$35 Million Settlement Shows Dannon Has an 'Activia' Imagination

Dannon has agreed to pay $35 million and to change its advertising campaign as part of a settlement of nationwide suits alleging the company made false claims about the health benefits of its probiotic yogurts.

In a statement announcing the deal, Dannon denied any wrongdoing. The company settled to "avoid the distraction and expense of litigation and to quickly resume 100-percent focus on making products that provide proven health benefits," spokesman Michael Neuwirth said in a statement.

The settlement is the largest ever reached in a false-advertising case concerning a food product. It covers seven suits filed between January 2008 and January 2009 and still must be approved by the U.S. District Court for the Northern District of Ohio.

The suits said the company had no scientific evidence to support its advertising claims that its Activia yogurt can regulate the digestive system or that its DanActive product can strengthen the immune system.

The White Plains, N.Y.-based company markets several varieties of yogurt and introduced its probiotic products in 2006. Activia and DanActive, which cost 30 percent more an ounce than regular yogurt, have earned an estimated $428 million.

The suits alleged the company violated several states' consumer protection laws by misrepresenting the products' benefits.

Dannon has agreed to set up a $35 million fund to return class members' money paid for the yogurt products. Claimants must submit a claim form to receive the refund. Refunds can total up to $100 and require a register receipt or other proof of purchase.

Any money left over in the fund will go to charities that help feed the poor, the company said.

Dannon also agreed to change its advertising and labeling for Activia and DanActive. A statement will be added to the Activia label stating that the product helps regulate the digestive system when eaten as part of a balanced diet. The word 'immunity' will be removed from the DanActive label.

The "frequently asked questions" section on the company Web site will include an explanation that the products should not be used to treat any medical disorder.

Coughlin Stoia Geller Rudman & Robbins, the San Diego firm representing the plaintiffs, has a lawsuit pending against another yogurt manufacturer in a Florida federal court. Fitzpatrick v. Gen. Mills, No. 09-60412, 2009 WL 1024264, complaint filed (S.D. Fla. Mar. 17, 2009).

That suit, like those filed against Dannon, alleges that Yoplait made false and misleading claims about the digestive health benefits of it Yo-Plus yogurt.

"Marketers had better beware of what they say in their marketing, and they better back up their clams before they say those things to the public," Tim Blood, a partner at Coughlin Stoia said in a statement.

To comment, ask questions or contribute articles, contact West.Andrews.Editor@ThomsonReuters.com.

The plaintiffs are represented by Timothy G. Blood of Coughlin Stoia Geller Rudman & Robbins in San Diego.Dannon is represented by Bruce A. Friedman of Bingham McCutchen LLP in Santa Monica, Calif., and Mark M. Pifko of Arnold & Porter in Los Angeles.