Contending that Monster Beverage Corp. either misled or failed to disclose that it was improperly advertising, marketing and promoting its Monster Energy® drinks and thus filed materially false and misleading financial statements, a putative securities class action has been filed against the company in a federal court in California. Rausch v. Monster Beverage Corp., No. 12-2058 (S.D. Cal., filed August 21, 2012). The filing follows news that an unnamed state attorney general subpoenaed company records in July 2012 seeking information about “the Company’s advertising, marketing, promotion, ingredients, usage and sale of its Monster Energy® brand of energy drinks.” Details about that action are included in Issue 450 of this Update. According to a news source, the company’s stock declined nearly 11 percent the day after Monster disclosed the investigation in a filing with the Securities and Exchange Commission. See Bloomberg, August 21, 2012.
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The Food and Drug Administration (FDA) has responded to Senator Dick Durbin’s (D-Ill.) letter requesting that the agency take regulatory action “to address the rising health concerns around energy drinks” purportedly containing high levels of caffeine and other ingredients such as taurine, guarana and ginseng. Among other matters, in its August 10, 2012, letter, FDA suggests that research to date shows that “even when the consumption of energy drinks is considered, most of the caffeine consumed [in the United States] comes from what is naturally present in coffee and tea.” For most healthy adults, according to FDA, caffeine intake up to 400 mg per day is not associated with untoward health effects. Additional details about Durbin’s letter appear in Issue 435 of this Update. FDA’s generally recognized as safe (GRAS) regulation for caffeine applies to cola-type beverages; the agency “has not challenged the use of caffeine in other beverages at…
According to the quarterly Securities and Exchange filing of Monster Beverage Corp., an unnamed state attorney general (AG) subpoenaed company records in July 2012 regarding its energy beverages. The subpoena apparently concerns “the Company’s advertising, marketing, promotion, ingredients, usage and sale of its Monster Energy® brand of energy drinks.” The company further notes, “As the investigation is in an early stage, it is unknown what, if any, action the state attorney general may take against the Company, the relief which may be sought in the event of any such proceeding or whether such proceeding could have a material adverse effect on the Company’s business, financial condition or results of operations.” News sources indicate that Monster had a 35 percent share of the energy drink market in 2011, and at least one financial analyst understands that others in the industry may also be targeted in the probe. While the caffeine in…
After two years of deliberation, the Food Safety and Standards Authority of India (FSSAI) has reportedly agreed to issue draft regulations that would require energy drink manufacturers to rebrand their products as “caffeinated beverages.” Based on the findings of an expert panel convened to study caffeine and energy drink consumption in India, the draft regulations would apparently set an upper caffeine limit of 320 milligrams per liter or 320 parts per million (ppm) in caffeinated beverages, as well as prohibit any nutritive claims and the use of the word “energy” as a descriptor. FSSAI has also proposed that all energy drinks bear safety labels warning that such products (i) are “not recommended for children, pregnant or lactating women, persons sensitive to caffeine and sportspersons,” (ii) should not be consumed in excess of two cans per day, and (iii) contain a “high caffeine content.” “We had been considering the standards for…
U.S. Senator Dick Durbin (D-Ill.) has urged the Food and Drug Administration (FDA) to “take regulatory action to address the rising health concerns around energy drinks” in an April 3, 2012, letter to FDA Commissioner Margaret Hamburg. Durbin’s action follows the December 2011 death of a 14-year-old girl that the lawmaker attributed to “caffeine toxicity after drinking two 24 ounce Monster Energy drinks in a 24-hour period.” Noting that FDA has the authority to regulate caffeine levels in soft drinks and additives in beverages, Durbin asked FDA to clarify whether energy drinks should be regulated as beverages or dietary supplements. “Most energy drinks are currently marketed as dietary supplements, therefore they do not need to establish evidence of their products’ safety or adhere to a limit on the level of caffeine,” he wrote. “At the same time, many energy drinks come in single-use containers ranging from 8 ounces to 32…
