Did POM Wonderful leave an aftertaste?

Mark Steven Johnson

Agricultural Finance Review, 2020, vol. 81, issue 2, 265-276

Abstract: Purpose - The purpose of this paper is to determine the impact of the Supreme Court’s ruling that POM Wonderful could sue Coca-Cola, a competitor, for misrepresentation of their products. This decision has the potential to alter the legal environment for soft drink and food processing firms. Design/methodology/approach - The author conducted an event study of the shareholder value effects of the court decision. The analysis estimates the market responses to the decisions. To control the effects of market-wide fluctuations, the author uses two alternative models of the returns generating process to calculate abnormal returns, the capital asset pricing model (CAPM) and the Fama-French 3-factor models. Findings - The author hypothesizes that soft drink firms will be negatively impacted by the Supreme Court’s decision, because it may limit their ability to market beverages with a low percentage of expensive juices. Consistent with this argument, the author finds that the stock prices of publicly traded soft drink firms reacted negatively to the announcement of the Supreme Court’s decision. The author also hypothesizes that there may be a spillover effect to food processing firms. These firms may also be at risk to being sued by competitors for exaggerated claims. Contrary to this argument, the author finds no spillover effect to other types of food processing firms. Thus, the decision did leave an aftertaste for the soft drink industry but not the food processing industry. Originality/value - This study is the first to examine the impact of the right to sue competitors in the food industry for misrepresentation of products.

Keywords: Supreme Court; Shareholder wealth; POM Wonderful (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:afrpps:afr-08-2020-0127

DOI: 10.1108/AFR-08-2020-0127

Access Statistics for this article

Agricultural Finance Review is currently edited by Valentina Hartarska and Denis Nadolnyak

More articles in Agricultural Finance Review from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().