NEWPORT BEACH, CALIF. — Leaf Brands, L.L.C., the maker of Hydrox cookies, seeks payment of $800 million in damages due to lost sales and reputation from Mondelez International, Inc., the maker of Oreo cookies, in a Federal Trade Commission complaint signed Aug. 17 by Ellia Kassoff, chief executive officer of Newport Beach-based Leaf Brands.
The complaint alleges Mondelez International hid Hydrox cookies at retail outlets and took advantage of its role as a “category captain” in the cookie category for retail chains.
A buyer for a large U.S. retail chain said Mondelez International, East Hanover, N.J., had the opportunity to hide Hydrox cookies in stores because of Mondelez’s direct-store delivery system, according to the complaint. The retail chain buyer said Leaf Brands would have to hire an outside company at its own cost to monitor all the retail chain’s stores and make certain Hydrox cookies are not hidden or manipulated to prevent their sale.
The F.T.C. complaint also said Mondelez International is a category captain for some large U.S. retailers. Retail chains may pick a supplier to become the category captain and assist the chains in determining where items in the category, such as the cookie category, are placed on shelves at stores nationwide.
“Category captains are supposed to be impartial and fair, but it is well known that they are not, as many use their power to place their own products in favorable locations in stores and move competitors in less desirable positions on store shelves,” the complaint said.
Mondelez International had Hydrox sandwich cookies placed away from all other sandwich cookies and on the top shelf in the cookie section, according to the F.T.C. complaint. Leaf Brands said customers, food brokers and employees of Leaf Brands have verified such actions through photos placed on the Hydrox Facebook page, e-mails and phone calls.
A spokesperson for Mondelez International said the company stood by its Aug. 16 comment: “We have not been contacted about this, but we are confident that this accusation has no merit. The Oreo brand is an iconic one, with a proud and rich history of delivering great tasting products and exciting innovations to our consumers for more than a century. This focus, and our commitment to operating with integrity, has made Oreo America’s favorite cookie.”
Leaf Brands is accusing Mondelez International of unlawful monopolization in violation of the Sherman Act, violations of the Lanham Act, tortious interference with contract, tortious interference with prospective advantage, product defamation and unjust enrichment.
Leaf Brands decided to ask for $800 million in damages after reviewing a case called Conwood Co., L.L.P. v. U.S. Tobacco Co., Mr. Kassoff said.
“The F.T.C. directed us to that case since it’s considered case law and extremely similar to ours,” he said. “In it, U.S. Tobacco was forced to pay $1.05 billion plus interest to Conwood. We believe our damages are similar.”
The cookie competition between Oreo and Hydrox dates back more than a century. Hydrox cookies, then manufactured by Sunshine Biscuits, made their debut in 1908. Oreos, then made by the National Biscuit Co. (Nabisco), followed in 1912. Keebler purchased Sunshine Biscuits in 1996 and replaced Hydrox with a reformulated product called Droxies in 1999. Leaf Brands brought back the original Hydrox cookies in 2015.