Antitrust and UCL in the News

April 10, 2014

McSweeny Confirmed as FTC Commissioner.  After a year-long vacancy, the FTC is finally complete with the 95-1 vote in favor of confirmation for Terrell McSweeny, who served as a senior antitrust attorney for the U.S. Department of Justice.   For more details, see this article

February 28, 2014

Post- KWIKSET: Labels Do Matter -- Exploring the "All Natural" Jurisprudence

Introduction

In 2011, the California Supreme Court held in Kwikset Corp. v. Superior Court, 51 Cal. 4th 310 (2011), that product labels needed to be truthful and upheld standing to bring actions under the UCL to challenge false, deceptive and unfair labeling. Kwikset involved clams that "Made in America" product labels misrepresented the fact that the goods were manufactured abroad. Finding that plaintiffs relied on the "Made in America" label in purchasing the product, the court ruled that plaintiffs were injured when they purchased a product, even a useful product, which was not accurately labeled.

Subsequently, there has been an explosion of recent litigation that has sought to challenge products labeled "all natural" on grounds that an analysis of their ingredients shows violations of the standards set by the Court in Kwikset. Challenges to product labeling have also included deceptive or false descriptive labels. The legal claims involve alleged violations of the Unfair Competition Law (UCL), False Advertising Law (FAL) and the state Sherman Law. This brief surveys a sampling of recent cases under California law to analyze when "all natural" or similar claims may be successfully disputed and when they may be sustained.

Sufficiency of Complaints -- Definition of Claims -- Standing

Balser v. Hain Celestial Group, No. 2:13-cv-05604 (C.D. Cal., December 18, 2013). Motion to Dismiss Granted. False Advertising class action against Alba Botanica for misuse of words "all natural" and "100% vegetarian." Plaintiffs argued that "natural" meant "existing in or produced by nature, not artificial." Defendant maintained a website which defined the terms: "we don't use parabens, sulfates or phthalates" and "vegetarian" means "without animal products," not "only from vegetable matter." The product labels defined what products are natural and what ingredients are excluded, amid a complete list of all ingredients maintained. In dismissing the complaint with prejudice, Judge Real found plaintiffs' theory of the case flawed as shampoos or lotions are not natural to begin with, ("they do not exist in nature nor do they grow on trees") and thus plaintiffs knew that the products were manufactured and could not have been deceived by a broad definition of "natural."

Judge Illston granted a similar motion to dismiss, albeit with leave to amend, in the case of Figy v. Amy's Kitchen, No. 3:13-cv-03816 (N.D. Cal., November 25, 2013). Amy's Kitchen sells a number of products containing "evaporated cane juice." Plaintiffs sued under the unlawful prong of the UCL, arguing that "evaporated cane juice" must be listed under its common and usual name, which is "sugar." The listing, they further alleged, violates Federal labeling laws and deceives the plaintiff class who, it is alleged, believe that omitting the words "sugar" or "syrup" in favor of the term "juice" both downplays the inclusion of "sugar" as an ingredient and misleads plaintiffs into believing that "juice" is a healthier ingredient than sugar or sugar syrup. In dismissing the initial complaint for lack of standing, Judge Illston ruled that the plaintiff must show actual reliance on the misrepresented ingredient and that the "misrepresentation was an immediate cause of the injury-causing conduct." She interpreted that to mean that plaintiff needed to allege he would not have bought the product but for the misrepresentation and that he saw the misrepresentation prior to purchasing the product, as analyzed in Kwikset. Plaintiffs filed an amended complaint in December, 2013, which is now subject to further motion to dismiss.

Swearingen et al. v. Yucatan Foods, L.P., No. 3:13-cv-03544 (N.D. Cal., February 7, 2014). Order Denying Motion to Dismiss. Judge Seeborg denied defendants' motion to dismiss UCL, Sherman Law, and FAL claims again involving "evaporated cane juice" in guacamole products. Judge Seeborg analyzed plaintiff's standing under the UCL. In particular, plaintiff relied on the "unlawful" prong of the UCL by referring to FDA regulations and draft guidance letters in 2009 that the term evaporated cane juice "falsely suggests that the sweeteners are juice." Plaintiff argued that this term misleadingly suggests that the product is healthier than it is, as "juice" connotes a healthful product. The court did not find that the plaintiff needed to plead actual reliance on the mislabeled product's representations in order to have standing to challenge them.

