FTC Report Cites Improvements in Alcohol Industry Self-Regulation

In response to a request from the House and Senate Appropriations Committees and hearings by House Appropriations Subcommittee Chairman Frank R. Wolf, the Federal Trade Commission today issued a Report on Alcohol Marketing and Advertising. The Report examines whether advertising for flavored malt beverages (FMBs) - beverages that combine characteristics of beer and distilled spirits - is targeted to underage consumers, as well as whether the alcohol industry has implemented self-regulatory recommendations made in the FTC's 1999 Alcohol Report to Congress. The FTC conducted an investigation of nine major alcohol advertisers, analyzing their advertisements, marketing plans, and consumer research. The Report's analysis indicates significant improvement in standards for the placement of alcohol ads, as well as improvement in the adoption of external advertising review mechanisms. The Report also found no evidence of targeting underage consumers in the FMB market. The FTC's Report concludes that while advertising self-regulation is designed to reduce the number of ads seen by minors, a comprehensive alcohol policy also must address underage access to alcohol.

In 1999, the FTC issued a series of recommendations to Congress regarding alcohol industry self-regulation. The 2003 Report examines whether the alcohol industry has implemented these recommendations and what actions marketers are currently taking to prevent advertising to minors. Until recently, voluntary alcohol codes generally required that at least 50 percent of the audience for alcohol ads consist of adult consumers aged 21 and over. The 1999 Report criticized both this standard and the low level of effort to ensure compliance with it, and identified several best practices in alcohol advertising placement to minimize underage exposure.

The FTC's recent investigation indicates that although FMBs have become increasingly popular, FMB marketers for the most part have complied with 2002 voluntary alcohol codes regarding ad placement. In 2002, for example, over 99 percent of the FMB advertising budget for television, radio, and print media was spent in compliance with the 50 percent placement standard. Documents produced by the companies also show that the intended targets for FMBs were above the legal drinking age. Moreover, in response to concerns raised about teen exposure to alcohol ads, the industry now has committed to adhere to a 70 percent placement standard and to implement post-placement audits. The Report notes that FMB advertising may have a "spillover" effect on teens, because themes that appeal to younger, of-age consumers also appeal to underage consumers.

The Report urges strong caution when introducing new alcohol products to ensure that they are not directed to an underage audience.

The FTC's 1999 Report also recommended that the alcohol industry use independent, third-party reviewers to determine whether ads complied with industry code standards, particularly to address complaints about underage appeal. The new Report finds that, since issuance of the 1999 Report, there has been modest but important movement toward external review. One company has adopted a third-party review system, and one trade association has improved the operation of its own external review mechanisms. Other companies also are considering adopting alternative external review systems.

The FTC's Report concludes that while advertising self-regulation is designed to prevent advertising and marketing practices that target underage consumers and reduce the number of ads seen by minors, a comprehensive alcohol policy also must address the means by which teens actually obtain alcohol for consumption. The FTC will continue to monitor alcohol industry self-regulation. In particular, the FTC will monitor the new placement standard requiring that adults constitute 70 percent of the audience for advertising. Additionally, the FTC will monitor the effectiveness of third-party and other external review programs and will continue to evaluate new advertising programs that may have undue appeal to underage consumers.

The Commission's vote to approve the 2003 Report on Alcohol Marketing and Advertising was 4-0-1, with Commissioner Pamela Jones Harbour not participating.

Copies of the FTC's report are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.