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Seventh Circuit Rejects Court Intervention In Light Beer Ad Wars: Is A New Trend Brewing In False Advertising Law?

The last few years have seen a pitched battle for market share among the manufacturers of America’s leading “light” beers—a battle that’s been waged not only in America’s bars and on the airwaves, but in the courtroom. Earlier this month, in Molson Coors v. Anheuser-Busch, Nos. 19-2200, 19-2713, 19-2782, 19-3097 & 19-3116, 2020 WL 2097557 (7th Cir. May 1, 2020), the Seventh Circuit gave Anheuser-Busch, the maker of Bud Light, a major victory in that battle, wiping out an injunction that the district court had entered in favor of Molson Coors, the maker of Miller Lite and Coors Light. That’s newsworthy in itself—but, because of its novel reasoning, the Molson Coors ruling may have broader significance for false-advertising law.

We’ve covered the underlying litigation before.  It began last year, when Anheuser debuted a new marketing campaign mocking Miller Lite and Coors Light for using corn syrup in their brewing process, while touting the fact that Bud Light is brewed without corn syrup.  Molson (then called MillerCoors) filed suit under the Lanham Act.  It did not dispute that corn syrup was used to brew Miller Lite and Coors Light.  However, it alleged that Anheuser’s ads misleadingly implied that corn syrup was present in the finished product, when in reality, all the corn syrup was consumed during fermentationSee MillerCoors, LLC v. Anheuser-Busch Companies, LLC., 385 F.Supp. 730, 735-39 (W.D. Wis. 2019).  The district court agreed with Molson and enjoined Anheuser’s ads in part, relying on Molson’s consumer surveys showing that almost a third of consumers who viewed the ads came away with the mistaken impression that corn syrup was present in its finished product. Id. at 755.

In a breezy, five-page opinion by Judge Easterbrook, the Seventh Circuit summarily reversed the district court’s injunction, notwithstanding that survey evidence.  Alluding to those surveys, the Seventh Circuit acknowledged it was “doubtless” that “some consumers” who viewed Anheuser’s ads mistakenly “infer that some corn syrup avoids fermentation and makes it into [Molson’s] beer.”  Molson Coors, 2020 WL 2097557, at *1. However, the court found that fact irrelevant, as—in its view—Molson itself had made “statements” that “yield the same inference.”  Id. Specifically, the Seventh Circuit pointed to the fact that “corn syrup” was present in the list of “ingredients” found on the label of Miller Lite and Coors Light.  By listing corn syrup as an “ingredient” in its product labeling, the Seventh Circuit reasoned, Molson “brought this problem on itself.”  Id. at 2. It cannot be “false or misleading,” the court reasoned, “for a seller to say or imply, of a business rival, something that the rival says about itself.” Id.

This reasoning is somewhat unorthodox.  Historically, courts in Lanham Act disputes have been reluctant to make their own assessment of whether a claim is misleading, and have shown more deference to survey evidence purporting to find that consumers derive a misleading message from advertising claims.  As the First Circuit has described the traditional position: “the court’s reaction [to the advertising] is at best not determinative and at worst irrelevant.”  Clorox Co. v. Proctor & Gamble Comm. Co., 228 F.3d 24, 37 (1st Cir. 2000).  “[I]f [the] consumer survey data … shows that the advertisements ‘deceived a substantial portion of the intended audience,’ [the plaintiff] is entitled to relief under the Lanham Act” irrespective of the court’s own views.  Id.  Here, the survey evidence appeared to show that a “substantial portion of the intended audience” walked away with an incorrect view about Molson’s products; under the Clorox standard, that arguably should have been enough.

Again, the Seventh Circuit thought that the presence of “corn syrup” in Molson’s ingredients lists made this survey evidence irrelevant as a matter of law.  Its apparent theory is that it can never be “misleading” to utter the same words about a competitor’s product that the competitor utters about its own product.  But this categorical approach departs from the usual rule that, in false advertising law, “context matters.”  Wysong Corp. v. APN, Inc., 889 F.3d 267, 272 (6th Cir. 2018). Perhaps Anheuser was just repeating words that Molson had already uttered about its own products.  But Anheuser was speaking those words in a different context: not as one item among others in an ingredient list, whose content and format are mandated by FDA regulations, but as the centerpiece of a voluntary advertising campaign that was allegedly crafted to imbue Molson’s words with sinister new connotations.  Most courts would probably have deemed it a question of fact whether Molson’s and Anheuser’s respective statements about corn syrup in Miller Lite and Coors Light truly sent “the same” message.  The Seventh Circuit did not.

This is not the first time the Seventh Circuit, through the pen of Judge Easterbrook, has taken an unusually hands-off approach to competitor disputes under the Lanham Act.  Two decades ago, in Mead Johnson v. Abbott Labs., 201 F.3d 883 (7th Cir. 2000), Judge Easterbrook wrote another opinion rejecting survey evidence purporting to show that a particular advertisement left consumers with a mistaken impression about a product.  In Mead Johnson, Judge Easterbrook took the position that, when an advertising claim is “objectively verifiable” by the court, surveys should not be introduced to show that consumers misunderstand the claim.  As he wrote there, “interpreting ‘misleading’ to include factual propositions that are [true but] susceptible to misunderstanding would make consumers as a whole worse off by suppressing truthful statements” and by “reducing ads and packaging to meaningless puffery.”  Id. at 885-86. Molson Coors appears to reflect this same free-market instinct—that there is a role for the Lanham Act in policing egregious advertising claims, but that it should not do much more than that.  Indeed, Judge Easterbrook’s Molson Coors opinion expressly takes the position that “[l]itigation should not be a substitute for competition in the market.”

Although Judge Easterbrook has long taken this view, it may be gaining ground in the federal judiciary more broadly.  As we have observed on this blog, in the last year or so, several federal appellate courts have rejected the orthodoxy that whether an advertising claim is misleading is always a question of fact, instead holding—at the pleadings stage—that particular challenged advertisements were non-misleading as a matter of law.  See, e.g., Chen v. Dunkin’ Brands, 954 F.3d 492 (2d Cir. 2020); Geffner v. Coca-Cola Co., 928 F.3d 198, 200 (2d Cir. 2019); Becerra v. Dr Pepper/Seven Up, Inc., 945 F.3d 1225 (9th Cir. 2019). Molson Coors follows these decisions in rejecting that orthodoxy; however, it extends their approach from consumer class actions under state unfair practices laws to competitor claims under the Lanham Act.

If this trend is real, what’s driving it?  In part, it may just be judicial exhaustion with the rising tide of false-advertising litigation in federal courts.  But it may also reflect the Supreme Court’s shifting approach to commercial speech.  For many years, the Supreme Court ascribed little, if any, First Amendment protection to marketing and advertising, affirming speech restrictions in that area as a matter of course.  That has been rapidly changing, however.  See, e.g., Amanda Shanor, The New Lochner, 2016 Wis. L. Rev. 133 (2016) (noting that “[c]ommercial interests are increasingly laying claim, often successfully, to First Amendment protections,” and arguing that the First Amendment “has emerged as a powerful deregulatory engine”).  Of course, neither Molson Coors nor any of the other lower-court decisions discussed above are First Amendment cases.  But it’s reasonable to ask whether the Roberts Court’s increasingly “deregulatory” approach to commercial speech may be exerting its influence behind the scenes.

Molson Coors, then, may portend a future where courts increasingly leave the policing of truth in advertising to the marketplace.  Or not: courts could also cabin the decision to the somewhat unusual scenario where a competitor bases an ad campaign on a statement taken verbatim from a manufacturer’s own ingredients list.  Time will tell how this curious brew develops.