Misleading advertising that’s already leaving the market can’t support finding irreparable harm

Danone, US, LLC v. Chobani, LLC, No. 18 Civ. 11702 (CM), 2019
WL 760040 (S.D.N.Y. Jan. 23, 2019)
Danone sued Chobani for advertising that Chobani’s kids’
drinkable yogurt product, Gimmies Milkshakes, contains “33% less sugar than the
leading kids’ drinkable yogurt” – which all agreed was a reference to Dannon’s
Danimals Smoothies.  Although Danone was
likely to succeed on the merits, it did not show irreparable harm and could not
secure a preliminary injunction.
Danimals are sold in 3.1 fluid ounce bottle serving sizes
which currently contain 9 grams of sugar per 3.1 oz. serving, although three of
them used to contain 10 grams of sugar. (Dannon reduced the sugar content in
those three flavors in mid-2018, but used up its old packaging for the new
products; this packaging was available at least through January 2019 in NYC.)
Chobani’s Gimmies are sold in packs of 6 4-ounce servings. Until early January
2019, each bottle of “Cookies & Cream Crush” and “Bizzy Buzzy Strawberry”
contained 9 grams of sugar (now 8), while the “Chillin’ Mint Chocolate” flavor
contained 7 grams of sugar. On a per ounce basis, Gimmies had less sugar (by a
gram or two) than did Danimals.
 

