The Intellectual Property Law Committee of the Chicago Bar Association Young Lawyers Section
Good afternoon. I'm delighted to be back in my home town of Chicago today to review the Federal Trade Commission's law enforcement programs in the areas of environmental marketing and food advertising. Before I go further, I must let you know that the views I express today are my own and are not necessarily those of the Federal Trade Commission or any other Commissioner.
The FTC is a federal law enforcement agency charged with prosecuting violations of consumer protection laws and antitrust statutes. Most of our consumer protection work involves enforcement of Section 5 of the Federal Trade Commission Act, which generally prohibits "unfair or deceptive acts or practices," including advertising or labeling that is false or misleading. Included in the types of advertisements that we review and investigate are those involving claims made for food products and claims about the environmental features of products.
Environmental Marketing Claims
Let me turn first to environmental marketing claims. Although the FTC prosecuted some environmental claims in the 1970s, it was really in the late 1980s and early 1990s that environmental marketing mushroomed. During this time period, consumer interest in buying environmentally compatible products grew dramatically. Various consumer polls found that shoppers changed their purchasing decisions based on concerns about the environment. The data indicated three trends:
- consumers avoided purchasing a product because they believed the product or package was environmentally harmful;
- consumers purchased a product specifically because of environmental advertising or labeling; and
- consumers were willing to pay more for products perceived as environmentally preferable.
Given these strong statements of consumer concern and preferences, it was not surprising that marketers increased their advertising and labeling of so-called "environmentally friendly" products. And a marketplace that is very responsive to consumer demand obviously can provide significant benefits, so long as the information provided to consumers is truthful and non-deceptive. Consumers can and do exert significant pressure on manufacturers and retailers to improve the environmental qualities of their products.
When environmental advertising mushroomed in the late 1980s and early 1990s, it seemed that many of the claims were exaggerated and concerns were expressed that there wasn't much truth in environmental advertising. As the agency that enforces the federal laws against deception, this presented a problem for the FTC. I'd like to relate how the FTC addressed this problem.
First, the FTC started investigating individual cases of possible false advertising, such as plastic bags and diapers claiming to be biodegradable, and aerosol sprays that contained ozone-depleting chemicals yet claimed to be ozone friendly.
There was a concern, however, that bringing individual cases wasn't enough. Some concluded that across-the-board guidance to advertisers was necessary. This would let advertisers know just when the FTC would or would not bring an enforcement action against an environmental claim -- in other words, provide a level playing field for advertisers wishing to promote the environmental attributes of their products. In fact, in 1991 the FTC received several petitions to issue industry-wide guidelines for environmental marketing claims. Several proposed guidelines were submitted for the Commission's consideration. The Commission held two days of public hearings as well as a public comment period. The overwhelming response from all quarters -- industry members, environmental groups, and state and local law enforcement agencies, was that the Commission should issue environmental marketing guidelines. Responding to this call, in July 1992 the Commission issued Guides for the Use of Environmental Marketing Claims, which are codified at 16 C.F.R. Part 260.
The Guides are administrative interpretations of FTC policy, laws, and cases. They are voluntary and apply to all forms of marketing of products and packages to the public. They do not preempt state and local laws or regulations. The Guides reiterate basic Commission law by requiring that all express and implied material environmental claims about objective product attributes be substantiated by competent and reliable evidence.
In the consumer protection area, the main concern of the FTC is consumer perception -- that is, how consumers interpret advertising claims. So, the FTC's environmental guides approach environmental advertising claims from the consumer's perspective. That means that the guides do not establish standards for environmental performance. And they don't even incorporate the technical, scientific definitions of terms. Instead, the guides give claims the meaning that consumers give them. The guides address eight common environmental terms, as well as four general principles.
These four general principles apply to all environmental claims, and they are pretty much common sense. First, qualifications and disclosures should be sufficiently clear and prominent to prevent deception. In other words, a disclosure that's too small or inconspicuous for a consumer to notice it, isn't going to be very helpful.
Second, claims should make clear whether they apply to the product, the package, or a component of either. The Commission settled a case with Mr. Coffee, where one of the allegations resulted from a failure to indicate whether the claim referred to the product or the package. On the side of the box of Mr. Coffee filters was the claim, "recycled paper." The Commission alleged that this claim meant that both the cardboard box and the coffee filters were made from recycled content. While the box was recycled, the filters were not.