Kane v. Chobani, Inc., No. 12-cv-02425 (N.D. Cal., February 20, 2014) Order Granting Motion to Dismiss With Prejudice. Judge Koh took the opposite approach in granting defendant's motion to dismiss claims that the yogurt manufacturer misrepresented both its "all natural" ingredients and its disclosure about "evaporated cane juice." After Plaintiff had re-pled the complaint three times and there were several hearings before the court, Judge Koh found that Kwikset required plaintiff's reliance on the misrepresentation to be pled to a standard of particularity under FRCP 9(b). Plaintiff did plead that she read the product ingredients and her understandings of the terms. As the judge analyzed plaintiff's claims, she found them "implausible" because they contradicted other statements made in the complaint or before the court on plaintiff's understanding of the meaning of "evaporated cane juice" and the quality in the "all natural" claims of color added to the product. In sum, plaintiff had not articulated a theory of how defendant's labels misrepresented the ingredients so that plaintiff was injured.

Motion for Class Certification

In an Order Denying Motion for Class Certification, Astiana v. Ben & Jerry's Homemade, Inc., No. 4:10-cv-04387 (N.D. Cal., January 7, 2014), Judge Hamilton denied certification to a class of purchasers of ice cream, frozen yogurt and popsicles which contained "alkalized cocoa" but were labeled "all natural." Plaintiffs claimed it was deceptive to package and advertise products as "all natural" when the ingredient cocoa was manufactured with a synthetic alkalizing product. The evidence showed that Ben & Jerry's used several different suppliers of cocoa, only one of which produced a product with a synthetic alkalizing agent. The others used natural agents in the production of cocoa. The Court questioned whether plaintiffs had met the standards of ascertainability (because it was impossible to determine which products contained the synthetic alkali), standing (because the evidence was inconclusive as to whether plaintiff relied on the "all natural" label and premium pricing prior to her purchase) and commonality (because "all natural" did not have a common meaning and plaintiffs had not produced any evidence that use of the term was evidence of intent to deceive.) Ultimately, while the court was willing to find some evidence toward each of the Rule 23 (a) criteria, she found predominance of common issues over individual issues lacking. Plaintiffs had submitted no expert evidence to show a common meaning of a consumer's valuation of the term "all natural;" no evidence toward damages as defendant sold wholesale only and all products were priced the same, regardless of the "all natural" label; and plaintiff has submitted no evidence showing FDA policy requirements of ingredients were violated. Further, the court noted that injury and damages is a component of every claim raised by plaintiffs and the lack of expert evidence establishing either was fatal to certification as there was no evidence submitted to show class-wide relief was available.

Similarly, Judge Fischer in the Central District denied class certification to a putative class of customers of Chipotle Grill who maintained they were deceived by Chipotle's practice of touting "naturally raised" meats, but substituting conventionally raised meat when the other was not available without changing its signage or menus. Order Denying Motion for Class Certification, Hernandez v. Chipotle Mexican Grill, Inc., No. 2:12-cv-05543 (C.D. Cal., December 2, 2013). Chipotle defined "naturally raised" meats as "coming from animals that are fed a pure vegetarian diet, never given antibiotics or hormones, and raised in a human environment." Chipotle had a practice of substituting the conventional product when naturally raised product was not available. Certification was denied on predominance grounds because the switch to conventionally raised meats took place as to varying products at varying places within a limited time frame. Even Chipotle would have a difficult time of delineating when the substitution occurred and for which products. Moreover, class members would not have retained sufficient records of these purchases nor could they be obtained from the stores. It proved near impossible to identify which meat was purchased in which transaction from stores that switched back and forth between "naturally raised" and conventionally raised meats. While Chipotle sometimes posted notices of the substitution at the point of purchase, the court determined that individual inquiry was necessary to determine whether a class member had seen the sign, or relied on the usual advertising or menu. The court further held that the class action mechanism was not fair or efficient as it would be near impossible to determine who was in the class and how any settlement could be distributed fairly.

Motion for Summary Judgment

Order Granting in Part and Denying in Part Defendants' Motion for Summary Judgment, Ogden v. Bumble Bee Foods, LLC, No. 5:12-cv-01828 (N.D. Cal., January 2, 2014). The case involved the false advertising and misrepresentations in claims of "Omega -3" nutrient content in tuna products. The claims were that the tuna was an "excellent source" and "rich" in "Omega-3," while no more specific nutrient content was provided. Various health claims were also challenged, as was a heart symbol, connoting health, which appeared on the packaging. Judge Koh granted in part and denied in part defendants' motion for summary judgment, evaluating the plaintiff's evidence produced in support of her claims. Actual reliance on the misrepresentation was required and, at the summary judgment stage, the party seeking summary judgment must produce evidence demonstrating an absence of an issue of general material fact to prevail. Here the court reviewed plaintiff's deposition and other uncontradicted statements and found that plaintiff had sufficiently proved antitrust injury and therefore standing, to challenge the "Omega-3" misrepresentations because she testified she was aware of statements on the packaging before she purchased. However, her acknowledgement that she had not read health claims on the defendant's website meant that those claims were dismissed for lack of standing. The court also found that the UCL and FAL provided a private right of action for consumers to challenge violations of the FDCA and the Sherman Law.

