Date: Nov 17, 2014
Law360, New York (November 13, 2014, 6:44 PM ET) -- Unilever’s recent false advertising lawsuit against Hampton Creek Inc.’s “Just Mayo” trademarked brand of egg-free mayo raises a number of hot button issues in food and false advertising law, with perhaps echoes of the recent U.S. Supreme Court decision in Pom Wonderful LLC v. The Coca-Cola Company. The case under consideration here is Conopco Inc. dba Unilever v. Hampton Creek Inc., Case No. 2:14 Civ. 06856 (WHW)(CLW) (D.N.J. Oct. 31, 2014).
In its complaint and preliminary injunction papers recently filed, Unilever claims it has supermarket switching data establishing that its best-selling brands of Hellman’s and Best Foods mayonnaise have suffered a direct loss of sales to Hampton Creek's Just Mayo. Just Mayo is an egg-free, creamy white spread consisting of canola oil, thickening agents and acidifying ingredients, such as vinegar, and is suitable in sandwich spreads or salad dressings. It is produced by the 2011 San Francisco start-up — funded in part by Bill Gates — Hampton Creek, whose business plan is to promote plant-based foods free of animal products, such as eggs, to consumers. Until recently, Just Mayo was a best-seller in specialty food channels and Whole Foods Market Inc., but is now available in large, traditional food retailers such as Safeway Inc. and The Kroger Co.
Unilever first claims that the product name Just Mayo is deceptive because it is “literally false” under the federal Lanham Act. Unilever explains that Just Mayo contains no egg products, which are required under the U.S. Food and Drug Administration's “standard of identity” (i.e., the regulatory definition) for “mayonnaise,” and therefore is not, as Unilever puts it, “real mayonnaise.” In addition to the federal standard, Unilever cites to dictionary definitions equating “mayo” with “mayonnaise” to support its “literally false” claim.
Under the Lanham Act, a label or advertisement can also be deceptive even if not literally false because it is “misleading,” typically in light of extrinsic evidence. Thus, Unilever also argues that the Just Mayo label and related advertising are “misleading” under the Lanham Act based on: past Hampton Creek advertising referring to Just Mayo as “mayonnaise”; an interview by the CEO of Hampton Creek touting consumer association of Just Mayo with mayonnaise; the Just Mayo product label displaying an egg vignette (albeit with a plant growing at the bottom); and the positioning of the disclaimer “egg-free” only in small font on the back label. However, Unilever’s primary evidence for its misleading claim is the result of a nationwide online panel survey of consumers, a net 43.5 percent of whom believed Just Mayo was “real mayonnaise” (43.5 percent after accounting for the differences between the control and test cells).
In addition, Unilever challenges as misleading Hampton Creek’s “product versus product” superior taste claim based in part on advertising depicting the Just Mayo product “knocking out” Hellman’s in a boxing ring. Unilever alleges that these taste claims were without reliable substantiation, and that in fact Just Mayo does not hold up under cooking temperatures and thus damages the mayonnaise product category in this regard as well. Moreover, Unilever is seeking not only a permanent injunction, but a preliminary injunction at the outset.
The time has not come yet in the litigation for Hampton Creek to respond in court filings. However, based on press interviews, it seems clear that Hampton Creek seeks to reach mainstream consumers with the functional equivalent of mayonnaise, at least for sandwiches and salads. It seems equally clear that Hampton Creek engaged in an aggressive marketing campaign to associate Just Mayo with “mayonnaise” by: calling the product Just Mayo, where "Mayo" arguably is a commonly used shorthand term for “mayonnaise and “Just” may reinforce the mayonnaise association; placing an egg vignette on the label; advertising the product as “mayonnaise”; and making comparative claims directly against Best Foods and Hellman’s.
Thus, this case implicates many important aspects of food and advertising law for the food industry — the role of the FDA and courts, standards of identity in regulation of food labeling and advertising, consumer perception surveys, mislabeling, substantiation and superiority claims. It pits an established food manufacturer with beloved brands in recognized product categories against a new company seeking to redefine or create a new category, and an edgy marketing campaign versus concerns over category protection.
This scenario is reminiscent of the circumstances addressed in Pom Wonderful LLC v. The Coca-Cola Company. Perhaps the Supreme Court’s 8-0 decision in favor of Pom's Lanham Act competitor claims continuing to trial somehow validated Unilever’s decision to haul a much smaller competitor into court. That said, Coca-Cola had an argument that its labeling complied with a specific FDA juice naming regulation, whereas “mayo” is not a defined term under the mayonnaise standard of identity regulation, and therefore the Just Mayo case raises a different issue.
Any stakeholder in our food supply system may have an interest in either Unilever or Hampton Creek’s respective positions, depending on the circumstances, given the fact that even large food companies themselves often are food product innovators. For Unilever, there is much at stake for its premier brands if its claims for lost sales are correct. For Hampton Creek, an injunction could wipe out the brand investment and the value of the word mark Just Mayo, unless substantial changes were made to the labeling and marketing campaign, changes that may not be compatible with the Hampton Creek business plan.
