Reputational risk: trans-fat litigation

McDonald’s Corp. will pay $8.5 million to settle a lawsuit accusing the fast-food giant of failing to inform consumers of delays in a plan to reduce fat in the cooking oil used for its french fries and other foods.

BanTransFats.com, a non-profit advocacy group, sued McDonald’s in California state court in 2003, alleging the company did not effectively disclose to the public that it had not switched to a healthier cooking oil. McDonald’s has agreed to donate $7 million to the American Heart Association and spend another $1.5 million to inform the public of its trans fat plans.

The settlement is the result of litigation from a San Francisco-area activist Stephen L. Joseph who has been seeking to raise public awareness of the health dangers from the trans fatty acids (TFAs) in hydrogenated or partially hydrogenated oils. Trans fats, which occur naturally in small amounts in dairy products and meat, are also formed artificially when manufacturers hydrogenate fat or oil, primarily to extend the shelf life of their products. It has been claimed that ongoing research suggests trans fats raise LDL cholesterol levels, causing the arteries to become more rigid and clogged. An increase in LDL cholesterol levels can lead to heart disease.

McDonald’s announced in September 2002 that it was voluntarily changing to a cooking oil with less trans fat and that the change would be completed by February 2003. However, McDonald’s encountered operational issues and the oil was not changed. Plaintiffs claimed in the lawsuits that McDonald’s did not take sufficient steps to inform the public that it had not changed the oil.

Mr Joseph’s organisation BanTransFats.com first gained publicity for his cause by suing Kraft Foods two years ago to highlight the trans fat content of Oreo cookies. The company has since moved to remove trans fats from its snack foods. Oreo cookies were targeted as Kraft had not at that time indicated they would be taking any steps to reduce trans fat content whereas other manufacturers had. It now looks like Mr Joseph, whose aim is to publicise the dangers of trans fats, is turning on the food restaurant business.

The aim of the litigation, as was the case against Oreo cookies, was to increase publicity and inform consumers about trans fats in McDonald’s oil. The aim of the settlement is stated to be to focus media and consumer attention on the issue of partially hydrogenated cooking oils in many restaurants, not just McDonald’s.

The US Food and Drug Administration (“FDA”) has now introduced the requirement for trans-fat labelling that will come into force on 1 January 2006. Europe has yet to introduce a similar rule, but consumer organisations are pressing for such transparency and food makers are feeling market pressure to reduce TFAs from their products.

Law suit or publicity stunt?

The level of media attention given to the above US actions highlight concerns over the relationship between the general level of consumer knowledge in relation to the specific properties of a product and the respective labelling obligations on the manufacturer for that product. There is clearly a risk in relation to brand reputation where products’ “healthy” qualities are marketed, or excessive consumption encouraged, where the products have corresponding high levels of another ingredient that should not be consumed to excess.

This article first appeared in our Food industry law bulletin May 2005. To view this publication, please click here to open a new window.