front with 33% less sugar claim

back with mouseprint

On the front, top, and back of the packaging, the Gimmies
packaging says that Gimmies contains “33% less sugar than the leading kids’
drinkable yogurt.” “On the front and top of the packaging, the claim appears in
reasonably readable typeface and is in no way qualified.” On the back, it’s
smaller and asterisked, referring the consumer to two footnotes that are found
below the nutrition facts panel, “in typeface so small that it is barely
legible.” Those footnotes read: “i. *chobani® Gimmies™ Milkshakes: avg. 8g
sugar; leading kids’ drinkable yogurt; avg. 12 g sugar, per 4 fl oz serving;
and ii. **Chobani® Gimmies™ Milkshakes: net 4 fl oz; leading kids’ drinkable
yogurt: net 3.1 fl oz.”
No matter what, 7 or 8 grams of sugar is not 33% less than 9
grams of sugar, or even than 10 grams of sugar. “Put otherwise, a single
serving of Gimmies does not have 33% less sugar than a single serving of
Danimals, no matter the flavor.” Chobani argued that its disclaimers disclosed
the necessary information, but doing so required—and the disclaimer didn’t
disclose that it required—a lot of math, including averaging all three flavors
of Chobani’s products (8.333) without knowing the grams of sugar in the flavors
other than those in the package the consumer was looking at, rounding that number to the nearest gram, then
comparing it to the sugar in Danimals, which is 9 grams per serving.  Additional calculations were required to
produce a hypothetical 4-ounce serving of Danimals (11.6 grams, which Chobani
rounds up to 12 grams). (“And as the Court noted at the TRO hearing, parents do
not ordinarily give a child 1.33 servings of yogurt anything.”)  At that point, the 33% less claim became “true.”
Chobani offered a simpler theory in litigation: dividing the
number of grams of sugar in a single serve bottle of each drink by the number
of ounces in the bottle yields 2 grams of sugar per ounce for Gimmies, and 3
grams of sugar per ounce of Danimals. “However, this rather more elegant and
easily comprehended ‘ounce for ounce’ comparison is not suggested by anything
on the packaging – especially not Chobani’s barely legible footnotes. And that
is not how Chobani calculated its claim.”
Dannon’s extrinsic evidence came from a marketing expert.  Based on his review of academic literature,
which the court considered an appropriate source, he concluded that consumers
were not likely to attend to Chobani’s disclaimers, primarily because of their
location on the packaging. He further opined that consumers would not likely
understand that Chobani’s “33% less sugar” claim required “an averaging of
Chobani’s three flavors, a scaling up of Dannon’s serving size, and a rounding
of fractional sugar contents to the nearest whole number[.]” He also conducted
an online consumer survey and concluded that significantly more consumers would
interpret Chobani’s “33% less sugar” claim as referring to the sugar content of
a bottle of Gimmies versus a bottle of Danimals – not to an ounce of Gimmies
versus an ounce of Danimals.
The online survey used a hypothetical involving two ice
cream brands with different single-serve sizes. Consumers were asked about
their understanding of a claim of “25% less fat” by the larger cup.
Specifically, the survey asked if they were more likely to assume that the
comparison above is made with respect to fat content per cup or per ounce; and
second, if they were more likely to assume that the comparison above is made
with respect to each flavor independently or the average of all three flavors. There
was a “don’t know/not sure” option. Forty-four percent of respondents thought
that the comparison statement “25 percent less fat than [hypo]” referred to the
fat content per mini cup of ice cream, while only 28% of respondents interpreted
it as a per-ounce claim. Similarly, 45% thought that the comparison statement
referred only to the specific flavor in question, while 27% of respondents chose
an average across flavors.  Only 10%
thought both that the comparison was per ounce and across flavors.  Chobani’s expert criticized the study, but conducted
none of her own.
The court found that Dannon’s evidence ruled out a literal
falsity claim but proved a misleadingness claim.  Dannon proved that multiple interpretations
were possible and that 10% of respondents would understand the claim completely
(which doesn’t seem like enough to me, but ok). 
Still, “read in the easiest and most straightforward way, the
advertising on the Gimmies package is not accurate. A bottle of Gimmies has
either 7 or 9 grams of sugar; a bottle of Danimials has either 9 or 10 grams of
sugar. Even taking the biggest difference (7 grams to 10 grams), without any
averaging, there is not 33% less sugar in a serving of Gimmies over a serving
of Danimals.”
Chobani offered no persuasive evidence of consumer
reception, and Dannon did. Indeed, the survey was actually favorable to Chobani
by offering respondents a menu suggesting per ounce and flavor averaging
options; “had the questions been open-ended, it is plausible that some
respondents would not have contemplated that interpretation.”  The questions were close-ended but not
therefore leading because they didn’t suggest a specific answer.  In this case, too, no control group was
necessary to guard against bias or pre-existing beliefs because it wasn’t that
kind of study.
Ultimately, reasonable purchasers who saw “33% less sugar
than the leading brand” on the front of the box “cannot be expected to study
the back of the packaging in the detail necessary to discover the cryptic,
microscopic footnoted disclosures … never mind figure out what needs to be ‘averaged’
with what and perform the multiple calculations needed to make sense of that
claim.” The court credited “numerous studies across different types of products
reveal[ing] that consumers are unlikely to notice or pay attention to Chobani’s
