False Advertising Claims Dismissed Against Blue Moon Beer in Artfully Crafted Opinion
For the past few years, the courts have decided a number of cases involving claims of false advertising and labeling of food products. For example, consumers and health advocates contend that an “all natural” designation is false and misleading if certain ingredients are used and that the “organic” label is compromised by certain types of processing. In an interesting decision handed down late last month by the federal court for the Southern District of California, these “food fights” extended into a similar question — can a large beer manufacturer advertise and label its product as a craft beer?
Before addressing the legal issues, it is helpful to understand some context, including the division between craft brewers and international conglomerates that brew major brands. In 2014, “craft breweries” (as defined by the Brewers Association) saw an 18 percent rise in volume and a 22 percent increase in retail dollar value, while the overall beer market increased only 0.5 percent. Thus, while the overall market share for all craft beer remains in the low double digits (11 percent as of the end of 2014 according to the Brewers Association), the market segment has grown tremendously at the expense of larger brands. In response to the growing demand for craft beer, major beer manufacturers have acquired a number of craft brands around the U.S. and internally developed other brands designed to compete in the craft market segment.
Parent v MillerCoors involved claims asserted against a joint venture owned by Molson Coors and SAB Miller, two of the largest breweries in the world, in connection with MillerCoors’ labeling and marketing of Blue Moon, a brand that was developed in-house as a craft beer. The plaintiff contended that beer consumers have a right to know the origin of Blue Moon and that selling and marketing the product as a “craft” beer is deceptive and misleading. Specifically, the plaintiff pointed to Blue Moon’s label, which states it is manufactured by “Blue Moon Brewing Co.” and not MillerCoors, even though Blue Moon is manufactured at the same locations as other MillerCoors beers. The plaintiff also objected to the trademark “Artfully Crafted” used to market Blue Moon and the fact that the beer sells at a premium price alongside other craft beers at retailers.
The plaintiff pled three causes of action, which is typical of these types of cases: (1) deceptive practices and misrepresentation in violation of California’s Consumers Legal Remedies Act; (2) untrue and misleading advertising in violation of California’s False Advertising Law; and (3) unlawful, fraudulent and unfair business practices in violation of California’s Unfair Competition Law. While the legal questions presented – and their analogy to the “food fight” line of cases mentioned above – made this case difficult to predict, the district court ruled that the plaintiff’s complaint failed to state a claim under all of the above theories.
The first defense advanced by the motion to dismiss is the Safe Harbor Doctrine, which holds a defendant cannot be liable for a violation of consumer protection statutes if the business practice is permitted by another regulation. The beer industry is heavily regulated, including by detailed regulations and requirements from the Alcohol and Tobacco Tax and Trade Bureau (a division of the U.S. Treasury Dept.) and state departments of alcoholic beverage control. Those state and federal regulations include specific rules governing the labeling of beer and permit a brewer to use a trade name (such as “Blue Moon Brewing Co.”) different from the formal corporate name. Because the court concluded that the conduct was expressly permitted by applicable regulations, it disposed of the aspects of the claim related to labeling.
The court next turned to the plaintiff’s contention that a reasonable consumer would have been deceived by the defendant (1) intentionally omitting MillerCoors’ ownership interest on the Blue Moon website; (2) identifying Blue Moon as a “craft beer” on the MillerCoors website; (3) using the “Artfully Crafted” trademark to falsely portray Blue Moon as a craft beer; and (4) pricing Blue Moon at a premium and placing it in retail stores among other craft beers. The Court disposed of each of these theories and found that they failed to state a claim.
Of particular interest is the parties’ dispute as to whether there is a legal or controlling definition of a “craft beer.” The plaintiff pointed to the definition adopted by the Brewers Association, which defines a “craft brewery” as one that produces less than 6 million barrels of beer per year (approximately 3 percent of U.S. annual sales) and less than 25 percent of the brewery is owned or controlled by an alcoholic beverage industry member that is not itself a craft brewer. The defendant disagreed with the Brewers Association definition and argued that there is no generally accepted and legally enforceable definition applicable to the industry.
The court declined to resolve whether the Brewers Association definition of a “craft brewery” was controlling, but disposed of the claim by deciding that the phrase “Artfully Crafted” is not misleading because “[t]o be actionable as an affirmative misrepresentation, a statement must make a specific and measurable claim, capable of being proved false or of being reasonably interpreted as a statement of objective fact.” The court held that “it is difficult to see” how “artfully crafted” could reasonably be interpreted as a statement of objective fact; accordingly, the phrase qualified as “puffery” that was immune from a claim of false advertising.
While leave to amend was granted, the decision is important for large beer manufacturers going forward, as these companies will likely continue to rely on advertising (and revenue) from internally-developed “craft” brands and seek to regain market share by promoting and distributing beers from recently-acquired regional craft breweries.
Kent Schmidt is a partner in Dorsey’s Litigation Group and Kyle Leingang is an associate in the Corporate Group. Kent is the author of Left Coast Law, a blog that discusses the legal environment in California and its impact on businesses, residents and consumers.