"'Natural' & 'Sustainable': Risks of Using Undefined Terms in Food Marketing," 35th Annual Marketing Law Conference
Author: Cheryl A. Falvey.
The failure of federal regulators to define two common marketing terms, "natural" and "sustainable," has resulted in a plethora of lawsuits claiming that the product advertising and labeling misleads consumers. The food industry has been the hardest hit in an ongoing battle regarding the use of the term "natural" on food packaging. Often used to attract purchasers and highlight healthy options for consumers, the use of "natural" or "sustainable" can convey a variety of meanings depending on their context and the overall consumer impressions of the products. The legal challenges often hone in on the use of a particular word and, at bottom, contest whether "natural" can ever be used if a product contains a processed ingredient, or "sustainable" can be used if the creation of the product somehow affects the environment.
Terms with a variety of meanings complicate an advertiser's basic responsibility to substantiate all the reasonable implications conveyed by their advertisement, not just the advertiser's intended messages. In its Green Guides, the FTC refused to provide specific guidance on the use of the term sustainability and highlighted the fact that the claim sustainable has "no single meaning" to most consumers and can be interpreted beyond environmental claims to include issues of durability and longevity.1 The Green Guide statement makes it clear that the Commission did not feel comfortable moving forward given the lack of consumer perception evidence upon which to base a decision.
The FTC specifically warns firms to ensure that before using sustainable that they have the claim substantiation to demonstrate what consumers understand the term to mean under the circumstance. The decisions from the National Advertising Division, the industry self-regulatory body, likewise focus on claim substantiation and compare that information to the use of the word sustainable within the overall context of the message. General claims related to corporate goals of sustainability have been found to convey specific product messages. For example, messages about sustainable farming may convey ingredient superiority claims when made in advertisements geared toward increasing food sales based on an impression that sustainability leads to a healthier product.2
With no consensus of a standard to use to verify the meaning of sustainability, using the term in a marketing context creates some risk. Nonetheless, properly substantiated or clarified to relate solely to aspirations and goals, the term sustainable can be used. But what level of substantiation will be enough? The FTC certainly warned marketers to beware of using the term without consumer perceptions studies and indicated the "challenge" of using a term that "is extremely difficult to verify."3 The Sierra Club argued that to substantiate a sustainability claim a firm must have irrefutable, science-based evidence of levels of environmental performance well beyond state and federal regulatory requirements. Sustainability remains a lightening rod term that can be argued to have no inherent meaning and, thus, confuse consumers.
The same is true for the term natural. The FTC failed to define natural because it lacked sufficient information to act given the wide variety of meanings the term can connote in different contexts.4 The FTC had data from both consumer advocates and industry but for the most part determined that the data was not nearly specific enough for it to provide guidance that would capture the many different meanings the term can have in a given context. Indeed, the FTC failed to provide guidance despite the fact that it had some consumer perception data in the docket. For example, Consumers Union submitted data to the FTC suggesting that 86 percent of consumers believe that natural conveys the impression that the product does not contain any artificial ingredients.5 The Green Guides do provide some specific advice for when natural claims require demonstrable proof:
- If the use of the word natural conveys the impression to a reasonable consumer that the product is not made with artificial ingredients, then the marketer must be able "to substantiate that impression."
- If the use of the word natural conveys the impression to a reasonable consumer that the product generally benefits the environment, then the marketer must be able "to substantiate that impression."
- If the use of the word natural conveys the impression to a reasonable consumer that the product is superior to one made with non-natural or synthetic ingredients, then the marketer must be able "to substantiate that impression."6
The Green Guides leave a void when it comes to the level of substantiation required in these circumstances, the ways context might appropriately qualify natural claims, and what other attendant implied claims would also require substantiation.
FDA has left a similar void in its handling of the word natural in its food labeling guidance. FDA explains its perspective on the use of the word natural in FAQs 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, 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.7
FDA's 1993 policy statement on natural indicated that the term meant that the food had nothing added that would not normally be expected in that food, including ingredients that are synthetic or artificial. Since then FDA has repeatedly refused requests for clarity from both sides of the debate. It refused to act on petitions separately submitted by the advocacy group, Center for Science and the Public Interest, and the industry group, the Sugar Association. Both organizations had asked FDA to provide a more definitive definition of natural. FDA has not been completely silent on the meaning of natural. In 2011, FDA issued a warning letter addressing the use of the word natural and indicating that the word should not be used on products known to contain a synthetic chemical preservative.8 So, the answer as to what is natural lays somewhere between the raw products of the earth and the use of synthetic chemical preservatives, quite a wide chasm to fill with substantiation and qualification.
