Addressing the issue of whether a recall notice issued by a competitor constituted false advertising and anti-competitive conduct in violation of Section 2 of the Sherman Act, the U.S. Court of Appeals for the Sixth Circuit reversed a district court’s judgment dismissing false advertising claims and affirmed the district court’s dismissal of Sherman Act claims.  Innovation Ventures, LLC D/B/A Living Essentials v. N.V.E., Inc., Case Nos. 10-2353, -2355 (6th Cir., Sept. 13, 2012) (Boggs, J.).

Plaintiff Living Essentials (LE) asserted that defendant N.V.E.’s “6 Hour POWER” energy shot infringed its trademark on its “5 Hour ENERGY” energy shot.  Before filing suit against N.V.E., LE had been involved in a trademark and trade dress dispute with another competitor over the competitor’s “6 Hour Energy Shot.”  LE succeeded in obtaining a preliminary injunction and recall order against the “6 Hour Energy Shot” product based on its trade dress claims.  In addition to the court-mandated recall notice promulgated by the defendants in that action, LE issued its own recall notice to retailers.  While the preliminary injunction only involved the “6 Hour Energy Shot” product, LE’s recall notice announced that a preliminary injunction had issued ordering the immediate recall of the “6 Hour” product.  The recall instructed retailers to return the product immediately if they had any of the “6 Hour energy shots” in stock.

On appeal, N.V.E. argued that LE’s recall notice constituted false advertising.  In analyzing N.V.E.’s claim, the 6th Circuit stated that if statements are literally true yet deceptive or too ambiguous to support a finding of literal falsity, a violation can only be established by proof of actual deception.  However, if a statement is literally false, actual deception is presumed.  The Court found that LE’s recall notice was on the cusp between ambiguity and literal falsity in two main respects—descriptive and grammatical.  For example, the Court noted that instead of identifying the recalled product by name, “6 Hour Energy Shot,” the notice referred to a “6 Hour” energy shot.  The court also stated that the use of the indefinite articles “a” or “any” in the notice could suggest that more than one energy shot with the words “6 Hour” in the title was subject to the recall.  Recognizing that it was a close question, the Court declined to find the recall notice literally false, instead finding that a genuine factual dispute existed regarding whether the notice was misleading and tended to deceive its intended audience.  The 6th Circuit found that the district court erred by dismissing the false advertising claim. 

The 6th Circuit upheld the district court’s dismissal of N.V.E.’s antitrust claim.  The court explained that in order for false advertising to rise to the level of an antitrust violation, the false advertising must be so difficult for the allegedly harmed party to counter that it could potentially exclude competition.  Since N.V.E. could counter the recall notice by informing retailers that its product was not subject to the recall, the court found that N.V.E. could not succeed on its antitrust claims.