The Kellogg Company has reached a new settlement to pay out $4m in its Frosted Mini-Wheats class action lawsuit. But the court has raised concerns on the significant cash drop from the previously rejected settlement of $10.5m.
The cereal giant has agreed to pay out $4m and no longer make the disputed health claim on its Frosted Mini-Wheats – that the cereal is clinically proven to improve children’s attentiveness by nearly 20%.
Kellogg continues to stand by its advertising and denies any wrong-doing. Company spokesperson, Kris Charles, told BakeryandSnacks.com: "Kellogg Company has a long history of responsible advertising. This class action settlement pertains to an advertising campaign that ran approximately four years ago. We long ago adjusted our communication to incorporate FTC’s guidance."
The US district court of the southern district of California filed a preliminary approval on the settlement but has raised “concerns” about the drop in cash.
“How is it that the value to the class dropped approximately 75%, while requested attorneys’ fees appear nearly constant?” it said.
Given the previous rejection based on ‘excessive’ attorney fees, this gives cause for concern, it continued.
“The court orders both the parties to fully address these concerns in their final approval briefing and at the final approval hearing,” it concluded.
The final settlement hearing is scheduled for September 9 and remains subject to objections that must be filed by August 10.
The cereal giant previously negotiated a settlement totalling $10.5m back in April 2011 – with just under half ($5.5m) set to go to charities.
However, it was rejected on September 4, 2012 as it was considered that the charity sum would ‘benefit’ Kellogg and attorney and administration fees were also thought to be too high; totting up to $2m.
The newly renegotiated settlement sees Kellogg put forward a cash fund of $4m, around half (£2-2.5m) of which will be paid out to any consumers that submit claims.
The remainder will be distributed equally among Consumers Union, Consumer Watchdog, and the Center for Science in the Public Interest as well as covering attorneys’ fees and administration costs.
‘Excellent recovery for consumers’
Kellogg will pay cash refunds for up to three boxes of cereal purchased during the time of the alleged false advertising – between January 28, 2008 and October 1, 2009.
Lawyers from Blood Hurst & O’Reardon – the firm representing consumers in the lawsuit – welcomed the settlement.
“This settlement represents an excellent recovery for consumers,” said Timothy Blood from the firm.
Kellogg ‘responsible marketing’
In an emailed statement to BakeryandSnacks.com last month on the topic of the lawsuit as part of our special edition on health claims, Kellogg said: “Kellogg has long been an industry leader in the responsible marketing of our foods.”
“We use a variety of on-pack communication to share important information that helps consumers make food choices they deem appropriate for themselves and their families.”
When asked if the lawsuit on Frosted Mini-Wheats would impact how Kellogg labels its cereals in the future, the company said that details of future plans are confidential.