Package size can be false advertising

In Re: Mccormick & Company, Inc., Pepper Products
Marketing & Sales Practices Litigation, 2016 WL 6078250, No. 15-cv-2188 (D.D.C.
Oct. 17, 2016)
Watkins, which produces black pepper, alleges that its
largest competitor, defendant McCormick (which has 70% of domestic black pepper
sales), deceptively “slack-filled” its black pepper containers, confusing
consumers and causing a loss in Watkins’ pepper sales. Consumers can’t see
inside McCormick’s containers before they buy. In early 2015, McCormick allegedly
reduced the amount of actual pepper in each of its pepper tins by 25% but
“misleadingly continued to use the same traditional-sized tins” and reduced the
quantity of peppercorns in its grinders from 1.24 ounces to 1 ounces, again
without changing the size of the containers. McCormick did print the reduced
quantity on the containers. Watkins also alleged that McCormick kept the price
the same, though it didn’t specify wholesale or retail price.  Under 21 C.F.R. § 100.100, “A container that
does not allow the consumer to fully view its contents shall be considered to
be filled as to be misleading if it contains nonfunctional slack-fill.
Slack-fill is the difference between the actual capacity of a container and the
volume of product contained therein.” 
McCormick challenged Watkins’ Article III standing. In a
false advertising suit, a plaintiff can demonstrate injury by showing that “
‘some consumers who bought the defendant’s product under a mistaken belief’
fostered by the defendant ‘would have otherwise bought the plaintiff’s
product.’ ” The court here quoted Judge Bazelon’s statement that “all claims of
competitive injury are to some extent speculative, since they are predicated on
the independent decisions of third parties; i.e., customers. However, … it is
the stuff of the most elementary economic texts that if two firms are offering
a similar product for different prices, the firm offering the lower price will
draw away customers from its competitor.” Given the purpose of the Lanham Act
to protect producers against unfair competition, the court adopted the Ninth
Circuit rule that “[a] plaintiff who can’t produce lost sales data may …
establish an injury by creating a chain of inferences showing how defendant’s
false advertising could harm plaintiff’s business.”  That’s what happened here.  Watkins alleged that consumers bought
containers that looked like they delivered more bang for the buck and wouldn’t
have done so if they’d known the truth; that was an adequate allegation of
injury fairly traceable to McCormick’s conduct.
Statutory standing: Lexmark
allowed Watkins standing. Lexmark
noted that “potential difficulty in ascertaining and apportioning damages is
not … an independent basis for denying standing where it is adequately
alleged that a defendant’s conduct has proximately injured an interest of the
plaintiff’s that the statute protects.”  Sales diversion from a direct competitor was a
“paradigmatic” direct injury for Lanham Act purposes.
On the merits, Watkins also stated a claim.  McCormick argued that slack-fill packaging wasn’t
“commercial advertising or promotion.”  “McCormick’s
insistence that the size of its containers does not constitute advertising or
promotion defies common sense and the law.” 
McCormick argued that the size of its containers didn’t propose a
commercial transaction.  But “advertising
includes statements about the product to be sold, not merely a proposal to
sell.” Moreover, “[t]he size of a package signals to the consumer vital
information about a product and is as influential in affecting a customer’s
choices as an explicit message on its surface.” As Watkins argued, “[t]he size
of McCormick’s containers is exactly what makes them misleading, because consumers
cannot see the amount of their contents.” (We might more properly call
McCormick’s actions communicative conduct, but that hardly helps its argument.  Compare this wrongly decided case about how color and price aren’t falsifiable claims.) 
Watkins properly alleged falsity, given federal law about
nonfunctional slack fill.  “[T]he
slack-fill regulations do not include an exception for containers which
accurately state the product amount.” The court articulated the reason for this
An accurate statement of weight
does not necessarily correct a consumer’s misimpression of product quantity
based on the size of a container, because consumers are accustomed to seeing
how much space a product occupies but may not know how that relates to its
weight. Moreover, as plaintiff has alleged, the history and iconic,
recognizable size of the McCormick containers creates a misleading impression.
McCormick argued that Watkins needed to plead “facts showing
that identifiable consumers were actually confused.”  But Watkins could rely on the allegations in
the parallel consumer class actions against McCormick, and anyway, the
regulations consider nonfunctional slack fill to be deceptive as a matter of
law, “ so there is nothing implausible about allegations of actual, widespread
deception among McCormick’s customers.”

State law claims under various deceptive trade practices
laws also survived.

from Blogger

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