Last Updated Nov 3, 2010 3:00 PM EDT
Mead's Q3 2010 earnings statement has a split personality on the effect of litigation against its business. It begins:
The Company is not aware of any environmental, health or safety-related litigation or significant environmental, health and safety-related financial obligations or liabilities arising from current or former operations or properties that are likely to have a material adverse impact on the Company's businessBut then it goes on to list six class action cases pending against it, all on the same issue: Mead's untrustworthy promotion of Enfamil. Three of those were dismissed, but a case in Florida federal court may proceed, a judge ruled. The company has lost three previous federal lawsuits over false advertising, and two rulings from the National Advertising Division of the Council of Better Business Bureaus, an ad watchdog.
The case argues that Mead falsely claimed that Enfamil was:
The only brand clinically proven to improve visual and mental development.At its worst, Mead used a blurry image of a yellow duckling (above) to suggest that if you didn't feed your baby with Enfamil the tyke would grow up short-sighted. The duck is Exhibit F in the case. More specifically, the Florida case alleges Mead claimed Enfamil was the only brand that contained two fatty acids, DHA and ARA.
In fact Enfamil is identical to store-brand formula because the companies all get their ingredients from the same suppliers. The plaintiff is demanding that anyone who bought Enfamil instead of a cheaper store brand get their money back. Enfamil has since abandoned using the duckling-of-doom on its website, although it was still there as late as March of this year.
Mead denies the claims. And it has yet to experience an economic incentive to change course. It appealed one of the awards against it and its Q3 2010 sales were up 12 percent in the U.S.