The food industry’s leading litigation experts met in Chicago at the end of September for a Food Advertising and Litigation Conference hosted by the Food and Drug Law Institute (FDLI). The panel, which was comprised of some of the industry’s top lawyers and leaders, discussed the litigation trends they see today in food mislabeling.
With increased consumer and media attention on the food industry lately regarding transparency in labeling, it seems that more and more companies are finding themselves on the hot seat. “The politics of food is strong and growing,” explained Beth Johnson, Principal and Founder of Food Directions, LLC, “and transparency is more of an interest.”
As this interest in transparency grows, it has become even more urgent that food companies proceed with a bit of caution when making marketing claims of healthiness, such as “all natural,” citing quantity of ingredients, such as “Rich in Antioxidants,” or providing incomplete competitive claims, such as “X fewer calories” and “X less grams of fat.”
What used to be a simpler process for resolving consumer complaints has become much more complex. Bruce Silverglade, Partner at Olsson Frank Weeda Terman Matz PC, explains that in the past, a company would get a warning letter from the FDA which used to be fairly simple to resolve, but now, as consumers have a much higher level of awareness about food labeling and many more avenues to pursue advocacy and activism, warning letters can now lead to State Attorney Generals taking action or a class action suit. Mr. Silverglade warns, “Food companies must ask themselves, is it worth the risk?”
To better understand how to avoid common labeling issues, let’s first start with what the top trends are for labeling litigation this year. Several of the most discussed mislabeling pitfalls discussed amongst the panelists at the FDLI conference included:
·Natural Claims: Even though it seems that natural claims are being scaled back or removed entirely from many food labels ever since the Naked Juice $9 million settlement in 2013, natural claims are still alive and well in lawsuits today. Kashi, Bear Naked, and Trader Joe’s have all removed natural claims from their packaging after lawsuits, as well. With the natural term becoming passé, there seems to be many synonyms for natural that are gaining in popularity, like “wholesome,” “real,” “whole,” and “nutritious.” Could these be the new ‘natural?’ Will these new natural names be next on the target list for lawsuits?
·Super Foods: Nutritionally dense super foods such as pomegranate, quinoa or kale can sometimes be promoted as the single or main ingredient of a food item. But often times many products don’t contain enough of the super food to qualify as the main ingredient. This potential discrepancy can be easily checked when looking at the ingredient statement. Per FDA regulations, ingredients are listed in descending order of predominance; meaning, the primary main ingredient is listed first followed by the second largest ingredient component and so on. If you see pomegranate or kale as the 6th or 7th ingredient, then chances are there is a small percentage of this food in the recipe. Last year, a class action suit was filed against Chia Crisps for listing chia seeds as the main ingredient, when in fact black beans was the first ingredient listed.
·“Made” Claims: Claims such as “Handmade,” “Craft made,” “Made from Scratch,” or “Made in the USA,” have come under fire the past few years, especially in the alcohol industry. Maker’s Mark won a lawsuit this year where the plaintiffs stated that they over paid for their bourbon because of the “handmade” claim. Although “Made in USA” has gained in usage, companies need to be aware of implications for the Federal Trade Commission (FTC). The FTC states that all, or virtually all, must be made in the U.S. in order to claim “Made in USA.” Some states, like California, also have laws that state a specific percentage of the materials used must be from the U.S.
The speakers at the FDLI conference also offered a number of useful tips for avoiding these common pitfalls. Some included:
·Improve company-wide communication between key departments. Stephen Baker, Director, FTC Midwest Region, explains that one of the biggest reasons a company falls into trouble is the disconnect between departments, “technical people and marketing people are not on the same page.” Food companies should try to better discuss key marketing initiatives to ensure that what is being said is actually true.
·Be careful about claims on both your food label and your website. With the accessibility of the Internet, food manufacturers have many more eyes on what is listed on their label or claims being marketed. Mr. Silverglade explains that the FDA now uses company websites for reviewing information listed on labels – especially if the website address is listed on the food label’s Information Panel.
·Implement systematic risk assessment. Companies can set up an algorithm to determine risk, and make it a routine part of taking food products to market. Food companies must ask themselves, is it worth the risk to stretch the truth? Is this a topic that resonates in the mainstream media? What type of product is it? What is the size of the company? Considering questions like these can help determine whether you might be a likely target.
We’ve seen a flurry of significant cases and regulatory actions in food advertising and litigation in recent years, many of which have had far-reaching implications for all food product manufacturers. It’s important to stay on top of what’s happening in federal agencies and the court of public opinion to best position your food business in the market to stay out of the litigation circuit.
