Increased Enforcement On Functional Foods Triggers Class Action Risk

Functional foods increasingly are vulnerable to costly class action lawsuits as regulators crack down on advertising claims in this previously oft-ignored category.

“Class actions are crazy. They are running rampant in this country and they show no signs of abating,” said Ivan Wasserman, a food and drug law attorney with the firm Manatt, Phelps & Phillips.

“It seems like almost any product out there that has any success in the marketplace and is making a functional benefit claim for food or a dietary supplement is subject to some class action,” he added during an Elsevier Business Intelligence webinar Aug. 16, “Functional Food Claims: Avoid Potential Pitfalls or Get Snared by the FDA and FTC.”

He explained the uptick in class actions against functional foods is due partly to increased enforcement in the area by FDA, the Federal Trade Commission and even the National Advertising Division.

Ivan Wasserman, an attorney with Manatt, Phelps & Phillips

FDA fired the opening salvo against improper functional food claims after the Obama administration took office by shooting a letter to General Mills in 2009 that warned cholesterol-lowering claims on packaging and in advertisements for Cheerios made the cereal an unapproved drug (Also see "FDA Cheerios Warning Signals Tougher Stance On Health Claims Enforcement" - Pink Sheet, 18 May, 2009.).

The letter came “out of nowhere” and “sent shock waves through the industry,” Wasserman said.

He explained the Cheerios letter reminded industry that functional foods cannot make disease treatment claims, but rather can make either structure function claims or approved qualified health claims.

The agency followed the Cheerios dust-up with a volley of 17 additional letters warning functional food makers in February 2010 about similar labeling violations and disease claims that made the products unapproved drugs. FDA Commissioner Margaret Hamburg also warned the industry in an open letter that the agency continues to see labeling that violates standards (Also see "FDA's Flurry Of Food Claim Warnings Sends Bold Enforcement Message" - Pink Sheet, 8 Mar, 2010.).

Regulatory Action Draws Lawyers’ Attention

All of these enforcement actions “can and do trigger some type of plaintiff’s lawyer trying to make a buck in a class action,” Wasserman said.

For example, this month the U.S. District Court for the District of New Jersey refused to throw out a consolidated class action claim that alleges Nestle Healthcare Nutrition misled consumers about the health benefits of BOOST Kid Essentials. The court also decided to allow a California woman the chance to bring a separate class action against Nestle under California law instead of New Jersey’s.

In the Aug. 1 ruling, Judge Faith S. Hochberg noted the New Jersey plaintiff “would not have purchased BKE but for Nestle’s misrepresentations about its health benefits” and “even if he purchased a similar product to BKE, he would have purchased a less expensive alternative in the absence of Nestle’s claims.”

Hochberg rejected Nestle’s argument to dismiss the claim in the absence of allegations that the plaintiff saw specific misrepresentations at particular times and in particular places.

When consumers allege false advertising, a jury or a court “may fairly infer” that a “false-marketing scheme,” rather than a single claim, influenced them, the judge said.

She also noted Nestle’s 2010 settlement with FTC regarding BOOST claims. The Healthcare Nutrition unit agreed to drop claims that the probiotics in the product could reduce absences from daycare or school due to illness, that the product could prevent upper respiratory tract infections, protect against cold and flu. Nestle also agreed to back future claims that BOOST reduces children's sick-day absences and the duration of acute diarrhea with at least two well-designed human clinical studies (Also see "FTC's First Probiotic Claims Case Emphasizes Need For Well-Designed Studies" - Pink Sheet, 19 Jul, 2010.).

In 2010, Dannon agreed to pay $35 million to settle allegations it falsely advertised Activa and DanActive with probiotics as having a “positive effect” on consumers’ digestive tracts’ immune systems. As part of the agreement with FTC, Dannon reworded labels to say the yogurt simply will “interact with your digestive tract’s immune system” (Also see "Dannon's FTC Settlement Requires FDA Approval For Cold/Flu Immunity Claims" - Pink Sheet, 20 Dec, 2010.).

Finally, Kellogg’s paid $1.2 million to settle a class action suit that alleged it overstated the immunity benefits of Rice Krispies cereal (Also see "Despite FTC's "Timid" Kellogg Action, Rigorous Claims Enforcement Expected" - Pink Sheet, 7 Jun, 2010.).

Each of these class actions followed enforcement action by FDA or FTC.

The last two examples illustrate FTC’s special interest in immunity claims for functional foods and claims directed at or about children, Wasserman said .

Acceptable Alternative For Claims

He explained an acceptable alternative structure function claim for an immunity claim for functional foods is “supports healthy immune system.”

FDA’s other current labeling priorities that could trigger class actions include failure to declare major allergens, failure to bear proper nutrition labeling, unauthorized health and nutrition content claims, conventional foods mislabeled as dietary ingredients, products that bear approved nutrient claims but fail to meet necessary qualifications and significant nutritional deviations.

Unfortunately, “there is little you can do to stop someone from filing a class action,” other than avoid causing the “trigger event,” such as FDA or FTC enforcement, Wasserman said.

He suggested firms know the rules that govern conventional foods, have “good science” to support claims and not oversell their science.

The definition of “good science” to support claims is evolving, Wasserman added.

He explained that recent consent decrees FTC reached with Nestle and other functional food marketers called for two double-blind, placebo-controlled clinical studies. FTC assures this is not a new standard but is simply case-specific (Also see "FTC To Tailor Claim Substantiation Requirements To Each Case" - Pink Sheet, 4 Oct, 2010.).

Wasserman said while the standard in the consent decrees applies only to the companies named in the documents, meeting the standard would behoove all functional food companies.

He also recommended the legal department work closely with research and development and marketing early in the claims development process to keep claims on the right path.

By Elizabeth Crawford