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Jul 28 2010

Court Rules “Vitamins + Water” = Misleading!

In a stunning blow to the Coca-Cola Company (owners of Vitaminwater), a Federal Judge ruled that a class action lawsuit could proceed against the company due to the misleading nature of its name and its health claims. Coke had tried to dismiss the complaint saying that the claims were just puffery and that non one would believe that what it says on its labels is actually true.  Well Judge Gleeson of the Eastern District here in NY saw it otherwise in the case of Ackerman v. Coca-Cola and it could spell big trouble for VitaminWater and a big payday for the lawyers who filed the suit.

Quick legal background: The Food and Drug Administration has a whole host of regulations that prohibit companies  from making deceptive health claims.  For example, FDA regulations do not permit a health claim, or any nutrient content claim involving the word “healthy,” (or any derivative) to be made about a food unless it contains, in the quantity customarily consumed at one sitting, at least 10 percent of the recommended daily reference quantity of vitamin A, vitamin C, calcium, iron, protein or fiber.  The FDA also prohibits a manufacturer from taking a non-healthy product and making it healthy by merely fortifying it up the wazoo. As Judge Gleeson said in Ackerman:

Fortification of a food of little or no nutritional value for the sole purpose of qualifying that food for a health claim is misleading for several reasons. There is great potential to confuse consumers if foods like sugars, soft drinks, and sweet desserts are fortified to qualify for a health claim when, at the same time, dietary guidance as contained in USDA’s Food Guide Pyramid, for example, states that “[T]hese foods provide calories and little else nutritionally. Most people should use them sparingly.”

What happens then is that “consumer lawyers” (also called trolls) scour the marketplace for potential claims, then find one or two people to serve as lead plaintiffs.  If they win,a huge fund is created so that people across the country can get  a refund if they have proof of purchase of the offending product plus a little something extra, like $5.00.  But multiply that by all the product sold and Jackpot! (the lawyers get a third of the established fund usually).

What the Judge Found Misleading:

This may be a thing of the past

A. The name itself – The court dismissed several of the plaintiffs claims but upheld many. The main ones are as follows:  First –  the name VitaminWater itself is misleading, the court said, because it leaves out the third main ingredient in the product: Sugar. VW contains huge amounts of sugar but you would need to look at the FDA required label to know that. According to the judge, it was made worse by several statements on the label such as   “vitamins + water = all you need” and “vitamins+water = what’s in your hand”  The judge said that this gave the false implication that there were only two main ingredients when in fact the sugar far outweighed the vitamins.

Shenanigans Indeed

B. The Company’s “Healthy” Claims: The FDA regulations restricting health claims (or implied claims of “healthiness”) to foods which meet certain minimum nutrient levels, known as “the jelly bean rule,” were developed in order to prevent food producers from encouraging the consumption of “junk foods” by fortifying them with nutrients. Well Judge Gleeson said that several VW drinks did just that.  VW’s B-Relaxed drinks states on the label: “This combination can help bring about a healthy state of physical and mental being.” It’s label for it’s “Defense” flavor boasts: “[S]ee, the trick is to stay healthy and use sick days to just um, not go in. [A]nd this combination of zinc and fortifying vitamins can help out with that and keep you healthy as a horse. [S]o drink up.”

C. Fortification: The court found that VW was essentially fortified sugar water and that therefore its fortification is impermissible under FDA guidelines that only permit fortification in four very strict situations (none of which applied here).

D. Damages: The plaintiffs had to allege damages to establish a  claim and the court dealt Coke another defeat in this area. The court said that consumers could be mislead by all this into thinking they were buying a nutritional product when in fact, its just fortified Kool-Aid. (OK the last part is my words).  The court said damages could be established by someone not obtaining the health benefit they thought they were obtaining. The court also held that the plaintiff’s claim that they would not have paid the premium price charged for VW had they known the claim about its healthiness were false makes out sufficient damage.

What It Means For VitaminWater: This could be the end of the brand and I do not say that lightly. The court upheld claims that go to the very heart of its marketing strategy:  Its name is no good; its formula is illegally fortified and its health claims are misleading. They must settle and settle quickly.  Otherwise if this case continues, the ugly truth about its product will be learned of far and wide. It’s time to get the checkbook out and try to salvage some compromise that lets you keep the name, which is one of the strongest brands in the country. Maybe something like this:  vitaminwater* and then somewhere else have *and sugar.

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