Friday, August 07, 2009

Ads Touting Sport Drink’s Sweat-Like Formula Not Enjoined

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

In a false advertising and trademark dilution case, PepsiCo subsidiary Stokely-Van Camp’s request for a preliminary injunction against Coca-Cola’s advertising of its Powerade ION4 sports drink was declined by the federal district court in New York City.

The court described the dispute as “an advertising battle between two major consumer products companies over one company’s comparison of its beverage to human sweat.”

Stokely-Van Camp (SVC) is the maker of Gatorade, the top-selling sports drink with annual sales of over $4 billion and over 75 percent of the U.S. market.

In March 2009, Coca-Cola launched its reformulated Powerade ION4, which it sought to position as more like human sweat than both old Powerade and Gatorade Thirst Quencher. Coca-Cola differentiated its new product as a sweat replacer, in particular, based on the inclusion of calcium and magnesium, small amounts of which are lost in sweat.

"Incomplete" Sports Drink

Early in its campaign, Coca-Cola launched an aggressive advertising blitz attacking Gatorade head-on. Ads included the claim “DON’T SETTLE FOR AN INCOMPLETE SPORTS DRINK” emblazoned above a half-bottle of Gatorade, along with the claim “MISSING TWO ELECTROLYTES* Ca CALCIUM Mg MAGNESIUM.”

Coca-Cola discontinued the comparative ads expressly targeting Gatorade in early May after SVC filed suit in April. Coca-Cola continued to advertise Powerade ION4 with claims including “The Complete Sports Drink.”

Trademark Dilution

SVC asserted that the advertisements showing half a bottle of Gatorade constituted trademark dilution by tarnishment in violation of the Lanham Act and New York law. However, SVC’s request for preliminary injunctive relief based on trademark dilution was moot, in light of the fact that the ads comparing Powerade ION4 to Gatorade were discontinued, the court ruled.

False Advertising

With regard to SVC’s Lanham Act false advertising claims, the request for preliminary injunctive relief barring Coca-Cola from advertising that Gatorade is “incomplete” and “missing” two electrolytes also was moot, the court held.

SVC argued that its request to enjoin Coca-Cola from running these ads was not moot because Coca-Cola’s alleged record of following a “cheat and retreat” strategy revealed bad faith and a likelihood that it would resume the ads. However, SVC’s fear that Coca-Cola would resume the ads was speculative and did not warrant a preliminary injunction, in light of Coca-Cola’s sworn declarations and testimony under oath that it would not resume the ads during the course of the litigation, according to the court.

Coca-Cola’s continuing advertising of Powerade ION4 as “The Complete Sports Drink” was not proven literally false, the court added. Claims that a product is “The” something-or-other are commonly viewed as mere puffery, the court said. In addition, advertising terms like “complete” have been held to be puffery because they are subjective and could not be proven true or false.

SVC contended that the advertising misleadingly implied that Gatorade was less effective because it lacked calcium and magnesium. However, a Lanham Act claim of implied falsity could not succeed without evidence that consumers viewed the ads as communicating a misleading impression. SVC had not conducted any research to produce such evidence, the court noted.

Unclean Hands

SVC’s own unclean hands precluded issuance of a preliminary injunction against Coca-Cola, the court ruled. Although SVC complained of Coca-Cola’s touting of calcium and magnesium, the evidence at the preliminary injunction hearing demonstrated that SVC too had marketed the advantage of adding calcium and magnesium to Gatorade Endurance Formula.

Some of SVC’s claims appeared to have gone further in that they suggested that calcium and magnesium provide performance or hydration benefits, while Coca-Cola only touted the addition of calcium and magnesium, without claiming that they actually do anything for the consumer other than replace the trace amounts that are lost in sweat, the court concluded.

The August 4 opinion in Stokely-Van Camp, Inc. v. Coca-Cola Co. will be reported in CCH Trade Regulation Reporter and CCH Adertising Law Guide.

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