Federal Trade Commission

The FTC has the primary authority to address nefarious business practices and commercial communications to protect consumers. The FTC has successfully brought individual cases addressing unfair and deceptive food marketing. It has less successfully attempted to enact regulations to restrict marketing to children and to lead cross-agency efforts proposing nutritionally strong voluntary guidelines.

The Federal Trade Commission Act prohibits unfair or deceptive acts or practices in or affecting commerce,^[1] and pronounces that false advertisements are an unfair or deceptive act or practice.^[2] There are two very distinct parts to this definition: unfair and deceptive. A bit of history is necessary to understand the authority the FTC has today as related to these two terms.

The FTC historically brought individual cases to address unfair and deceptive acts and practices. A consumer protection movement began in the 1960s, and in 1975, Congress passed the Magnuson-Moss Act granting the FTC substantive rulemaking authority. At that time, the FTC interpreted its unfairness authority to include considerations of “public policy, morality and ethics, and ‘substantial injury to consumers.’ ”^[3] The FTC began promulgating regulations to address problematic marketing practices. One such initiative was termed KidVid.^[4]

In response to petitions by consumer protection groups, the FTC conducted an investigation and, in 1978, issued a report, which concluded that “there was sufficient evidence to suggest that both (1) the televised advertising of any product directed to children too young to understand the selling purpose of, or otherwise comprehend or evaluate commercials and (2) the televised advertising of sugared products to children of all ages may be unfair and deceptive within the meaning of section 5 of the FTC Act.”^[5] The FTC concluded that an appropriate remedy was necessary due to a concern over dental caries in children who consume sugary products. The agency issued a Notice of Proposed Rulemaking that same year, declaring its intent to hold a comprehensive rulemaking proceeding to address the marketing of sugary products to children on television.^[5] The FTC was considering whether and how to ban television advertising of sugary products to very young children.^[7]

There was political backlash to the proposed KidVid rulemaking and in May 1980, Congress enacted the FTC Improvements Act. This is in force today and states: “The Commission shall not have any authority to promulgate any rule in the children’s advertising proceeding pending on the date of the enactment of the Federal Trade Commission Improvements Act of 1980 or in any substantially similar proceeding on the basis of a determination by the Commission that such advertising constitutes an unfair act or practice in or affecting commerce.”^[8] The FTC considered whether to continue under its deceptive authority but noted many issues, including legal and policy concerns, competing theories on cognitive development, and the reliability of a method to measure the cariogenicity of food advertised to children.^[5] It terminated the proceedings in October 1981.

After this significant setback, the FTC went back to bringing individual cases. It issued a Policy Statement explaining what it considered its unfairness authority to be. In 1994, Congress codified the Commission’s authority to declare unlawful an act or practice on the grounds that it is unfair if it “is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.”^[10] Congress added that the Commission may take into consideration whether the act or practice violates “established public policies as evidence to be considered with all other evidence,” but that the public policy consideration “may not serve as a primary basis for such determination.”^[10]

In 1983, the FTC issued a Policy Statement characterizing its authority to address deceptive acts or practices. The policy sets forth three criteria for finding deception: (1) there must be a representation, omission, or practice that is likely to mislead a consumer; (2) that is analyzed from the perspective of a consumer acting reasonably in the circumstances; and (3) the representation, omission, or practice must be material.^[12] This has not been codified but remains the FTC’s policy.

When scrutinizing marketing practices directed at children, the FTC analyzes them from the perspective of the child. The FTC considers children to be a “specially susceptible group of people” and the advertisement will be measured by how it would impact them.^[13] This is important because children do not often purchase all the products advertised to them. Thus, while the parent or another adult is usually the primary purchaser of food, the FTC looks to determine whether the marketing practice is false, deceptive, or unfair to the targeted audience. Over the years, the FTC has brought cases against food manufacturers for unfair or deceptive marketing directed at children, such as a television commercial that depicted bread “as an extraordinary food” for producing dramatic and impossible growth in children,^[14] and a cereal commercial that represented that cereal alone would enable children to perform physical activities portrayed in the advertisements.^[15] In one case brought against a vitamin manufacturer, the FTC argued that directing advertisement of a vitamin to children was in itself an unfair or deceptive practice because they are “unqualified by age and experience to decide for themselves whether or not they need or should use multiple vitamin supplements in general or an advertised brand in particular.”^[16] The agency also noted that the use of the Spiderman character to promote vitamins took “advantage of the trust relationship developed between children and the program character.” Most cases settle and the companies agree to refrain from engaging in the challenged practice in the future.

