Observers say class-action suit may have merit
United States Dannon, the US branch of French food giant, Danone, will not change the way it runs its highly successful probiotics business in the wake of a class action mounted in a California court. The suit accuses Dannon of misleading advertising and demands it return hundreds of millions of dollars to US consumers.
Dannon may feel its confidence is justified given the seminal role it has played in developing the US probiotics yoghurt market, which has soared from virtually nothing to more than $400 million in little more than two years.
If Dannon-owned Stonyfield Farm is thrown into the mix, about 80 per cent of that $400-million market is in Dannon's hands. Market researcher Business Communications estimates the US probiotics market will reach $1 billion by 2010 in all categories.
Perhaps it is the outrageous success of this campaign that has spurred the class action seeking reimbursement for all consumers that have purchased New York-based Dannon's Activia and Activia Lite spoonable yoghurts, and DanActive one-shot yoghurt drinks.
The action accuses Dannon of employing 'massive and comprehensive' unsubstantiated gut- and digestive-health statements to lure consumers into purchases, and justify price premiums of up to 30 per cent over regular yoghurt products. "Dannon's representations are false, misleading and reasonably likely to deceive the public,? the action states before accusing Dannon of ignoring its own negative scientific findings, and demanding the company mount a corrective advertising campaign.
Dannon/Danone issued a statement that said it would 'vigorously challenge this lawsuit.'
But veteran Colorado-based food-industry lawyer, James R Prochnow, of the firm Greenberg Traurig, believes the class action has the potential to cause problems for Dannon, despite the fact Danone makes similar health claims about similar products in regimes stricter than the US, such as the European Union and Australia. These would be considered by the court, he said.
Under the California legal process, the class action that has been brought by two law firms representing a consumer named Patricia Weiner must now be certified in the California court in which it was lodged. This may not occur for up to a year, but in Prochnow's view it has a 50/50 chance of succeeding. "The question is: does the science justify the claims? Having read the action, there may be enough of a gray area for the court to decide that Dannon's scientific data are not consistent with its marketing messages,? he said. "This class action looks a lot better than others I have seen and it could well be a long, litigative law suit as many class actions are.?
Dannon's senior director of public relations, Michael Neuwirth, told Fi Dannon would not speculate about this, and had said all it wanted to say in its previous statements.
Prochnow highlighted what he believed were fundamental flaws in the action:
- Accusing Dannon/Danone of using its marketing messages to justify 30 per cent price premiums ("This is very weak, as proving a consumer's reliance on these messages in their purchasing decision is nearly impossible.?)
- Accusing Danone/Dannon of inducing placebo effect in its trials ("There is no merit in this.?)
- Accusing Dannon/Danone of using deceptive names of bacteria strains ("The American legal system allows great leeway on trademarked names so this is highly unlikely to succeed.?)
Prochnow said the US Federal Trade Commission and Food and Drug Administration, which usually police health and nutrition claims, were unlikely to get involved, but would wait for the court decision. "This action is not revolutionary, but it will draw attention to foods and supplements claims. If I were Dannon/Danone, I would be taking this seriously, as I'm sure it is, despite the dismissive tone of its official statements.?
Ioannis Misopoulos, executive director of the Illinois-based International Probiotics Association, whose membership mostly consists of probiotics suppliers, said it was unfortunate the case had attracted a lot of negative press, but pointed to the huge amount of clinical data that supported the efficaciousness of probiotics in gut and digestive health and immunity, as well as the fact Activia's European equivalent, Actimel, had been on sale there with a similar set of claims for about 20 years, and was a multi-billion-selling product worldwide.
Danone received a boost in February when two English hospitals — the Royal Sussex County Hospital and Princess Royal Hospital, in the county of Sussex, began trialling Actimel to reduce the risk of patients developing superbugs such as Clostridium difficile. "We are providing Actimel probiotic yoghurt to patients on the wards where we have previously had more cases of C.diff,? a National Health Service spokesperson said.
A PDF of the Dannon/Danone class-action can be found at www.csgrr.com/csgrr-cgi-bin/mil?case=dannon.