Avoiding labeling-related lawsuits in 2015

by Donna Berry
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CHICAGO — During the past few months numerous news stories have focused on flavor forecasts and consumer trends that may shape the food business in 2015. There is something else to consider and that’s how various lawsuits from this past year may affect the claims food marketers may make. This issue pertains to the packaged food sector and, increasingly, in food service.

“As consumer packaged food companies have begun to change their labeling marketing behavior as a way to alleviate litigation risk, there is increasing scrutiny of restaurants by plaintiffs’ attorneys,” said David L. TerMolen, a partner and member of the Food Industry Team at the Chicago law firm Freeborn & Peters L.L.P.

In an exclusive interview with Food Business News, Mr. TerMolen outlined the labeling landscape in the wake of several court.

Food Business News: What are the riskiest claims to make on packaged food labels in 2015? What are alternative, safer ways to make the same point to consumers?

David TerMolen: No. 1 is clearly “all natural” claims followed by, more broadly, ingredient quality claims and “healthy” claims.

Companies are using a variety of alternative claims to convey the same message as “all natural.” The most common is simply claiming “no artificial flavors or preservatives.” Companies also use claims emphasizing a limited number of natural-sounding ingredients with minimal processing, for example, “made with only strawberries and cane sugar” or “simply granola.” Many companies are qualifying their natural claims by providing their meaning of “natural” for consumers on their label or web site.

Ingredient quality claims include statements such as “100% fresh squeezed” orange juice or “pure” coconut water. Such absolute claims about a product’s ingredients have the same potential problem as “all natural” claims to the extent room exists to quibble that, for example, the orange juice is actually stored for a period of time and/or reconstituted. Accordingly, the same methods for reducing risks apply to these claims.

“Healthy” claims suggest that a product is wholesome or healthy when it actually contains ingredients such as saturated fats or added sugars. For example, Nutella was the target of a class action lawsuit because it was touted as being a product made with “simple quality ingredients like hazelnut, skim milk and a hint of cocoa.” The lawsuit complained this was misleading because Nutella contains 10.9 grams of added sugar per serving, which is close to 55% (by weight) of the overall product, and 2 grams of saturated fat.

Besides minimizing the use of explicit or implied claims that a product is wholesome or healthy, companies can minimize risks by disclosing all relevant information on the front label of a product as advocated by the “Facts up front” campaign advocated by the Grocery Manufacturers Association (G.M.A.).

When is making an “all natural” claim the riskiest?

Mr. TerMolen: The F.D.A. will not object to the use of this term if the food does not contain added color, artificial flavors or synthetic substances. But, of course, natural claims that meet this standard are still targeted by activists, competitors or plaintiff’s attorneys. In this regard, the biggest risk remains the use of genetically modified organism (G.M.O.) ingredients, followed by products with ingredients that are allegedly produced by a chemical or non-natural process.

Is there any power in a natural claim, or have consumers lost their confidence in it?

Mr. TerMolen: Although I am not a marketing expert, I understand that natural claims remain attractive to a large segment of consumers. That said, some consumers have no doubt lost confidence in the claims and many more are likely confused as to what exactly a natural claim means. Accordingly, I expect such claims to continue into the future but with more qualifiers to minimize risks.

What about organic? Does it still command the power it once did, or again, are consumers skeptical?

Mr. TerMolen: I believe most consumers have confidence that organic foods comply with the certification process and U.S.D.A.’s robust requirements for organic labeling. This market segment continues to grow, so the real question is whether consumers’ perceptions might change as to the alleged social and health benefits relating to organic foods.

How does all of this apply to food service?

Mr. TerMolen: My advice with respect to packaged food labels applies equally to food service. But because food service involves more variable products, there is the additional risk that nutrient disclosures might be incorrect if they are not routinely updated.

As consumer packaged food companies have begun to change their labeling marketing behavior as a way to alleviate litigation risk, there is increasing scrutiny of restaurants by plaintiffs’ attorneys.

What are these attorneys looking for? What can food service marketers do to decrease their risks of potential lawsuits?

Mr. TerMolen: Generally, plaintiff’s attorneys are looking for chain restaurants making allegedly deceptive claims that would influence consumers’ purchasing decisions. Not surprisingly, these are the same types of higher-risk claims that I identified with respect to packaged foods. I also expect to see scrutiny of claims relating to nutrient content of menu items where, for example, an item allegedly contains more calories or fat than advertised.

Any cautions about the new calorie disclosure requirements in food service?

Mr. TerMolen: These need to be updated when a product changes and such changes occur more often in food service than with packaged food products. A food service company must have good internal communication regarding such changes in order to determine whether a particular item should be retested. For example, if more salt and cheese is added to improve a particular item, then there is an obvious risk that the prior disclosure for sodium, fat and calories is not accurate.

Let’s talk G.M.O.s. Where do you see this going in the U.S.? How should marketers proceed with attempting to make G.M.O.-free claims? What are the risks?

Mr. TerMolen: The G.M.A. and a few other trade associations have filed suit to block Vermont’s G.M.O. labeling law, which was scheduled to go into effect in 2016. The result of that lawsuit will play a large role in whether similar laws spread to more states. With respect to G.M.O.-free labeling, however, there is little to no risk with such claims when done pursuant to the verification process established by Non-G.M.O. Project.
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