Motion for Settlement

Judge Orrick preliminarily approved a class action settlement with Trader Joe's that alleged that several products advertised and sold by Trader Joe's contained synthetic products, despite being labeled "all natural." Larsen et al v. Trader Joe's Co., No. 3:11-cv-05188 (N.D. Cal., February 7, 2013). The products (cookies and juices) variously contained alkali processed cocoa; ascorbic acid, a synthetic form of Vitamin C; sodium acid pyrophosphate; xanthan gum and vegetable monoglycerides, all of which were alleged to be synthetic ingredients. The lawsuit alleged violation of FDA standards that products are not natural if they contain color additives, artificial flavors, or synthetic substances. The class consists of tens of thousands of consumers nationwide who purchased the products from October 2007 to the present. The settlement established a class fund of $3.375 million from which claims will be paid. Consumers with proof of purchase will receive the average price of goods purchased while those without proof will be eligible for a flat reimbursement amount.

Susan Kupfer is a partner at Glancy Binkow & Goldberg, LLP, San Francisco.

November 25, 2013

We have two fantastic webinars scheduled for December (get your CLE credits here!!).

The European Commission Comes to California. December 10, 2013 noon-1:00 p.m. Pacific.

Niall Lynch (Latham & Watkins) and Ewoud Sakkers, Directorate General for Competition, European Commission will provide a unique perspective on current developments and trends in competition law enforcement in Europe. Mr. Sakkers’ program will:

  • explain the system of mixed responsibilities between the EU and the Member States;
  • review proposals for enhancing private damages actions in the EU;
  • discuss decisions of the European Commission and EU Member State authorities in high-tech and other markets, and;
  • consider the latest case law of the European Courts.

To attend, you must register in advance: http://calbar.inreachce.com/Details?resultsPage=
1&sortBy=&q=The+European+Commission+Comes+to+California&
searchType=1&groupId=3bc918c9-ca9e-42ad-b280-f2ccdf275761

“Antitrust 101.” December 12, 2013 noon-1:00 p.m. Pacific.
Learn the basics about claims and defenses to antitrust, unfair practices and unfair competition claims under Federal and law. Speakers John Landry from Sheppard Mullin and Paul Riehle from Sedgwick.

To attend, you must register in advance: http://calbar.inreachce.com/Details?resultsPage=1&sortBy=&mediaType=9cdd3b37-d59d-462a-96e9-20d8591584fb&category=c87bfc50-be21-43d9-bd8c-ed58071df880&groupId=51ad991a-6fb0-4c9c-a0d7-5643af19dd39

August 14, 2013

On August 13, 2013, the U.S. Department of Justice along with the Attorneys General of six states (not including California), filed suit to block the merger of US Airways and American Airlines. In its press release announcing the suit, the DOJ contended that “[i]f this merger goes forward, even a small increase in the price of airline tickets, checked bags or flight change fees would result in hundreds of millions of dollars of harm to American consumers," and also noted that "[b]oth airlines have stated they can succeed on a standalone basis and consumers deserve the benefit of that continuing competitive dynamic.” Press release and complaint are available at the Antitrust Division’s website.

June 24, 2013

On June 20, 2013, the U.S. Supreme Court handed down its opinion in American Express Co. v. Italian Colors Restaurant.  The opinion considered “whether a contractual waiver of class arbitration is enforceable under the Federal Arbitration Act when the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the recovery.”  Slip op. at 1.  The federal statutory claim in question was a Sherman Act claim, and the Court held that the arbitration clause was enforceable. 

June 18, 2013

On June 25, 2013 at noon, join the Antitrust Sections of the State and Los Angeles County Bars for a presentation on the intersection of patent law and antitrust. Panelists include: Bret Bocchieri of Novak Bruce Connolly Bove + Quigg; Sean Royall of Gibson, Dunn & Crutcher; and moderator Doug Lichtman, UCLA Law School. The panelists will discuss recent developments in this area and key unsettled issues facing antitrust and intellectual property practitioners in the coming months and years. The presentation will include a question-and-answer discussion with panel attendees.

MCLE credit available and lunch will be provided. Register today at the Section’s discounted rate of $40.00.