Unless the federal court in New Jersey disposes of this case on some perhaps novel legal grounds, this case should represent an important battle of the experts. The Lanham Act does not require Unilever to come forward with a survey to prove a likelihood of deception, but of course having a survey as strong as Unilever claims does increase its chances of success. Hampton Creek will have to decide whether to adduce its own consumer perception survey, or just employ experts to attack Unilever’s survey.
In challenging the Unilever survey, Hampton Creek will have to raise questions either with the definition of the respondents’ pool and/or with the nature of the questions posed, and find some bias or flaw that would undermine Unilever’s net 43.5 percent conclusion of deception. In attacking the questions, Hampton Creek’s expert would have to formulate a critique based on a number of factors, such as whether open-ended or closed-ended questions were used to establish a certain point, what that means, the utility of the alternative labels proposed to establish net confusion and the framing of the questions themselves. For example, Unilever’s expert in his declaration predicated his conclusion in part on responses to a closed-ended question asking for a description of the Just Mayo product, with the possibility of selecting from among several options, including “Real mayonnaise”; “A spread or dressing that resembles mayonnaise but is not real mayonnaise”; “Tartar sauce”; “I don’t know” and others.
Interesting legal questions are also raised. Unilever claims that Just Mayo is literally false because this “mayo” does not meet the federal standard of identity for “mayonnaise,” which requires an egg product. However, equating “mayo” with the federal definition of “mayonnaise” arguably requires looking at evidence beyond the four corners of the regulation. Hampton Foods may respond that the FDA could have included the term “mayo” in the standard of identity, but chose not to.
On the other hand, “mayo” seems rather unique in the food world since at least the dictionaries cited by Unilever indicate that many English speakers use “mayo” as a shorthand version for “mayonnaise.” Unilever essentially argues that “mayo” is understood as “mayonnaise,” and the extrinsic evidence it cites simply reinforces this fact, and is not in fact required to prove the literal falsity of Just Mayo. Unilever’s logic thus seems to flow this way: the reasonable consumer interprets “mayo” to mean “mayonnaise,” federal law defines “mayonnaise” as containing egg products, so the Hampton Creek egg-free product is literally false because it does not meet this definition.
Alternatively, Unilever argues that extrinsic evidence, including an independent survey and its own focus group testing, establishes at a minimum that Just Mayo is “misleading” under the Lanham Act because the 43.5 percent net confusion rate of its survey showed that more than the legally requisite number of respondents found, mistakenly, that the Hampton Creek product was “real mayonnaise,” when in fact it was not. A net confusion rate of 15 to 20 percent typically is generally considered more than sufficient to show deception. Here, Unilever’s logic is tied again to the federal definition, where respondents according to Unilever mistakenly thought Just Mayo was “real mayonnaise” when it was not, because it does not contain egg products, and thus, again, it does not meet the federal definition.
A court may very well want to avoid an up-or-down ruling on the federal standard of identity, that is, whether Just Mayo is literally false solely with reference to the standard of identity. If so, the court will look to consumer perception and other extrinsic evidence to decide whether Just Mayo is misleading. And on this point, Hampton Creek presumably will want to have its own consumer surveys at the ready.
Unilever’s reliance on the federal standard is, of course, logical, but suggests a possible defense: preclusion. In the Supreme Court's Pom ruling it found that Pom's Lanham Act claims were not precluded even if Coca-Cola's juice label at issue complied with federal juice labeling regulations under the federal Food, Drug & Cosmetic Act because the Lanham Act and FDCA were “complementary” in cases of misbranded or false or misleading food labeling. However, the court left open the possibility that preclusion was not dead as a defense in “a case where a lawsuit is undermining an agency judgment.”
However, it is certainly an open question now as to what cases and circumstances would give rise to a preclusion defense acceptable under the Supreme Court's Pom decision in cases involving the Lanham Act and FDCA. The Supreme Court in Pom at oral argument and perhaps implicitly in its decision appeared to value consumer perceptions, and took an interest in consumer protection. A court could very well decide that preclusion, whatever exists of this defense now, is inapplicable here because the FDA only defined “mayonnaise” and not “mayo,” so there was no FDA judgment on “mayo” with which this case could interfere.
This case also seems to be noteworthy because Unilever claims that it has retailer data showing that customers of its brands switched over to Just Mayo. Damages based on direct evidence of lost sales are typically difficult to prove in such cases given that there are often more than two competitors (as is the case here), and the checkout data available in many cases cannot distinguish between switches (i.e., customers moving in and out of a product category) and new customers. How Unilever will quantify damages will be worth watching if the case goes to trial, but likely subject to a confidentiality order until that time.
In sum, it seems likely that the trial court here will want to consider all of the evidence bearing on consumer perception and avoid making novel rulings of law, particularly given Unilever’s consumer survey, however persuasive or unpersuasive it proves to be and given the tenor of the Supreme Court’s Pom decision. Absent a successful legal defense, Hampton Creek thus has liability exposure in several areas of false advertising law, from the alleged mislabeling and false advertising of the nature of the product in the aggressive marketing campaign to the superiority and comparative advertising claims.
The success of Hampton Creek’s defense thus may more than ever depend on skilled counsel with experience in food litigation, Lanham Act juries and consumer perception surveys.