hard-to-find and hard-to-read ‘disclosure’ footnotes,” and these particular
disclosures were also incomprehensible. No yogurt-specific study was required
to show likely success on these points.
Chobani made a useless argument that it couldn’t be liable
because it complied with FTC/FDA rules. Multiple problems with that: (1) Pom Wonderful says the Lanham Act is
different. (2) Read carefully, the rules did not clearly authorize, much less
require, Chobani’s choices here. “The relevant FTC Guideline about ‘Comparative
Nutrient Content Claims’ states that comparative nutrient content claims must
not contain ‘misleading implications’ in order to survive FTC scrutiny” and
should also make clear the basis for the comparison, which Chobani didn’t do.
And the FDA regs cited by Chobani, to the extent they governed relative claims,
didn’t seem to allow Chobani to average the sugar content of its various
flavors.
Ultimately, though, the court was guided by common sense:
[A] parent walking down the dairy
aisle in a grocery store, possibly with a child or two in tow, is not likely to
study with great diligence the contents of a complicated product package,
searching for and making sense of fine-print disclosures in asterisked
footnotes, and looking for flavors other the one(s) s/he wishes to buy (which
may or may not be on the shelf) in order to perform multiple mathematical
calculations – all in order to confirm the truth or falsity of a claim that is
of dubious veracity, and that could easily have been replaced with the simple
and truthful statement, “My product has less sugar per ounce than his product.”
Nor does the law expect this of the reasonable consumer. With yogurt or any
other product, plain vanilla ads and labels tend to work best.
As a result, Dannon also showed a likelihood of success
under its NY GBL § 349(a) claims. Chobani argued that Dannon’s competitive
injury was insufficiently consumer-oriented, but that’s not true. Misleading
parents about the sugar content of a product intended for their children is a
consumer harm: the public “has a strong interest in receiving accurate
information, especially when it comes to products marketed specifically for
children.”
However, Dannon failed to show irreparable harm. Though some
courts have found irreparable harm with a showing of competition + “a logical
causal connection between the alleged false advertising and the plaintiff’s own
sales position,” that couldn’t happen here. The evidence indicates that, in the
month Gimmies launched, Dannimals’ share of the yogurt product market expanded.  This wasn’t an absolute increase—sales of kids’
drinkable yogurt were generally down during the holiday season—but it did
indicate lack of harm to Dannimals’ market position. “This data strongly suggests
that neither Danimals’ sales position nor its brand equity has suffered
irreparably.”  Danone also didn’t offer
any evidence that it lost sales, or that the lost sales were attributable to
the 33% less sugar claim versus the fact that Gimmies has somewhat less sugar
than Dannimals and a larger serving size. It was purely conjectural to say that
Danone lost sales as a result of the
misleading claim.
Anyway, lost sales would be remediable at law. Danone argued
that its injury was to its good reputation as a purveyor of healthy and
nutritious food for children.  But such
“purely conclusory testimony” proved nothing. 
“[T]here is no denying the fact that Danimals has more sugar per fluid
ounce than Gimmies does.”  Even if the
ads were misleading, there was no evidence or other reason to think that
Danone’s reputation would be more
injured by the misleadingness than by the truth, and Chobani had a right to
injure Danone with the truth. 
[There is an interesting set of ideas about but-for
causation and appropriate baselines in here; this issue comes up a lot in
various ways in advertising law, from whether a difference between the truth
and the ad claim is merely puffery or is potentially actionable to materiality
to harm causation, as here.  One can
imagine a different legal regime where the advertiser acts at its peril in
making false claims, even if it can show that the truth would also have worked.
Presumably the advertiser chose falsity over truth because it thought the
falsity would sell better, so we might rely on the advertiser’s own choices and
not its post-hoc defenses. But that’s not the legal regime we have.]
Even worse for Danone, it developed that it had been selling
Dannimals in old packaging that overstated the sugar content of its product. If
Danone was willing to tolerate that because of the expense of making new
packaging, it couldn’t turn around and accuse Chobani of irreparably harming it
on the same metric.
In addition, prompted by the lawsuit, Chobani changed
Gimmies, reducing the sugar in two flavors and changing the packaging. Flavor-specific
labels now advertise that they contain “30% less sugar*” “*than the leading
kids drinkable yogurt and disclose the comparison “Gimmies: 2g sugar per fl.
oz.; leading kids’ drinkable yogurt: 2.9g sugar per fl. oz.” This easy to
understand comparison will be on the front and the back.  The remaining old stuff will be sold or reach
its expiration date by the end of March. Thus, an injunction would have nothing
to redress. Although this will take a few weeks, Danone’s own use of stale
packaging made its irreparable harm claim unpersuasive.
Relatedly, the balance of hardships favored Chobani because of
the expense/difficulty of repackaging existing product (over 2.8 million
bottles would expire before they could be relabeled) and the special harm of
pulling a new product from the shelves before it’s fully established, which
would damage relations with retailers.
Nor would a preliminary injunction help vindicate the public
interest given the ongoing reformulation and repackaging.

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