State AG Monitor

State Attorneys General (AGs) are bringing their considerable consumer protection and law enforcement authority to bear on the business practices of the food and beverage industry. AGs in the past have transformed how entire industries operate through similar actions, from the Tobacco Master Settlement Agreement to lawsuits against pharmaceutical companies to the most recent AG litigation to transform the mortgage and financial service industries. Awareness of AGs’ interest and scope of authority and proactive planning to identify and address concerns are essential for food and beverage companies to adapt to similar industry changes that AGs can cause.

AGs have begun by scrutinizing food and beverage marketing practices, particularly companies that tout unproven health benefits or that target or appeal to children. Thirty-nine AGs investigated Dannon in late 2010 regarding its marketing of products that it claimed improved consumers’ digestion and enhanced their immune systems. The company ultimately was required to pay a multi-million dollar penalty and alter its marketing practices. A coalition of AGs also examined sellers of alcoholic energy drinks, pursuing allegations that those companies improperly marketed to minors, misrepresented the energizing effect of the products, and further alleged that the formulation of the products themselves posed a danger, ultimately leading to the discontinuation of many alcoholic energy drinks.

Even when the industry has attempted self-regulations, AGs have looked closely at the sufficiency of those efforts, including their scrutiny of the accuracy of the “Smart Choices” product labeling initiative which resulted in the discontinuation of that program. Individual AGs also have taken action. The Oregon AG investigated and settled with Kellogg’s over its claims that its cereals could boost children’s immune systems. More recently, the New York AG subpoenaed several companies that make energy drinks, seeking information regarding marketing efforts and the ingredients used, particularly caffeine.

State AGs’ ability to affect industries extends beyond the investigation and litigation context. In a specific example, Vermont Attorney General Sorrell demonstrated a keen interest in food and obesity-related issues and attempted to impact the industry through policy changes and initiatives. He has proposed that the state legislature undertake numerous measures that include: enacting a soda tax, requiring calorie counts on menus, and using deceptive trade practice laws to curb food marketing aimed at children. In addition, he has encouraged other AGs to undertake similar initiatives. AGs also work closely with the Federal Trade Commission (FTC) to police consumer protection, and accordingly AGs are likely to be further prompted to act by the FTC’s 2012 study closely examining various aspects of child-focused marketing by food and beverage companies.

Plaintiff’s lawyers and health advocacy groups are prompting AGs to focus even more on these issues. Enterprising attorneys have pitched alleged links between food marketing and obesity as the “next tobacco” to several AGs offices and have suggested pursuing litigation against food and beverage companies on a contingency fee basis as they did in the tobacco cases. Advocacy groups like the Center for Science in the Public Interest, Rudd Center, Robert Woods Johnson Foundation and the National Policy & Legal Analysis Network to Prevent Childhood Obesity, have also conducted a significant campaign. They are encouraging AGs to use their stature as public officials and their consumer protection authority in novel ways to regulate food and beverage companies, often invoking parallels similar to the tobacco litigation. These groups attend conferences, draft white papers, and make panel appearances at national AG events, such as those sponsored by the National Association of Attorneys General (NAAG) and Conference of Western Attorneys General (CWAG).

AGs are already active in regulating the food and beverage industry, and the pressures from anti-industry advocates and the general public focus on healthcare issues will only drive their interest further. Countering that messaging requires companies to account for and understand AGs, their authority and processes, and their concerns. AGs have driven change in other sectors, but a proactive strategy can help food and beverage companies manage what the future holds for their own industry.