The settlement means that a trial, which was due to start in January next year in a US District Court for the Central District of California, will no longer go ahead.
The dispute was over allegations that McNeil, a subsidiary of Johnson & Johnson, had misleadingly marketed its Splenda sweetener as a natural product. McNeil denied the allegations.
Now they have announced that an agreement has been reached.
McNeil and the Sugar Association said in a joint statement: “The details of the settlement agreement are confidential and the parties have agreed to make no additional comments on the terms of the settlement.”
However, Dan Callister, of law firm Squire Sanders & Dempsey, lead counsel for the Sugar Association, told FoodNavigator-USA.com: “The sugar industry is very satisfied with the settlement and with what they believe will be the outcome of the settlement in terms of marketing of the product.”
The US trade body had claimed that Splenda’s tag line that it was 'made from sugar so it tastes like sugar', was deliberately used to make consumers believe that the artificial sweetener contained sugar.
It alleged that this demonstrated a deliberate attempt to misinform consumers into believing that Splenda was a no-calorie natural sugar product.
However, McNeil refuted the allegations and claimed that all material supplied to customers regarding its man-made sweetener were not misleading or deceptive.
A spokeswoman for McNeil told FoodNavigator-USA.com today that the tag line was still being used.
It stated that the Splenda Brand Sweetener (sucralose) was “made from a process that begins with sugar” and said it had promoted the product as a lower calorie alternative to sugar to tap into concerns over increased obesity rates and other health issues.
It said this distinction had helped the product to become the US’ biggest selling zero calorie sweetener of the last five years.
The Sugar Association alleged that internal documents from Johnson & Johnson suggested the company was well aware that its promotional material was causing confusion amongst consumers.
In November 2006, the Sugar Association filed a complaint with the nation's Federal Trade Commission (FTC), requesting an investigation into the marketing of Splenda.
Prior to that, McNeil had filed a lawsuit against the Sugar Association, accusing it of false advertising in connection with a website it had established.
The site, truthaboutsplenda.com published information about the sweetener but a federal court in Wilmington, Delaware, dismissed the suit, stating that McNeil had no right to maintain an independent action.
McNeil has also come up against resistance from competitor Merisant, which sells the artificial sweeteners Equal and NutraSweet.
The two companies were embroiled in a fierce court battle, again in 2006, which Merisant said was all about providing consumers with accurate information, while also creating an "equal playing field" for manufacturers of other artificial sweeteners.
A settlement agreement was reached in May last year, although no information on the terms of the agreement was released.