Marketing Products in the Current Regulatory and Litigation Environment Michigan State University College of Law Food Law Current Issues Seminar – July 14, 2016 Steven B. Steinborn Note – 3D supergraphic ‘mask’ is now a selectable object in foreground of slide.

Overview Litigation and Regulatory Risk Tolerance Identifying Risk Areas Managing Risk

Litigation And Regulatory Risk Tolerance Starting point – understanding risk continuum; critical threshold legal assessment Where does a given claim or planned marketing plan fall on continuum? Threshold issue in constructing claims: risk tolerance Litigation “costs” - negative publicity/impact on brand equity, cost of potential settlement or a negative outcome on the merits, drain on resources, legal fees Court decisions all-over-the-map. Numerous potential defenses and possible judicial outcomes

Litigation Risk Tolerance Risk adverse –avoid claims that are or could be subject to litigation or regulatory sanction Moderate risk-taking – limited to well-substantiated claims; recognition you may be sued but less likely to lose on the merits. Aggressive risk taker - roll the dice! Remember: Cannot evaluate risk unless you have accurate understanding of legal landscape

Whose Looking Over Your Shoulder? Food and Drug Administration Federal Trade Commission State mini-FDA’s State Attorneys General Private Plaintiff/Consumer Advocacy Groups Competitors

Identifying Risk Areas: Misbranding Cases Nutrient Content Claims Ingredient Claims/Product Naming Health Claims

Risk areas: Nutrient Content Claims FDA Warning Letter to KIND, objecting to “healthy” claims “+” Claims Antioxidant claims Failure to disclose level of total fat where good source of fiber claim is made and product is not low in fat Failure to include % Daily Value for protein Failure to declare poly and mono unsaturated fats Class action plaintiffs filed lawsuit days after letter was posted by FDA

“made with ___” No bright line rule Need a material amount, consistent with consumer expectations Lawsuits over “made with real fruit” claims In assessing claim, consider: Graphics – do they imply how much or what type of the ingredient? Whether any nutrients are associated with the highlighted ingredient – are those nutrients present at sufficient levels? Consult FDA flavor labeling rule Hogan Lovells

“No artificial _____” “No artificial ingredients” has been challenged as an implied “all natural” claim “No artificial flavors” FDA has defined artificial flavor (21 CFR 101.22(a)(1)) “No preservatives” FDA has defined chemical preservative (21 CFR 101.22(a)(5)) Lawsuits filed challenging this claim where a product contains citric acid as an ingredient Hogan Lovells

“No artificial ____” “No artificial colors” FDA takes the view that all colors, regardless of source, are not natural FDA regulations define artificial color as any color additive (21 CFR 101.22(a)(4)) Many companies make a qualified claim: “No artificial colors – added colors from natural sources” Hogan Lovells

Health-Related or Nutrition Cases Immune system claims Claims that juice provides the brain support benefits Claims that infant formula prevents or reduces the risk of developing allergies Heart symbols Weight loss claims Nutritional “Halo”/Value Claims “Real” claims Wholesome breakfast Depictions of fruits or vegetables not present in product or at low levels

Lessons and Recommendations Use of “natural” in any context should be carefully evaluated; many companies opt to switch than fight FDA “natural” notice for public comment promising but unlikely to yield definitive rule “Natural” as illustration of risk assessment Remove claims Reformulate product to avoid use of targeted ingredients Tailor claims to specific ingredients (rather than the entire product) Continue to make claims consistent with FDA’s existing policy

Lessons and Recommendations FDA policies and regulations remain relevant and important – basis for preemption and to avoid lawsuits premised on technical violations Heed FDA Warning Letters and guidance to diminish risk Conduct internal audit of labels; identify issues and select appropriate timeframe for revisions where needed

Lessons and Recommendations Nutrition and health claims – premium on substantiation Often a high level of proof is required – consider the Federal Trade Commission’s “competent and reliable scientific evidence” standard Competitive advantage to companies with sound science Tailor claims to level of science Leverage new Dietary Guidelines and Committee Report for consensus views on nutrition science

Other Proactive Strategies Leverage third-party certification bodies Involve academic or other credible “external” experts Clarity in constructing claims; avoid unintended implied claims