FOR RELEASE: AUGUST 10, 1992
FEDERAL APPEALS COURT UPHOLDS FTC RULING THAT
KRAFT MISREPRESENTED CALCIUM CONTENT
OF INDIVIDUAL CHEESE SLICES
A federal district court of appeals has affirmed a 1991
Federal Trade Commission order against Kraft, Inc. in connection
with a two-and-a-half year, $15 million advertising campaign for
Kraft Singles cheese slices, the Commission announced today. The
order prohibits Kraft from misrepresenting the absolute or com-
parative content of calcium or any other nutrient in any product
that is a cheese, related cheese product, imitation cheese, or
substitute cheese in the future, and requires any such nutrient
or calcium-content claim to be substantiated by competent and
reliable scientific evidence.
The FTC had filed a complaint charging that Kraft misrepre-
sented the calcium content and relative calcium benefit of its
Kraft Singles in its advertising campaign, in June 1987. The
Kraft television ads ran from February 1985 until mid-1987, and
appeared on all three national networks. The print ads were
disseminated in numerous national magazines. The two series of
ads were known as the "Skimp" and "Class Picture/5 Ounce" ads.
The Commission alleged that these ads were deceptive because they
implied that Kraft Singles contained the same amount of calcium
as five ounces of milk, when actually some of that calcium was
lost in processing. The Commission also alleged that the ads
were deceptive because they implied that Kraft Singles contained
more calcium than imitation cheese slices, when that generally
was not the case.
- more -
Kraft Opinion--08/10/92)
In 1989, Administrative Law Judge Lewis F. Parker concluded
that both sets of ads falsely conveyed the calcium superiority
and milk equivalency claims. He found that both claims made were
material to consumers because they implicated important health
concerns. He ordered Kraft to cease making false and unsubstan-
tiated claims about calcium or any other nutrient for any of its
individually wrapped slices of process cheese food, imitation
cheese, or substitute cheese.
The Commission's opinion, issued in January 1991 and
authored by Commissioner Deborah K. Owen, affirmed much of the
ALJ's decision, disagreeing, however, with the ALJ's finding that
the "Class Picture/5 Ounce" ad conveyed the implied calcium
superiority claim. The Commission also disagreed with the ALJ's
finding that there was no "persistent, long-term pattern of
deceptive advertising." The Commission's order broadened the
prohibitions in the ALJ's order to cover not only individually
wrapped slices, but all of Kraft cheeses and cheese-related
products.
Kraft then filed an appeal in the Seventh Circuit Court of
Appeals, in Chicago, contending that the order was too broad and
asking the court to amend or rescind it. Kraft argued, among
other things:
-- That the FTC erred in not requiring extrinsic evidence
in determining whether consumers would be deceived by
the ads. Kraft argued that the FTC had no objective
basis for determining if the company's ads actually
contained the implied claims alleged, and that the
FTC's order chilled Kraft's constitutionally-protected
commercial speech.
-- Alternatively, Kraft contended that FTC did not have
substantial evidence to support its finding that the
"Class Picture" ads contained the milk equivalency
claim.
-- Finally, Kraft maintained that even if it did make the
alleged milk equivalency and calcium superiority
claims, the FTC did not have substantial evidence to
support its findings that these claims were material to
consumers.
On the first argument, Kraft contended that the Commission
should, as a matter of law, be required to rely on extrinsic
evidence, rather than its own subjective analysis, in cases
involving alleged implied claims. By relying on its own judgment
that an ad, while literally true, implies a false message, Kraft
argued, the FTC would chill non-misleading, protected speech
Kraft Opinion--08/10/92)
because advertisers are unable to predict whether the FTC would
find a particular ad misleading. The way to avoid this chilling
effect, Kraft contended, is to require the FTC to rely on objec-
tive indicators of consumer perceptions as to whether an ad
actually contains certain implied claims.
