false hope. The same law firm that brought the Cap’n Crunch suit previously had Toucan Sam (of Froot Loops fame) in its sights; a prior lawsuit alleging consumer confusion that Froot Loops do not contain any real fruit was also thrown out. Perhaps they will try again.

In all seriousness, likely the best way to avoid liability in this space is to be scrupulously honest when describing the ingredients in your products. Depending on your products’ formulations, that can mean avoiding the use of marketing buzzwords like “all-natural” and even “organic.” Unless you can affirmatively demonstrate that your use of a word is consistent with any applicable FDA (or other relevant regulatory body) rules and regulations, you should tread carefully using that word in your product descriptions and labeling. Even then, you may find yourself and your company’s reputation at risk. Take, for example, the case of Tito’s “Handmade” vodka. Handmade was a description that made a lot of sense when Tito Beveridge himself began crafting his products from a 16-gallon still in 1997 — but makes considerably less sense today as the product is made in a multi-acre industrial facility. Consumers noticed, and many lawsuits were filed alleging false and misleading advertising. Those suits have largely failed, but the fact that they were filed only highlighted the fact that the product wasn’t actually handmade — at least not anymore. So the reputational damage was done.

Ultimately, that is any food or beverage company’s biggest nightmare. Reputational damage can kill most any company eventually, but it can kill a food or beverage company overnight. All the more reason to be honest and open with your consumers. To paraphrase Toucan Sam, the consumers will follow their nose — it always knows — and learn the truth about your product eventually.

DefoeB 2012Brian B. DeFoe is a business lawyer at Lane Powell, where he focuses his practice on helping companies in the customer-facing industries of hospitality and retail. Reach him via phone at 206.223.7948 or on Twitter @BrianBDeFoe. Brian also hosts a blog on spirits and the laws that govern them; find out more at hoochlaw.com

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