The third general principle is that environmental claims should not be overstated or exaggerated. For instance, it would be deceptive to say that a product has "50% more recycled content than before," when the recycled content was increased only from 2% to 3%, since that represents an insignificant increase in the use of recycled material. Fourth, comparative claims should be sufficiently clear so that consumers know whether the comparison is to a previous version of the advertiser's product, or to a competitor's product. So a claim like "less waste" would be too vague, but a claim like "thinner package means 75% less waste than before" would be better.
As I mentioned earlier, the guides address eight common environmental terms. These are:
- general environmental benefit claims, such as "environmentally safe" and "environmentally friendly,"
- and more specific claims such as degradable, including biodegradable and photodegradable,
- recycled content,
- source reduction,
- refillable, and
- ozone safe and ozone friendly.
By providing a basic definition of these terms as well as examples of different contexts in which the claims would or would not be deceptive, the guides help advertisers make environmental claims without deceiving consumers and breaking the law.
After the Commission issued the guides, we continued our law enforcement program, bringing cases against individual companies we believed to be violating the law. We've brought well over two dozen cases, addressing a variety of environmental claims, including claims that products are "degradable," "ozone friendly," "environmentally safe," "recycled," and "recyclable." These cases involved products including plastic trash bags, disposable diapers, paper and plastic grocery store bags, other paper products, a snow-melting chemical, and various aerosol sprays.
Though we've continued to bring cases, we have seen many fewer misleading environmental claims in the marketplace than before the guides were issued. So it appears to us that the guides have been working very well -- that they are providing guidance to advertisers and thereby reducing deceptive environmental advertising claims. We also worried that manufacturers would simply stop making environmental claims. Not true. In fact, one study has shown that environmental labeling claims have increased in number and prominence since 1992.
But we're not going to rely simply on our own sense of how the guides are working -- instead, we're in the process of testing the theory that the guides are working well.
Let me explain. One of the things we did when we adopted the guides was to schedule them for a three-year review. That review began last July, when we published a notice in the Federal Register requesting comment on whether and how the guides should be modified in light of developments in environmental technology or in consumer understanding. The comment period closed at the end of September. We received about 95 comments addressing a wide range of issues. Though I haven't yet had a chance to review the comments, I'm told that the principal issue addressed by the comments was the use of the term "recyclable," followed by "recycled." A number of comments addressed issues associated with "biodegradable" claims, as well as whether new terms, such as "non-toxic" and "renewable resource," should be added to the guidelines.
Next month we will be holding a public workshop-conference to discuss the major issues raised during the comment period. When the Commission has had an opportunity to consider all the issues, we will decide what changes, if any, need to be made to the guides. At this point, however, the guides appear to have been a real success story and so I don't anticipate major changes.
Food Advertising Claims
Now I'd like to turn to the issue of food advertising. The problem faced by the FTC was how to provide guidance to industry on food advertising once massive new food labeling regulations were promulgated. Specifically, what happened was that, pursuant to the Nutrition Labeling and Education Act, or the NLEA, the Food and Drug Administration issued food labeling regulations that became effective in 1994. These regulations did not apply to food advertising, but they raised questions about how the Commission would enforce the law against deceptive claims in food advertisements.
Before the NLEA was enacted, the FTC relied on its traditional case-by-case approach to provide guidance about its food advertising policy. But the changes in food labeling required by the NLEA were so comprehensive, with very specific requirements and prohibitions, that the Commission believed it was necessary to provide a separate statement of its enforcement policy. The Commission was determined to make its advertising policy as consistent as possible with the labeling regulations. After a lot of hard work and careful thought, the Commission issued a Food Advertising Enforcement Policy Statement in May 1994.
I'd like to emphasize the principles that drove the Commission's decision-making process in formulating the Policy Statement. While the NLEA changed FDA's statutory authority, it did not change the FTC's authority. This means that FDA could consider goals such as educating consumers about proper nutrition and promoting healthy dietary choices, in addition to preventing false or misleading claims.
In contrast, the Commission's statutory authority to regulate food advertising claims derives from the FTC Act, which provides authority to prevent unfair or deceptive practices but does not go so far as to encompass educational or public health goals. So, when we considered to what extent our policy for nutrient content and health claims in advertising would conform to FDA regulations, we were guided, as the law requires, by whether or not a given claim would violate the FTC Act.
In short, the Commission's approach in formulating its food advertising Policy Statement was the same as its usual approach to advertising claims: to consider the claims made by the ad -- whether express or implied -- and then to determine whether the claims are deceptive.
