Academic journal article Business Case Journal

With Egg on Its Face, Unilever Considers Pulling a Lawsuit over Hampton Creek's Egg-Free Mayo

Academic journal article Business Case Journal

With Egg on Its Face, Unilever Considers Pulling a Lawsuit over Hampton Creek's Egg-Free Mayo

Article excerpt

Case Overview

This case considers the lawsuit filed by Unilever against Hampton Creek alleging false advertising and seeking monetary damages as well as restraining Hampton Creek from continuing to package, market and advertise their product Just Mayo. Relying on the federal Lanham Act and consumer protection laws of the state of New Jersey, Unilever attempted to prevent Hampton Creek's description of their Just Mayo product as "mayo" and "mayonnaise" because the product lacked eggs, a key ingredient according to federal standards. The lawsuit caused a torrent of negative publicity for Unilever because it appeared to be bullying a smaller, innovative competitor. A change.org petition initiated by celebrity chef and TV personality Andrew Zimmern amassed more than 100,000 signatures encouraging Unilever to dismiss the lawsuit. Now the decision maker is faced with what to do. Rather than deciding whether to initiate a lawsuit, the decision maker in this case must decide whether to continue with the pending lawsuit or drop it.

This case is appropriate for upper-level undergraduate and graduate courses in business law, strategic management, and public relations.

Learning Outcomes

Students should be able to:

1. Assess the chances of the parties prevailing on the legal merits of the case presented.

2. Evaluate alternative courses of action using cost/benefit analysis.

3. Recommend the most appropriate course of action.

Research Methods

This case is based solely on secondary research. There has been no attempt to disguise this situation.

Questions

1. Using the case study and industry note, what are the chances of Unilever prevailing on the legal merits of its claim against Hampton Creek? (LO1)

2. Evaluate the strengths and weaknesses of Unilever either continuing or dropping the lawsuit. (LO2)

3. Recommend a course of action for Michael Faherty to pursue. (LO3)

Answers to Questions

1. Using the case study and industry note, what is the likelihood of Unilever prevailing on the legal merits of its claim against Hampton Creek? (LO1)

Under the federal Lanham Act, commercial parties have the right to pursue lawsuits against competitors falsely describing goods and services. In this scenario, Unilever initiated a lawsuit against Hampton Creek alleging Hampton Creek's use of the terms mayonnaise and mayo and their packaging design are likely to cause Unilever harm consistent with the requirements of the Lanham Act (Bouchoux, 2005). In support of the argument Hampton Creek's Just Mayo was falsely described, Unilever referenced the federal standard for mayonnaise established by the Food and Drug Administration. This definition clearly identifies one or more egg-yolk containing ingredient as a required component for mayonnaise (21 CFR 169.140(c)). See Appendix C.

Under the New Jersey Consumer Fraud Act, an action can be maintained by a person or business who suffers financial loss as a result of an unlawful commercial practice. The broad language defines unlawful commercial practices to include fraud, misrepresentation, concealment, or omission in connection with the advertisement of any merchandise (N.J. Stat. Ann. [section] 56:8-2).

The initial allegations presented by Unilever present a compelling case under the Lanham Act as well as the New Jersey Consumer Fraud Act. Review of the initial pleadings filed by Unilever along with the reference to market research suggesting consumer confusion indicate prevailing against Hampton Creek is certainly possible.

Note to Professor: Students may be inclined to conclude that Hampton Creek has violated the law simply because the Just Mayo product does meet federal food standards. The standard for mayonnaise was incorporated into Unilever's complaint against Hampton Creek in order to provide support for its claim Just Mayo was falsely described. …

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