5-Hour Energy v. 8-Hour Energy: Monopolization Claim Flops
By Guest Blogger Joseph Eckhardt
In an unfair competition suit under 15 U.S.C. § 1125, the king of the two-ounce energy shot, 5-Hour Energy, is suing the makers of 8-Hour Energy in the Eastern District of Michigan, claiming that 8-Hour Energy falsely associates itself with 5-Hour Energy. 8-Hour Energy has tried to strike back with a monopolization claim, arguing that 5-Hour Energy has engaged in a number of anticompetitive tactics to drive away competitors like 8-Hour Energy, and 6-Hour Energy, which 5-Hour Energy sued in 2008.
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Anyone who has recently set foot in a convenience store or watched late night cable television knows how valuable the energy drink business has become. To get an idea of how this market has grown, take a look at the wall of energy drinks displayed at thescreamingenergy.com product review web site. Perhaps the most valuable spot in that market is in the two-ounce “energy shot” space, on the counter next to the cash register, where customers are willing to pay $3.50 for two ounces of an elixir that will “help you feel sharp and alert.” (By comparison, a consumer will seldom pay more than 99 cents for a 12 ounce can of caffeinated cola.) And the consensus is that 5-Hour Energydominates this category.
The 8-Hour Energy defense team may have a good argument that 5-Hour Energy is the king of the convenience store counter, but the Eastern District of Michigan issued an Order last week slapping down 8-Hour Energy’s monopolization claim. 8-Hour Energy argued that 5-Hour Energy engages in anticompetitive tactics to control the market, but failed to convince the court that those tactics actually harm 8-Hour Energy. For example, the court noted that anything 5-Hour Energy did to exclude 6-Hour Energy from the market couldn’t have harmed 8-Hour Energy. Ultimately, 8-Hour Energy should be able to argue that any anticompetitive conduct is relevant to prove that 5-Hour Energy has harmed competition – this may be an issue that 8-Hour Energy can exploit on appeal.
The court’s order provides a good example of the risks associated with raising antitrust counterclaims. Here, the Eastern District of Michigan dismissed 8-Hour Energy’s monopolization counterclaim for failure to convincingly plead the claim. If 8-Hour Energy somehow revives the claim, the next hurdle will be definition of the relevant market. Is there an exclusive market of 2-ounce energy drinks? If Red Bull, Coca Cola, or coffee are reasonable substitute “energy drinks,” 8-Hour Energy’s monopolization case doesn’t have a chance.
Federal Court Ends Alleged "Super Berry" Scheme (For Now)
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A U.S. District Court in Illinois, at the request of the Federal Trade Commission, has issued a 
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preliminary injunction freezing the assets of two individuals and five related companies selling dietary supplements derived from the acai berry. According to the FTC, the defendants engaged in a number of deceptive practices in violation of the FTC Act including advertising false celebrity endorsements by Oprah Winfrey and Rachel Ray, making misleading claims regarding the health benefits of the supplements, and providing misleading information regarding the prevalence and severity of illnesses and health conditions which the supplements were intended to cure and prevent. The FTC’s complaint not only cites misleading health claims regarding the fruit, but also alleges that the companies repeatedly deceived consumers by fraudulently charging their credit cards during and after “risk free trials” of the supplements. In addition to this preliminary injunction, the FTC is seeking a permanent injunction, damages for injured consumers, and costs and attorney’s fees. The defendants’ answer is due August 31, 2010.
This suit is another warning to the supplement industry that the FTC, along with the FDA and consumers, are paying special attention to the claims and practices of dietary supplement companies.
