Second Round with FTC Leads to $100,000 Civil Penalty
Federal Trade Commission follow-up of its 1994 case against Eggland's Best, Inc. has led to another settlement with the company over the cholesterol-related claims it has made in marketing its eggs, and this time the settlement includes a civil penalty of $100,000. NW Ayer, Inc. also has agreed to settle FTC charges over its role in creating ads that allegedly conveyed the same deceptive claims as those challenged by the FTC in its first action against Eggland's. At issue are claims regarding the effect of Eggland's eggs on blood cholesterol.
"The importance of the FTC action here is twofold," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "First, consumers are paying up to a dollar a dozen more for these eggs based on what we maintain are false and unsubstantiated claims, and consumers need truthful information about the health-related aspects of the foods they buy. And second, the case tells other advertisers making health claims that we take these claims seriously and that failing to comply with an FTC order is a costly proposition.
"When we examine ad agency culpability in deceptive advertising cases, we're looking to see whether the agency made a reasonable effort to determine what claims its ads were making to consumers and whether the claims were truthful and backed up by solid evidence," Bernstein continued. "In this case, Ayer created the first ads, so it clearly was on notice that the FTC believed the claims were deceptive. Yet it actively participated in creating new ads making essentially the same cholesterol-related claims."
Eggland's Best is based in King of Prussia, Pennsylvania, and N.W. Ayer & Son, Inc., which does business as NW Ayer, Inc., is based in New York City. The FTC's first action against Eggland's was announced in February 1994, and culminated in a consent order prohibiting the company from misrepresenting the amount of cholesterol or other nutrients or ingredients in its eggs or in foods containing egg yolks, and requiring the company to have scientific substantiation for health-benefit claims for such foods. This consent order, finalized in August 1994, also required the company to label certain egg cartons with a corrective notice.
According to the FTC complaint detailing the new charges against Eggland's, advertisements that have run since August 1994 included statements such as:
"Imagine eating delicious, real, whole eggs and not raising your serum cholesterol. People did. In clinical tests of Eggland's Best eggs. They ate a dozen a week while keeping within the limits of the Surgeon General's low-fat diet. And . . . their serum cholesterol didn't go up."
The FTC complaint alleges that, through these and other statements, the new ads conveyed messages that:
- eating Eggland's Best eggs will not increase serum cholesterol at all, or that doing so won't increase it as much as ordinary eggs; and
- clinical studies have proven that adding 12 Eggland's Best eggs a week to a low-fat diet does not increase serum cholesterol.
Eggland's did not have substantiation for the first set of claims, and the clinical studies claim is false, the FTC charged, adding that the claims all violate the 1994 consent order. The FTC's complaint against Ayer cites these claims, as well as allegedly false claims made in the earlier ads that Eggland's Best eggs are low in saturated fat, and lower in such fat than ordinary eggs.
Eggland's Best has agreed to pay a $100,000 civil penalty over two years to settle these charges. At the FTC's request, the Department of Justice has filed in federal district court the proposed consent decree containing this penalty. The consent decree, which was negotiated by the FTC and requires the court's approval to become binding, also would prohibit Eggland's from violating the 1994 consent order in the future.
Because this is its first encounter with the FTC over the Eggland's Best claims, Ayer has signed a proposed consent agreement that includes fairly broad prohibitions against specified types of false or deceptive claims, but not a civil penalty. Any future violation of the order against Ayer could lead to civil penalties, however. The proposed consent agreement is being announced today for public comment before the Commission determines whether to make it final. It would prohibit Ayer from misrepresenting with regard to eggs and any meat, dairy or poultry product:
- the absolute or comparative amount of cholesterol, total fat, saturated fat or any other fatty acid; and
- the existence or results of any test or study.
Further, Ayer would be required to have competent and reliable scientific evidence to back up any claims that eggs or a meat, dairy or poultry product has any effect on serum cholesterol or any health benefit.
Claims specifically permitted by certain other government regulation would not be prohibited by these settlements. Finally, both settlements contain reporting and other provisions that would assist the FTC in continued monitoring of the respondents' compliance.
The Commission vote to accept these settlements was 5-0.
The proposed consent decree with Eggland's Best was filed on March 12 in U.S. District Court for the Eastern District of Pennsylvania, in Philadelphia, by the Justice Department. The proposed consent agreement with Ayer will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement or consent decree is for settlement purposes only and does not constitute an admission of a law violation. When finalized, both have the force of law. Any violation of an FTC consent order may result in a civil penalty of $10,000.
Copies of the documents referenced above 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 for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov