Health-Conscious Food Label Claims: The “Natural” Frontier for State AGs?

Consumer interest in eating healthy has grown.  Organic food sales have risen rapidly over the last decade, jumping from just over $10 billion in sales in 2004 to $32 billion in 2014.  This boom in sales has led to some of the nation’s biggest food companies acquiring small organic food companies and developing products that are nutritious and natural.  It is estimated that products labeled as “natural” totaled $40.7 billion in sales in 2014.

Plaintiffs’ lawyers around the country have sought to capitalize on this boom by initiating class action lawsuits against these so-called “conventional” food companies alleging that their health-conscious labels are misleading.

As our Cozen O’Connor colleagues Richard Fama and Brenden Coller have noted, “even the most innocuous statement on a label can expose a manufacturer to a class action lawsuit and multiple copycat lawsuits.”  For example, Welch Foods Inc. was hit with a proposed class action in California alleging that the company’s juices and fruit spreads are mislabeled as “no sugar added” and “all natural” because the products are made from concentrate and contain citric acid. The plaintiffs even claimed that their mere possession of these allegedly “mislabeled” products could subject them to criminal sanctions.

Some of these class actions settle.  Kashi recently announced the settlement of a class action lawsuit over the use of “all natural” in the labeling of its cereals and snack bar products, which was alleged to be misleading because of the presence of genetically modified organisms (“GMOs”).  Quaker Oats settled over the use of the phrase “wholesome,” among others, in the labels of its snack bars and instant oatmeal, which allegedly contain partially hydrogenated oils.  Many class actions, however, fall apart at the certification stage.  Courts also have dismissed these cases under federal preemption and primary jurisdiction grounds.

These losses could lead the plaintiffs’ contingency fee bar to look for allies among the State Attorneys General (perhaps with the hope of being retained as the State’s outside counsel).  In fact, consumer interest groups have advocated for State AGs to take action on food labeling and advertising.

Generally, State AGs have authority to bring consumer protection claims under their states’ unfair and deceptive acts and practices (“UDAP”) statutes.  State AGs also have broad investigatory powers, which allow them to investigate for possible violations of state UDAP statutes by issuing civil investigative demands and subpoenas to obtain documents and information.  State AGs will work together in “multi-state” investigations and also partner with federal agencies to enforce state and federal UDAP laws.  For example, in 2010 thirty-nine states, in collaboration with the FTC, settled for $21 million with Dannon over health benefits claims for its yogurt and dairy drink products.  In addition, State AGs can have significant sway in policy debates playing out within state legislatures.  Consumer advocates have called on State AGs to use these powers and tools to address food labeling.

The bottom line is that food and beverage companies should monitor not only FTC, FDA, and private class actions, but also State AGs who may weigh in on the rising use of health-conscious terms in food labeling.

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