June 17, 2013

On June 17, 2013, the U.S. Supreme Court issued its opinion in FTC v. Actavis, Inc., holding that “reverse payment” settlement agreements between a patent holder pharmaceutical and potential generic competitors were subject to a rule of reason analysis and were not immune from antitrust scrutiny.

June 3, 2013

Quid Novi? – Join the Section for a CLE Webinar on June 12, 2013 at 12-1 p.m. (PDT) for a review of recent developments in Antitrust and UCL in California. The program will discuss recent competition trials and key takeaways. Highlights include Bazaarvoice, Higbee, makeup tattooists and Cartwright’s relationship to pre-merger activity. Register now for CLE!

May 17, 2013

From the Antitrust and Unfair Competition Law Section: Save the date of October 24, 2013 for the 23rd Annual Golden State Antitrust and Unfair Competition Law Institute and Antitrust Lawyer of the Year Award Dinner, taking place this year a...t the Julia Morgan Ballroom in San Francisco. Congratulations to Senior Assistant Attorney General Kathleen E. Foote, who will be honored at the event as the 2013 Antitrust Lawyer of the Year. Please join us for an exciting day of panels. Among other distinguished speakers, we will hear from keynote luncheon speaker Justice Goodwin Liu of the California Supreme Court. More details will be posted on the Section website as the date approaches. See Golden State Institute for more information.

May 7, 2013

On May 13, 2013 at 9 a.m. - 10:30 a.m. (Pacific), join the State Bar of California’s and the ABA’s Antitrust Sections for an audio presentation on “Antitrust and the First Amendment.”  The panel will explore the inter-relationship between the First Amendment and antitrust such as:  “Can the ranking of search engine results be challenged under antitrust or is that ranking an opinion?”  or “Can the antitrust laws bar firms subject to a FRAND commitment on a standard essential patent from seeking an injunction?”  If the First Amendment applies in these contexts, what standard of scrutiny applies?   Register now for this event on the ABA website.

April 22, 2013

GET PUBLISHED!  The Section's journal, Competition, is looking for authors for an exciting issue we are developing entitled "The California Difference."  The focus of each article will be on the differences between California antitrust and unfair competition law and federal antitrust and FTC Section 5 law.  The deadline is June 15, 2013.  Please contact Tom Dahdouh if you are interested in writing on any of the following areas - or any other issues worth discussion:  1) Antitrust Injury; 2) Standing; 3)  Standard for predatory pricing and geographic price differentials (Brooke Group versus the Unfair Practices Act); 4) Differences between the UCL and the FTC Act jurisprudence (for example, the difference between the FTC's "reasonable consumer" standard and the UCL standard); 5) Exploiting differences at trial (a. Fifth Amendment; b. Use of Experts; c. Procedural differences); 6) The Impact of CAFA; 7) Merger enforcement; 8) Use of "Quick Look" analysis in antitrust cases; and  9) Vertical price-fixing.

April 15, 2013

On April 16, 2013 from noon to 1:30 Pacific, the Antitrust and Unfair Competition Law Section will present a webinar on Comcast Corp. v. Behrend, the latest word from the United States Supreme Court on class certification. Hear the attorneys who argued the case before the Supreme Court discuss the opinion – and the impact it will have on class action litigation. Register here.

April 4, 2013

Ethics and UCL claims – practicing lawyers and legal corporations may be subject to UCL claims.  Check out the recent article by Diane Karpman, legal ethics expert, in the April 2013 edition of the California Bar Journal.

March 28, 2013

On March 27, 2013 the U.S. Supreme Court issued its opinion in Comcast v. Behrend, reversing the Third Circuit’s affirmation of class certification in an antitrust case, and holding that the plaintiff’s expert report was insufficient in light of the legal theory supporting class certification.  The slip opinion is available HERE.

March 22, 2013

On March 14, 2013, the California Court of Appeal handed down a new opinion construing the Unfair Competition Law in the context of actions between business competitors.  In the opinion, the Court of Appeal reversed the judgment sustaining the defendant’s demurrer and reinstated the action, holding that the competitor plaintiff had standing to bring the claim.  Read the full opinion at this link:  http://www.courts.ca.gov/opinions/documents/G046778.DOC

March 18, 2013

On March 20, 2013 at noon, join the Antitrust Sections of the State Bar of California and Los Angeles County Bar for a presentation on the Capper Volstead Act, a federal law providing antitrust law exemptions for qualifying agricultural cooperatives. Once an obscure law, it has recently become the centerpiece of several major nationwide class action litigations. Beyond providing an overview on the basics of the Act, the program will discuss strategic and procedural considerations when advising clients in the agricultural sector on antitrust issues. 

MCLE credit available and lunch will be provided. Register today [opens in a new window] at the Section’s discounted rate of $45.00.