Self-Regulation in the Alcohol Industry: A Federal Trade Commission Report to Congress

Authors:
Janet M. Evans, Bureau of Consumer Protection, Division of Advertising Practices; Richard F. Kelly, Bureau of Consumer Protection, Division of Advertising Practices

This report responds to a recent request from the Congressional Committees on Appropriations that the FTC examine the effectiveness of the alcohol industry's voluntary guidelines for advertising and marketing to underage audiences. The report provides company-specific information, supplied in response to orders by the Commission, only in an aggregate or anonymous fashion.

Underage alcohol use is a significant national concern. Last year, a third of twelfth graders reported binge drinking. Moreover, while underage alcohol use levels decreased from about 1980 to 1993, those decreases have stopped and some important markers of underage alcohol use appear to be on the rise. Finding ways to deter alcohol use by those under 21 is a constant challenge for the beverage alcohol industry -- including beer, wine and distilled spirits producers -- as well as for government agencies and consumer organizations.

One important industry initiative involves voluntary self-regulatory codes intended to prevent alcohol advertising and marketing that appeal to underage consumers. Self-regulation is a realistic, responsive and responsible approach to many of the issues raised by underage drinking. It can deal quickly and flexibly with a wide range of advertising issues and brings the accumulated experience and judgment of an industry to bear without the rigidity of government regulation. The Commission regards self-regulation as particularly suitable in this area, where government restriction -- especially if it involves partial or total advertising bans -- raises First Amendment issues.

The industry presently seeks to minimize the extent to which underage consumers are exposed to and attracted by alcohol advertising by employing self-regulatory codes. Information supplied by trade associations and eight key industry members leads the Commission to conclude that for the most part, members of the industry comply with the current standards set by the voluntary advertising codes, which prohibit blatant appeals to young audiences and advertising in venues where most of the audience is under the legal drinking age. In addition, many individual companies follow their own internal standards that exceed code requirements when they are deciding what their ads should say and where they should be placed.

While the current codes provide important protections, improvements are needed both in code standards and implementation to ensure that the goals of the industry codes are met. The Commission recommends the following:

  • Third-Party Review: The industry should create independent external review boards with responsibility and authority to address complaints from the public or other industry members. This fundamental change would demonstrate to those in the industry -- as well as to consumers -- that code compliance is a high priority and that all members are held to reasonably consistent standards. Currently, none of the codes provides for an independent assessment of the merits of a complaint or follow-up procedures for complaint resolution.
  • Ad Placement: The industry should raise the current standard that permits advertising placement in media where just over 50 percent of the audience is 21 or older, and members should be able to demonstrate their compliance with that higher standard. Because the 50 percent standard permits alcohol advertising to reach large numbers of underage consumers, some companies already have raised their own internal placement standards, prohibiting ads where as little as 25 percent of the audience is underage.
  • Best Practices: Several industry members have put into place practices that reduce the likelihood that their advertising and marketing will reach -- and appeal to -- underage consumers. All industry members should adopt and build upon these "best practices," as follows:
    • For ad placement: Bar placement on TV series and in other media with the largest underage audiences, and conduct regular audits of previous placements.
    • For ad content: Prohibit ads with substantial underage appeal, even if they also appeal to adults, or target ads to persons 25 and older.
    • For product placement in movies and TV: Restrict the placement of alcohol products for which some form of payment is made(1) to "R" and "NC-17" rated films (or, if unrated, to films with similarly mature themes) and apply the standards for placing traditional advertising to product placement on TV.
    • For online advertising: Use available mechanisms to block underage access and avoid content that would attract underage consumers.
    • For college marketing: Curb on-campus and spring break sponsorships and advertising.

The beverage alcohol industry has an opportunity to make its self-regulatory programs more effective and credible. By strengthening enforcement mechanisms, raising the standard for the legal-age audience for ads beyond the 50 percent level, and adopting the best prevailing industry practices, the industry can improve compliance without sacrificing legitimate advertising and marketing activities.