“Made from Sugar” Sweetener Ad Campaign Could Be Impliedly False

This posting was written by William Zale, editor of CCH Advertising Law Guide.

McNeil Nutritionals' advertising of its Splenda artificial sweetener as “made from sugar, tastes like sugar” could falsely imply that the product “contained” sugar or was “natural,” in violation of Sec. 43(a) of the Lanham Act, the federal district court in Philadelphia has ruled.

McNeil's motion for summary judgment was rejected because there were unresolved issues of fact about the percentage of consumers who were confused by the advertising, in light of consumer survey evidence introduced by Merisant, a manufacturer of competing artificial sweeteners.

Literal Truth

McNeil maintained that the phrase “made from sugar” was literally true and unambiguously excluded the interpretation that Splenda was sugar or that it was made with sugar. McNeil unsuccessfully contended that Merisant was improperly using survey evidence to define the word “from” in the phrase.

As employed by McNeil, the phrase “made from sugar” meant that Splenda was made through a patented, multi-step process that started with sugar and chemically converted it into a no-calorie, non-carbohydrate sweetener, the court found.

If Merisant were to produce enough evidence that McNeil attempted to mislead consumers about Splenda's sugar origins, then the claim that reasonable consumers were misled could not be rejected as a matter of law.

Consumer Survey Evidence

Although Merisant's survey evidence addressed consumer perceptions about the advertising claim “made from sugar, tastes like sugar” only as it appeared on packaging of Splenda, Merisant could pursue its allegations of implied falsity against McNeil's entire Splenda ad campaign—including television and print advertising.

If the jury were to find that “made from sugar” was impliedly false on a product package, the court said that it would be hard pressed to find the logic in permitting McNeil to use the same claim in other forms of media.

Laches

The defense of laches, based on Merisant's four-year delay in bringing suit, did not bar its false advertising claims because too many facts remained in dispute at the summary judgment stage of the case, the court held. McNeil had the burden of establishing the elements of laches—inexcusable delay and prejudice—because the delay did not exceed the most closely analogous state statute of limitations, the six-year “catch all” limitation under the Pennsylvania Unfair Trade Practices and Consumer Protection Law.

If McNeil’s advertising for Splenda was truly misleading, and if Merisant offered evidence that McNeil intended to mislead consumers, then principles of equity would prevent McNeil from successfully asserting a laches defense, according to the court..

Disgorgement of Profits

Deciding whether a disgorgement of profits would be an appropriate remedy was premature because of hotly-contested disputes of fact about whether McNeil intended to deceive the public and whether Merisant's sales were diverted by the McNeil's alleged misconduct, the court determined. Merisant asserted that it would incur lost profits of $24 million as a result of McNeil’s allegedly false advertising and that McNeil would realize approximately $20.1 million in profits on sales allegedly diverted from Merisant. Merisant also sought to recover $176.1 million in profits that McNeil allegedly earned from all sources through 2006 as a result of its advertising.

Unclean Hands

McNeil could not prevail on a defense of unclean hands because it failed to show with clear and convincing evidence that Merisant had engaged in egregious conduct, that the alleged misconduct of the parties shared a close nexus, and that either McNeil or the public interest was injured by Merisant’s alleged misconduct.

The decision, Merisant Co. v. McNeil Nutritionals, (ED Pa.) No. 04-5504, March 2, 2007, will be reported in CCH Trde Regulation Reporter and in CCH Advertising Law Guide.