In May 2009, Kellogg’s placed a claim on its Rice and Cocoa Krispies cereals, “Now Helps Support Your Child’s IMMUNITY.”^[17] The San Francisco City Attorney sent a letter to Kellogg’s and to the Food and Drug Administration (FDA) voicing concern about the claim. Due to limitations in the FDA’s authority, discussed in Chapter 6, the FDA did not act. The FTC, however, did investigate the claim, which it called “dubious” and “questionable.”^[18] Moreover, only a month before Kellogg’s launched the “immunity” claim, it had agreed to settle another case brought by the FTC for falsely claiming that its Frosted Mini-Wheats cereal was “clinically shown to improve kids’ attentiveness by nearly 20%.”^[18] The FTC modified and expanded its earlier order to require the company to refrain from misleading representations.

Although the FTC has the authority to enact regulations for deceptive marketing to children, it has thus far declined to do so. In addition to real and perceived First Amendment constraints, the FTC’s Magnuson-Moss rulemaking authority imposes requirements that other federal agencies do not face, and which render the FTC’s rulemaking process quite onerous and lengthy.^[4] Thus, the FTC has focused on individual cases. The FTC also led a cross-agency collaboration to support voluntary food marketing guidelines. This also faced industry opposition, described next.

• [1] 15 USCS § 45
• [2] 15 USCS § 52
• [3] Stephen Calkins, FTC Unfairness: An Essay, 46 Wayne L. Rev. 1935 (2000).
• [4] J. L. Pomeranz. Federal Trade Commission’s Authority to Regulate Marketing toChildren: Deceptive v. Unfair Rulemaking. Health Matrix: Journal of Law-Medicine. 2011;21:521-553.
• [5] 46 Federal Register. 48710 (October 2, 1981).
• [6] 46 Federal Register. 48710 (October 2, 1981).
• [7] 43 Federal Register. 17967, 17969 (Apr. 27, 1978).
• [8] 15 USCS § 57a(h).
• [9] 46 Federal Register. 48710 (October 2, 1981).
• [10] 15 USCS § 45(n).
• [11] 15 USCS § 45(n).
• [12] Federal Trade Commission. Policy Statement on Deception (1983), appended to CliffdaleAssoc., 103 F.T.C. 110, 174 (1984).
• [13] Heinz W. Kirchner Trading as Universe Co., 63 F.T.C. 1282 (1963).
• [14] ITT Continental Baking Co., Inc. v. Federal Trade Commission, 532 F.2d 207 (1976).
• [15] In the Matter of Kellogg Co, 99 F.T.C. 8 (1982).
• [16] In the Matter of Hudson Pharmaceutical Corporation, 89 F.T.C. 82 (1977).
• [17] Bruce Horovitz. Critics Blast Kellogg’s Claim That Cereals Can Boost Immunity. USA Today. November 6, 2009. http://www.usatoday.com/money/industries/food/2009-11 -02-cereal-immunity-claim_N.htm.
• [18] Federal Trade Commission. Press Release. FTC Investigation of Ad Claims that Rice KrispiesBenefits Children’s Immunity Leads to Stronger Order Against Kellogg. June 3, 2010. http://www.ftc.gov/news-events/press-releases/2010/06/ftc-investigation-ad-claims-rice-krispies-benefits-childrens.
• [19] Federal Trade Commission. Press Release. FTC Investigation of Ad Claims that Rice KrispiesBenefits Children’s Immunity Leads to Stronger Order Against Kellogg. June 3, 2010. http://www.ftc.gov/news-events/press-releases/2010/06/ftc-investigation-ad-claims-rice-krispies-benefits-childrens.
• [20] J. L. Pomeranz. Federal Trade Commission’s Authority to Regulate Marketing toChildren: Deceptive v. Unfair Rulemaking. Health Matrix: Journal of Law-Medicine. 2011;21:521-553.