The plaintiffs' bar has attempted to fill this void in the regulatory guidance and create common law meanings by bringing false advertising and unfair competition claims predicated on the misleading nature of the terms. The cases seek damages based on allegations that the plaintiff did not receive the benefit of the premium paid for the environmentally superior/natural product. Plaintiffs have targeted the food industry as well as other consumer products manufacturers, such as manufacturers of cleaning products, often creating the impression that the product labels use the term "all natural" rather than natural and failing to provide the overall contextual message conveyed by the product's packaging.
In some circumstances, whether a business practice is misleading or deceptive can be a question of fact precluding early resolution by a court.9 Defense efforts to dismiss these cases hinge on fact specific arguments and have met with mixed results. Recently, a federal district court dismissed an all-natural case on the theory that the plaintiffs' interpretation of the term was not plausible and the allegations of consumer deception were insufficient, in part because the plaintiff had not alleged that certain ingredients had been defined as artificial by the FDA.10 In other cases, claims regarding terms that have been defined by FDA or that overlap areas where FDA has specific regulatory guidance have been found to be expressly preempted.11 However, the failure of FDA to act to issue regulations on the use of natural on food labels has hurt the success of similar arguments in cases where the claims relate solely to the use of the word natural. Indeed, in 2010, a number of district courts stayed a series of natural cases for six months to allow FDA to take further action to define the parameters of the use of the term natural. FDA declined to do so citing resource limitations and other priorities. More recently, a court denied a motion claiming that the FDA had the primary jurisdiction to decide the meaning of the use of the word natural on the packaging stating that it was unclear when and whether the FDA might ever address the issue.12 Other courts have continued to stay cases in deference to FDA's primary jurisdiction.13 Action by FDA to define natural would fill this void and provide marketers with the clarity they need to label products uniformly and properly.
Standing arguments have proven to be successful where the plaintiffs have failed to sufficiently plead reliance on the allegedly misleading statements in making their purchasing decisions and how they were deceived.14 However, while some claims have been dismissed or narrowed through aggressive motions practice, most cases settle. Settlements involve relabeling of the product moving forward and monetary payments to class members where the class is ascertainable and there is proof of product purchase. In one such case, the defendant agreed to remove the term natural from any product that contained an ingredient that had been genetically modified and established a fund to pay up to a hundred dollars to any plaintiff entitled to a refund under the terms of the agreement.15 In another, a cosmetics company agreed qualify its natural claims by adding a labeling statement regarding what percentage of each product is naturally derived.16
In the absence of federal guidance and without a clear path to preemption and dismissal of these cases in early motions practice, companies must conduct diligent labeling review and be in a position to substantiate the use of these terms when necessary. Before approving labeling or advertising for a product using natural or sustainable, counsel must know the identity of all constituent ingredients, including whether there has been genetic modification or processing with synthetic ingredients. Risk prevention starts with knowing the product and the supply chain.
1 http://www.ftc.gov/os/fedreg/2012/10/greenguidesstatement.pdf ("Green Guide Statement") at 250.
2 See http://www.asrcreviews.org/2012/04/nad-finds-chipotle-can-support-implied-claims-in-back-to-the-start-sustainable-farming-campaign/ (holding that company had adequate substantiation for claims of "naturally-raised" meat).
3 Green Guide Statement at 258.
4 Id. at 264-65.
5 Id. at 262, n. 916.
6 Id. at 265-66.
9 Astiana v. Kashi Co., No. 11cv1967 (S.D. Cal.) (certifying a class to allow for determination of whether use of natural in light of certain ingredients could mislead a reasonable consumer).
10 Pelayo v. Nestle, No. 2:13-cv-05213 (C. D. Cal.).
11 Simpson v. The Kroger Corp,opinion at: http://www.courts.ca.gov/opinions/documents/B242405.PDF (discussing specific federal regulations on the definition of margarine and labeling requirements as to height of lettering and prominence and boldness of lettering).
12 In re Frito-Lays All Natural Litigation (E.D. NY) ("[T]he FDA is unlikely to respond in a timely manner to any referral from this court. . . . In an analogous situation, the FDA took nine years to define the requirements a manufacturer must meet before it can label food 'gluten-free.'")
13 Id. (discussing two district courts that stayed cases on primary jurisdiction grounds finding that the decision of whether the term natural could be used on foods made with genetically modified corn uniquely in the expertise of the FDA).
14 Kane v. Chobani, Inc., No. 12cv2425 (N.D. Cal.).
15 Trammel v. Barbara's Bakery, No. 12cv2664 (N.D. Cal.)