The court disagreed with Kraft. It ruled that the Commis-
sion could "rely on its own reasoned analysis to determine what
claims, including implied ones, are conveyed in a challenged
advertisement, so long as those claims are reasonably clear from
the face of the advertisement." The court noted that the Com-
mission "does not have license to go on a fishing expedition to
pin liability on advertisers for barely imaginable claims ... .
However, when confronted with claims that are implied, yet
conspicuous, extrinsic evidence is unnecessary because common
sense and administrative experience provide the Commission with
adequate tools to make its findings."
The court also rejected Kraft's First Amendment argument
that the FTC's current approach chills truthful commercial
speech, stating that current case law teaches that "consumer
surveys are not compelled by the first amendment when the alleged
deception although implied, is conspicuous."
Kraft next argued that the FTC did not have substantial
evidence to support its finding that the "Class Picture" ads
conveyed a milk-equivalency claim. According to the court,
however, the ads emphasized, visually and verbally, that five
ounces of milk go into each slice of Kraft Singles. The image
linked to calcium content, strongly implies that the consumer
will get the calcium found in five ounces of milk, the judges
found. In response to Kraft's assertion that the ads were lit-
erally true -- that Singles are made from five ounces of milk and
do have a high concentration of calcium -- the court observed
that the average consumer was not likely to know that much of the
calcium in five ounces of milk would be lost in processing,
leaving the consumer with a misleading impression about the cal-
cium content. "The critical fact is not that reasonable consum-
ers might believe that a 3/4 ounce slice of cheese actually
contains five ounces of milk, but that [they] might believe that
a 3/4 ounce slice actually contains the calcium in five ounces of
milk," the court determined.
Lastly, Kraft argued that the milk-equivalency and calcium
superiority claims were not material to consumers. The court
rejected that argument, as well, ruling that the Commission had
solid evidence to show that consumers rated calcium consumption
as a very important factor in their decision to buy Kraft Sing-
les. That evidence included survey evidence on the importance of
calcium content, as well as evidence that Kraft designed the ads
Kraft Opinion--08/10/92)
with the intent to capitalize on consumer calcium-deficiency
concerns. The Commission found that even though Kraft was given
numerous repeated warnings about providing substantiation for the
milk and calcium claims in the ads, it continued to run the ads
for two and a half years. The FTC thus reasonably inferred,
according to the court, that Kraft thought the milk-equivalency
claim induced consumers to purchase Kraft Singles and, therefore,
the claim was material to consumers. The FTC also had solid
evidence that the calcium superiority claim was material, the
court found. Not only was there evidence that Kraft intended the
challenged ads to convey this message, but the challenged ads led
to increased sales of Singles over imitation cheeses, the court
said. Thus, the court held that it was reasonable for the Com-
mission to infer that the calcium superiority message, as a
central theme in the ads, contributed to increased Singles sales
and market share.
Finally, the court rejected Kraft's argument that the Com-
mission's order is too broad. Kraft argued that the order (1)
bans constitutionally-protected commercial speech, and (2) is not
rationally related to its violation of the FTC Act. The court
noted that the Commission had determined that the ads were
actually misleading, not potentially misleading, thereby justi-
fying a total ban on the challenged ads. In any event, the court
found that the order was sufficiently narrow to pass Constitu-
tional muster. The court also ruled that the Commission has
discretion to issue multi-product orders -- so-called "fencing-
in" orders -- that extend beyond alleged law violations to
prevent violators from engaging in similar deceptive practices in
the future. The court said that the Commission provided suffi-
cient evidence showing that "Kraft's violations were serious,
deliberate, and easily transferable to other Kraft products, thus
warranting a broad fencing-in order."
Copies of the court of appeals decision, as well as previous
news releases on the case, are available from the FTC's Public
Reference Branch, Room 130, 6th Street and Pennsylvania Avenue,
N.W., Washington, D.C. 20580; 202-326-2222; TTY 1-866-653-4261.
# # #
MEDIA CONTACT: Brenda A. Mack, Office of Public Affairs
202-326-2182
(Docket No. 9208)
(Kraft-AP)