Think about a consumer evaluating your product in the middle of the grocery store — will they carefully scrutinize the ingredients, nutrition facts and labeling of every item they purchase, or will they simply toss a familiar brand into the cart? It may be tempting for food and beverage manufacturers to play up the best qualities of their products on the labeling (after all, millions of dollars are spent on research and development, production and marketing of a new food product). Yet if manufacturers let one small word slip onto a label, the consequences could be very costly.
Since 2011, consumer advocacy groups and plaintiffs have filed more than 150 food labeling class action lawsuits against food and beverage companies. The lawsuits allege claims of false advertisement, fraud, unfair trade practices and breach of warranty stemming from food manufacturers' use of the terms "natural" or "all natural" on their product labels. While many of these lawsuits have been dismissed by courts for a variety of reasons, including preemption, lack of standing, jurisdiction or failure to plead with specificity, food and beverage manufacturers are not entirely in the clear, as many of the lawsuits have resulted in substantial, multimillion dollar settlements.
Lack of definition for "natural" leading to confusion, lawsuits
One of the main reasons for the rise in litigation regarding claims on food labels is that the two United States agencies in charge of enforcing labeling laws—the Food and Drug Administration (FDA), and the United States Department of Agriculture (USDA)—have not defined the term "natural." Because of this, courts have been burdened with the task of addressing questions surrounding the use of the term on food labels, determining whether a product is "natural," or whether naturally processed products can also be considered "natural." Courts deciding on "all natural" lawsuits have been inconsistent, granting dismissal in some cases yet certifying classes in other cases that are very similar.
The majority of recent food labeling litigation has centered on using the word "natural," mostly because of the confusion and ambiguity created by the FDA's reluctance to establish an enforceable standard for the claim. Both the FDA and USDA have issued guidance on the use of the term "natural," with the USDA issuing a Draft Guidance in 2013 to help manufacturers classify materials as synthetic or non-synthetic. The FDA's position is that it is not opposed to using the term if the food does not contain added colors, artificial flavors or synthetic substances.
In 1993, the FDA invited comments to help it decide on a definition of "natural." After reviewing them, it concluded that due to "resource limitations and other agency priorities," it would not undertake rulemaking to establish a definition, instead making a determination on a case-by-case basis. In fact, though, the FDA provides consumers with the following explanation of "natural" food labels on its website:
From a food science perspective, it is difficult to define a food product that is "natural" because the food has probably been processed and is no longer the product of the earth. That said, the FDA has not developed a definition for use of the term natural or its derivatives. However, the agency has not objected to the use of the term if the food does not contain added color, artificial flavors or synthetic substances
Contentious words on labeling should be carefully examined
Other words on food and beverage labeling have triggered lawsuits in recent years similar to the "natural" claims cases. Following are some other contentious words that manufacturers will want to take extra caution using, as well as the suggested style of usage for each.
- "Low," "high," "free," "reduced" and "light" are all words used in a nutrient content claim, which is the most frequently used claim on food products, and directly or implicitly characterizes the level of a nutrient in the food. The FDA has established specific standards and definitions for each nutrient content claim that may be used, such as "low fat" or "high in fiber."
- "Healthy"—even this seemingly nondescript word has a very specific meaning when it is used on food labels under FDA regulations. The term may be used only if a food is low in fat and contains limited amounts of cholesterol. Further, if it is a single-item food, it must provide at least 10% of the daily value per serving of at least one of the following: vitamins A or C, iron, calcium, protein or fiber.
- "Fresh" means that the food is in a raw state and has not been frozen or subjected to any form of thermal processing or preservation, except: the addition of approved waxes or coatings; the post-harvest use of approved pesticides; or the application of a mild chlorine wash or mild acid wash on produce.
- "Gluten free" means that the food either is inherently gluten free, or does not contain an ingredient that is: 1) a gluten-containing grain; 2) derived from a gluten-containing grain that has not been processed to remove gluten; or 3) derived from a gluten-containing grain that has been processed to remove gluten, if the use of that ingredient results in the presence of 20 parts per million (ppm) or more gluten in the food.
Labeling litigation a costly, but avoidable, process for manufacturers
The FDA's lack of a formal definition for "natural" has left many food and beverage manufacturers at risk for litigation if they choose to use the term "all natural" or "natural" on their packaging labels. Labeling lawsuits against food and beverage companies generally fall into two categories: claims that are legal or unregulated, but are still allegedly misleading, and claims that violate state laws equivalent to the Federal Food, Drug and Cosmetic Act (FDCA) and the FDA's regulations.
Most of the lawsuits in the last few years involve challenges to the controversial words "natural," "nutritious" or "healthful"—words that are permitted or not regulated by the FDA, but which are still misleading. Lawsuits alleging misuse of the word "natural" generally target four categories of products: products containing artificial preservatives, products processed with chemicals or that contain other unnatural ingredients, products containing high fructose corn syrup and products containing genetically modified organisms (GMOs).
In reviewing some recent cases from the past two years, the settlements can be particularly large, considering the costs of litigation as well as the increased manufacturing costs needed to change labels. In addition to paying the following settlement amounts, the companies are removing, or have removed, the "natural" or "all natural" wording from their products, but have not admitted liability in the process of the settlements.
- Kellogg's agreed to a $5 million settlement regarding the labeling of Kashi products as "all natural."
- Trader Joe's agreed to a $3.4 million settlement over the labeling of a juice product.
- PepsiCo agreed to a $9 million settlement over the labeling of its Naked Juice brand.
- PopChips agreed to a $2.4 million settlement over labels stating that its chip products were "all natural."
Research, familiarity with the law key to avoiding problems
In the end, new and creative marketing claims will outpace regulations, putting food and beverage processors at risk if they utilize such claims without understanding the laws that regulate them. Manufacturers must know about the ingredients in their products and the processes by which the products, or ingredients, are made. Further, to avoid expensive and damaging lawsuits, manufacturers can remove contentious words from their labels, focus on specific ingredients that are not regulated as heavily and highlight regulated ingredients that are not present in the product. Remaining current on all developments regarding "natural" and "all natural" labels on products is now also a critical necessity for food and beverage manufacturers.
About the Author
Jennifer L. Naeger is a shareholder in Reinhart Boerner Van Deuren's Litigation Practice and chair of the firm's Food and Beverage Law Practice Group. Jennifer counsels clients on all regulatory matters affecting food and beverage companies, including product development, labeling, marketing and advertising, recalls and market withdrawals and food safety issues. She also represents food and beverage clients in litigation at the state and federal levels. Jennifer can be reached at JNaeger@reinhartlaw.com.