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Class action may follow FTC-Nestlé settlement

By Shane Starling , 15-Jul-2010

Nestlé was not dealt a financial penalty in its settlement this week with the Federal Trade Commission over immunity health claims being made for some of its probiotic products, but a class action is possible, says a food attorney.

“Google ‘Nestlé’ and 'class action’ tomorrow and I would not be surprised if something popped up,” said Ivan Wasserman, a Washington DC-based advertising and labeling attorney at Manatt Phelps & Phillips.

“Class actions were mounted after the FDA in February issued a slew of warning letters to food companies for making misleading claims so I can’t see why that would not happen here.”

Recent class actions against Dannon and Wrigley have succeeded in millions of dollars being set aside by the food companies to reimburse consumers for buying products bearing misleading health claims.

The Nestlé settlement that referred to Nestlé HealthCare Nutrition’s BOOST Kid Essentials can be found here.

Double standards

Marc Ullman, food and drug attorney at Ullman, Shapiro and Ullman in New York, didn’t rule out a class action on the grounds of misleading claims, but said the settlement itself could not be used to back such an action as it specifically cleared Nestlé of any wrongdoing.

"The FTC should have dropped the case if the evidence was there or fined the company if it was not." -Marc Ullman

Ullman highlighted the disparity between the treatment of Nestlé and supplements manufacturer Iovate Health Sciences, which was hit with a $5.5m fine for misleading immunity and weight loss claims, also this week.

“There is a double standard here in that if you are Big Food you get treated one way and if you are a supplements company you get treated another way,” he said.

“The fact is the FTC brought this action so either Nestlé had the evidence to back the claims or it didn’t. The FTC should have dropped the case if the evidence was there or fined the company if it was not. These settlements send a bad signal to the industry.”

Recent FTC settlements with Kellogg’s evidenced the disparity, he said, adding the severity of the Iovate action meant supplement companies were better off litigating if they came under the scrutiny of the FTC.

“As it stands the odds are better to litigate than settle. You are better off in front of a judge and losing,” Ullman said.

The Iovate action can be found here.

Two trials

The fact the FTC had stipulated that Nestlé must have two gold standard clinical trials to back any future claims in the area, and that they must be pre-approved by the FDA, was going to create interesting interpretations in the law, he said.

Of the two trials aspect, Ullman said, “The FTC has slipped this provision in here and will hope to rely on it but I would doubt that a court will be willing to enforce it.”

Wasserman added: "These settlements show that when settling cases involving health and safety claims in the future, the FTC may be very specific in the type of evidence that the advertisers will be required to possess before they are able to make similar claims again. Whether the specific substantiation required in these orders becomes FTC’s de facto substantiation standard remains to be seen."

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