The Maharashtra Food and Drug Administration (MFDA) has reportedly seized more than 1 million cans of Red Bull®, an energy drink containing 250-300 parts per million (ppm) of caffeine, on the ground that the product exceeds the 145 ppm limit for carbonated beverages. according to a press report, no separate standards for caffeine in energy drinks exist, but the Food Safety and Standard Act 2006 states that all drinks containing caffeine should follow the carbonated beverage rules. The nation’s Food Safety and Standards Authority is developing a new energy drink category that could allow higher caffeine content. The action is apparently the second in India; Tamil Nadu has also evidently targeted the beverage for exceeding caffeine limits. MFDA Commissioner Mahesh Zagade reportedly said, “Caffeine is addictive and it has a long-term impact. Youngsters today are increasingly consuming alcohol with Red Bull. Parents should be keeping a check on what their…
A federal court in California has denied a motion for class certification filed by a plaintiff who alleged that Vital Pharmaceuticals, Inc. misled consumers by claiming their energy drinks, marketed under the brand name Redline®, were safe and effective for enhancing energy and promoting weight loss. Aaronson v. Vital Pharms., Inc., No. 09-1333 (S.D. Cal., decided February 3, 2012). The plaintiff allegedly became shaky and his heart raced when he consumed the product, so he claimed that the company failed to adequately inform consumers about its risks. According to the court, the plaintiff failed to establish typicality, adequacy of representation and predominance. As to typicality, he apparently admitted that he never read the product’s warning labels, thus subjecting him to “unique defenses that are not applicable to the class members who read the labels.” As to adequacy of representation, the court found, “The record confirms that Aaronson and/or his counsel have…
Spike, LLC, a company that makes and distributes energy drinks, has filed a lawsuit against the company it hired to destroy 18 pallets of products that Spike determined should be removed from the marketplace as unfit for sale, claiming that the recycling company failed to destroy the products and, in fact, sold them “thereby undercutting Spike’s sales.” Spike, LLC v. Nationwide Recycling, LLC, No. 12CV00111 (Wis. Cir. Ct., Waukesha Cty., filed January 10, 2012). Seeking compensatory and treble damages, attorney’s fees, and interest, the plaintiff alleges conspiracy; breach of contract; property loss through fraudulent misrepresentation; misrepresentation: intentional deceit; misrepresentation: strict responsibility; misrepresentation: negligence; and conversion. According to the complaint, Spike paid the company $10,000 to destroy 13,617 cases of energy drink products, which had a value of about $900,000.
Health Canada recently announced new measures that would reclassify energy drinks as food instead of a natural health product (NHP), thus requiring each can to bear a nutritional facts table. According to an October 6, 2011, press release, the new rules would also direct energy drink manufacturers to (i) limit caffeine content to 180 milligrams per single serving; (ii) indicate caffeine amounts on product labels and identify groups, such as children, “for whom high levels of caffeine are not recommended”; (iii) declare ingredients, nutrition and allergens; (iv) ensure that “types and levels of vitamins and minerals are within safe levels”; and (v) warn consumers not to mix the product with alcohol. The proposed approach would bring energy drinks under the purview of the Canadian Food Inspection Agency, while compelling producers to report any consumer complaints to Health Canada as well as submit information about consumption and sales. The agency intends…
The American Academy of Pediatrics (AAP) has issued a report warning that children and adolescents should not consume energy drinks because the beverages “pose potential health risks.” Titled “Sports Drinks and Energy Drinks for Children and Adolescents: Are They Appropriate?”, the report appears in the June 2011 issue of Pediatrics. Sports drinks and energy drinks are not the same, the report says, noting that sports drinks contain carbohydrates, minerals, electrolytes, and flavoring intended to replace water and electrolytes lost through sweating during exercise. “Sports drinks can be helpful for young athletes engages in prolonged, vigorous physical activities, but in most cases they are unnecessary on the sports field or the school lunchroom,” according to the report. Energy drinks, however, “are never appropriate for children or adolescents,” and should be avoided because they contain stimulants, such as caffeine, guarana and taurine, the report says. “Caffeine—by far the most popular stimulant—has been…
