Suing SpongeBob: For Real, Or For Leverage?

With last week’s threat by two consumer advocacy groups to sue Kellogg and Viacom for marketing unhealthful food to children, industry experts said the real question is whether the talk of lawsuits is merely a negotiating tactic or a sign that this debate is finally heading to the courts.

The pressure comes just as an article published in the American Journal of Preventive Medicine last Thursday shows how the legal strategies employed in the tobacco cases could be used against food and beverage companies to combat obesity.

Parties on both sides of the debate will have an opportunity this week to hash out their differences at the Association of National Advertisers’ annual law and business affairs conference. ANA has invited the head of the Washington-based Center for Science in the Public Interest, one of the groups threatening to sue Kellogg and Viacom, and a rep from Ralph Nader’s Commercial Alert to lunch. It’ll be a meeting worth watching: Not only did CSPI make a statement last week that it would “settle for a commitment from the companies to change their marketing practices,” it decided to hold off on a similar suit against PepsiCo and Coca-Cola because those companies had come to the negotiating table.

Either way, significant money is at stake. Of the more than $880 million that U.S. companies spent to market cereal last year, more than $250 million was spent on products aimed at kids.

CSPI estimates that the companies could face billions in damages. Cigarette makers agreed to pay more than $206 billion over 25 years in their 1998 settlement with 46 states.

“The legal battle has begun,” said Dan Jaffe, ANA’s evp of government relations. “Anytime somebody sues or threatens potential penalties of more than a billon dollars, you have to take it seriously.”

Kellogg declined comment, writing in a statement that it had “a longstanding commitment to marketing in a responsible manner.” The company has been stung before. Kellogg settled a claim last November from the Children’s Advertising Review Unit of the Council of Better Business Bureaus by agreeing to remove the tagline “It’s the fruit snack with a twist” from ads for its Twistables snack. CARU, the industry’s self-regulatory arm, said the line gave the impression the snacks were made mostly from fruit.

A Viacom rep said the company would not alter its ad model, pointing out that only 20 percent of the ads on Nickelodeon are food-related, and only 3 percent of the revenue the company receives from SpongeBob licensing deals comes from food-related packaged-goods marketers.

In other measures, Kraft said last January it would shift products like Kool-Aid and Oreo cookies out of TV, radio and print media viewed by kids ages 6 to 11. Those two brands accounted for $85 million in ad spending from January to November 2005, per Nielsen Monitor-Plus.

But such efforts may not be enough given the mounting legal price tag. McDonald’s paid $8.5 million in February to settle claims that it failed to remove trans fats when it said it would. And a class-action lawsuit was filed last March in California against Kellogg, Kraft and General Mills refuting “low sugar” claims in cereal ads.

Richard Daynard, chair of the Obesity and Law Project at Northeastern University’s School of Law’s Public Health Advocacy Institute and co-author of the journal article, has his eye on the soda giants as well. He wants the drinks out of schools and said a class-action suit would follow if “discussions … don’t come to a satisfactory conclusion.”

Coca-Cola and PepsiCo referred calls to the American Beverage Association. A rep there could not be reached by press time.

At the core of the debate is just whose responsibility it is to prevent childhood obesity. Food companies and advertisers say parents should monitor a child’s nutrition. “The pundits are looking for an easy fix to a very complicated problem, and it is always easy to point to advertising as the cause of the problem,” said Doug Wood, a lawyer at Reed Smith, New York, and the ANA’s counsel.

Consumer groups counter that ads aimed at kids undermine parental authority. “Parents are ultimately responsible for making sure their young kids don’t get hit by cars,” said CSPI litigation director Steve Gardner last week. “But if someone’s recklessly driving around your neighborhood at 80 miles an hour, you’re going to want to stop them.”

—with Aaron Baar and Steve McClellan