Amidst allegations of rampant, deliberate overcharging stemming from mislabeling on prepared foods products, Whole Foods Market took to the offensive against New York’s Department of Consumer Affairs (DCA), claiming that the bureau's inspectors “have not provided evidence to back up their demands nor have they requested any additional information from us, but instead have taken this to the media to coerce us."
First reported in the New York Daily News, the Department’s claims drew regional (and ultimately national) attention after commissioner Julia Menin suggested that investigators within her department had potentially uncovered food labels featuring “the worst case of mislabeling they have seen in their careers."
In documents made available to the public following its initial investigation, the DCA allegedly tested 80 different package types and found they all featured mislabeled weights, adding that 89 percent of the tested packages were incongruous with federal statutes for the maximum amount "that an individual package can deviate from the actual weight." Commissioner Menin continued, “"the overcharges were especially prevalent in packages that had been labeled with exactly the same weight when it would be practically impossible for all of the packages to weigh the same amount. These products included nuts and other snack products (flavored almonds, pecan panko and corn nuts), berries, vegetables, and seafood."
It remains unclear what effect the discovery may have had on consumer confidence in the company, as Whole Foods Markets’ stock continued to trade at $40.35/share in the days following the announcement (a fairly negligible drop of 0.86% in value entering the week). NBC’s widely-popular financial analyst Jim Cramer, of “Mad Money,” recently argued that the company’s largest basis for steady revenue was their prepared foods department, which provided restaurant-grade food at grocery-store prices. It would stand to reason that the latest allegations would undermine the very bedrock of that revenue stream.
Falsely labeling a prepared-foods package in New York State carries an initial fine of up to $950 with supplemental fines as high as $1,700 for each additional infraction. Given the volume of charges against them, Whole Foods Market could be facing a significant payout to New York State.
The Food and Drug Administration provides universal guidelines as to the methodology of scaling and advertising food weights, to wit: “Only the quantity of food in the container or package is stated in the net quantity statement. Do not include the weight of the container, or wrappers and packing materials. To determine the net weight, subtract the average weight of the empty container, lid and any wrappers and packing materials from the average weight of the container when filled with food.”
Fair and proper measuring of foods sold to consumers is of immense importance. In violating the FDA’s standards for presentation of food labels, food manufacturers and retailers fail to uphold their end of a vital relationship in the United States: that between consumers and commerce.
Last week, New York City Mayor, Bill de Blasio, announced that plastic foam containers will be banned in the city beginning July 1st of this year. This includes expanded polystyrene cups or containers used in retail, restaurant take out or other food manufacturers.
The reason behind this law is mainly environmental impact. It is estimated that the city will reduce its polystyrene materials in waste by 30,000 tons. Minneapolis, San Francisco, and Seattle have already banned similar food containers.
This is an initiative that former Mayor Michael Bloomberg has started before the end of his last term. In December 2013, city council passed a law to ban any takeout containers that were not recyclable. With this new law, the type of non-recyclable container has been established.
For over 15 years the upscale upper-west side market, Zabars, has sold their Lobster salad to unaware New Yorkers and it took Doug MacCash, a vacationing reporter from New Orleans, to notice the familiar crayfish taste when he ordered one of the popular salads on a bagel. Turns out the expensive lobster salad has absolutely no lobster in it, but made with fresh water crayfish. Yesterday, in a New York Times article, Dane Somers, Executive Director of the Maine Lobster Council, said this kind of problem comes up about a dozen times a year, “sometimes it’s using lobster substitutes.”
Ever wonder what is in your favorite foods? People getting their favorite foods tested for allergens and purity claims is a growing trend that we see, because you just never know… lobster might not be in the lobster salad.
In a recent webinar hosted by National Restaurant News titled Menu Labeling: Healthy Solutions to a Weighty Issue, Trent Norris, a partner at Arnold & Porter, LLP, advised restaurant owners not delay nutrition analysis per the FDA’s pending regulations expected to come out at the end of the year. One reason being that the FDA believes the original requirement for calorie labeling is in effect right now – since March 23, 2010. Although they are not currently enforcing the requirement, there is “a possibility of private enforcement of the FDA standards under State Consumer Protection Laws.” And even though, it is only “theoretical at the moment,” Norris urges that “restaurants need to be on top of this pretty much yesterday.”
Are you a restaurant owner? What are your thoughts on the pending FDA regulations?