Enfamil Ad Claims Enjoined; Store Brand Awarded $13.5 Million

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

A jury awarded $13.5 million to store brand infant formula producer PBM Products on a finding that Mead Johnson & Co. falsely advertised its Enfamil® LIPIL® formula in violation of the Lanham Act.

After the jury returned its verdict on November 10, the federal district court in Richmond, Virginia enjoined Mead Johnson from publishing any advertisement containing a false representation about PBM’s infant formula. PBM supplies store-brand infant formulas to Walmart, Sam's Club, Target, Kroger, Walgreens, and other retailers.

The December 1 injunction order expressly bars Mead Johnson from making the following claims: “It may be tempting to try a less expensive store brand, but only Enfamil LIPIL is clinically proven to improve brain and eye development,” and “There are plenty of other ways to save on baby expenses without cutting back on nutrition.”

The court directed Mead Johnson to retrieve any and all advertisements, promotional materials, or other literature containing the above claims.

The December 1 order does not articulate the basis for entering the injunction. In an earlier ruling (see Trade Regulation Talk, May 28, 2009), the court had denied PBM’s motion for a preliminary injunction (CCH Advertising Law Guide ¶63,417; 2009-1 CCH Trade Cases ¶76,619).

Laches Defense

Mead Johnson unsuccessfully contended that PBM’s suit was barred by the defense of laches on the theory that PBM had not diligently pursued its Lanham Act claim.

Mead Johnson argued that its challenged ad claims in a 2008 mailer had been made for more than two years. The court viewed the two-year Virginia statute of limitation period for fraud as analogous to false advertising under the Lanham Act, which lacks a statute of limitations.

Contrary to Mead Johnson’s contention, the 2008 Mailer took a new approach in tone and message towards store brand infant formula, according to the court. Mead Johnson consciously decided that its marketing should be more aggressive and risky, as it had witnessed a decrease in its sales and an increase in store brand sales, the court said.

The 2008 Mailer and its attack on store brands was the result of that marketing decision. On these facts, the court determined that Mead Johnson had not shown that PBM lacked diligence in pursuing its Lanham Act claim.

The December 1 order in PBM Products, LLC v. Mead Johnson Nutrition Co. will be reported in CCH Trade Regulation Reports and CCH Advertising Law Guide.

Store-Brand “Compare To” Statements Could Be False Advertising

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

“Compare To” statements by a manufacturer of store brand joint care dietary supplements (Perrigo Company) were not mere puffery and could constitute false advertising under the Lanham Act and New York law, the federal district court in Central Islip New York has ruled.

The statements could convey a false message of equivalence in formulation and efficacy as compared to branded Rexall Sundown Osteo Bi-Flex products, in the court’s view.

Perrigo countered with false advertising claims against Rexall Sundown, one of which survived summary judgment review.

Product Equivalence Message

Most of Perrigo’s “Compare To” statements invited a comparison of the products’ ingredients, according to the court. The competing products were likely to be shelved near each other in stores, making it more likely that a consumer would understand the Perrigo Products to be equivalent to the national brand.

Much of the text on the side and rear panels of the Perrigo Products matched the prior packaging for Osteo Bi-Flex. Perrigo’s sponsored website stated that a comparison of the active ingredients might reveal that the only differences between the two products were the inactive ingredients, such as the colors etc. and the price.

A consumer survey commissioned by Rexall Sundown raised genuine issues of fact as to whether the “Compare To” statements created a false message of product equivalence in terms of ingredients and/or efficacy that was likely to deceive consumers, the court found.

In addition, a leading U.S. specialist in the field plant-derived drugs stated that the store brand Perrigo products and Rexall Sundown's Osteo Bi-Flex were “significantly different,” based on the higher ratio of an anti-inflammatory ingredient in Osteo Bi-Flex.

Materiality

To prove false advertising, Rexall Sundown was required to demonstrate that a false or misleading representation involved an inherent or material quality of the product. A rational trier of fact could conclude that the disputed issues related to core ingredients and/or efficacy of the supplement, according to the court. In addition, the manner in which the Compare To statements were conveyed—in prominent highlighting and in close proximity to product performance claims—contributed to their materiality.

National Brand’s Ingredient Concentration Advertising

Perrigo raised a disputed issues of fact as to whether Rexall Sundown falsely advertised the key ingredient of its Osteo Bi-Flex products as “10 times more concentrated,” the court held. A consumer survey commissioned by Perrigo concluded that the “10 times more concentrated” claim caused a meaningful proportion of prospective consumers to think that Osteo Bi-Flex provided greater performance benefits than, or was superior to, other products.

Injury and causation could be presumed from comparative superiority claims, the court noted. Perrigo created a triable issue as to whether it was “obvious” that Rexall Sundown's claim targeted Perrigo products and, thus, that injury should be presumed.

Fatal Delay

Perrigo was barred from challenging other claims that Rexall Sundown had featured on packaging and in advertising since the late 1990s.

Perrigo contended that it had no reason to know that the claims were false until the National Advertising Division issued a decision regarding the claims in 2007 (CCH Advertising Law Guide ¶62,608). However, under the doctrine of laches, the court found Perrigo’s delay in bringing suit both inexcusable and prejudicial, in light of Rexall-Sundown's substantial investments in its packaging and advertising.

The September 10 opinion in Rexall Sundown v. Perrigo Co. will be reported in CCH Advertising Law Guide and CCH Trade Regulation Reports.