One way of looking at the Policy Statement is to think of it as a traffic light. The Statement makes clear that advertisers have a green light for claims approved by FDA. The Statement also lists a series of clear red lights for non-approved claims. And finally, in a number of areas reflecting either differences between advertising and labeling, or differences between the FTC's and FDA's statutory authority, there are yellow lights. There, the messages is slow down, be cautious -- don't deceive consumers.
Nutrient Content Claims
Keeping in mind the traffic light metaphor, I'll turn to the Statement's treatment of claims about the nutrient content of foods, also called nutrient content descriptors.
First, the Policy Statement gives a green light to absolute nutrient content claims such as high fiber, low fat, or low sodium. If you meet FDA's definitions, then you can use the term in advertising.
Then, the flip side of the green light for absolute nutrient content descriptors is a red light. If you use FDA-defined terms such as fat-free or low cholesterol without meeting the FDA definition and without any qualification, then that is a clear, "no go" situation.
I can illustrate this principle with a case the Commission brought against Klondike Lite Bars, although the Commission brought this case before the Policy Statement was issued. In the Klondike case, the Commission settled charges about deceptive fat and cholesterol claims. Klondike's ads stated:
- "If you don't believe that something lite can taste delicious, then try new Klondike Lite. It's 93% fat- free. Low in cholesterol."
The FTC's complaint challenged four claims:
- First, that the Lite bar is 93% fat-free. In fact, the bar actually contained at least 14 percent fat by weight when the entire bar, including the chocolate coating was considered;
- Second, that the Lite bar is low in fat. In fact, it had 10 grams of fat.
- Third, that the Lite bar has significantly less fat and/or fewer calories than the regular Klondike bar. In fact, it was smaller than the regular bar and on a per-weight basis, did not have significantly less fat or fewer calories; and,
- Finally, that the Lite bar will cause little or no increase in serum cholesterol levels. In fact, the bar contained a substantial amount of saturated fat, and would in many cases cause a substantial increase in serum cholesterol.
Another red light relates to FDA serving sizes. In general, the Commission will use FDA's serving size or reference amounts customarily consumed, to analyze a claim. However, if an advertiser depicts a non-standard serving size in an advertisement, the Commission will require the advertiser to meet the FDA's standard for that claim, both for the reference amount customarily consumed and for the serving size depicted.
Another Commission case illustrates this principle, though again it was settled before we issued the Policy Statement. This case arose from Nestle Food Company's advertisements for its Carnation Coffee Mate Liquid. The Commission's complaint challenged express and implied claims in television and print ads that Coffee Mate Liquid was a low-fat product. The ads depicted Coffee Mate Liquid being used not just in coffee but also over fruit and cereal.
This was deceptive because at the half-cup serving used for cereal and fruit, Coffee Mate Liquid has 8.5 grams of fat, nearly twice the fat of whole milk. We would require the amount of creamer shown in the ad to meet FDA's low fat standard -- which is 3 grams of fat or less. In other words, if the ad shows a half cup of creamer being used, then there must be no more than 3 grams of fat in a half cup, even though FDA's reference amount for creamer is a tablespoon.
Next -- the yellow lights associated with nutrient content claims. Here, there are some areas where we take a slightly different approach from FDA. This different approach reflects the differences between advertising and labeling. The biggest yellow light given to nutrient content descriptors is with comparative claims, that is, claims such as "less" or "more." For one thing, comparative claims are more likely to be used in ads than on labels. For another, FDA regulations have some disclosure requirements that also seem more practical for labeling than for advertising.
Unqualified comparative terms must meet FDA's minimum percentage difference requirements for those claims. For example, FDA requires a 25% minimum difference to make a "less" claim. If an ad claims that a food has "less fat than Brand X," but doesn't say how much less fat, the Commission will hold the advertiser to FDA's 25% reduction standard.
We intend to look very closely at comparative claims that do not meet FDA's thresholds. I'm referring to comparative claims that are qualified, but in a way that does not comply with FDA regulations. For example, the claim might say "20% less fat," when FDA requires at least a 25% reduction before a "less" claim can be made. The Commission will consider whether this type of claim accurately identifies the amount of increase or reduction in a particular nutrient.
In short, FDA-approved nutrient content claims get a green light, unqualified claims not meeting FDA's standards get a red light, and properly qualified claims get a yellow light.
After nutrient content claims, our Policy Statement addresses health claims, which is probably the more difficult area. FDA defines a health claim as any claim that characterizes the relationship of any nutrient to a disease or health-related condition. So, to be governed by FDA's health claims regulations, a claim on a food label must have two components: first, a reference to a nutrient or other substance, and second, a reference to a disease or health condition.
Going back to the traffic light metaphor, the FTC's Statement gives a green light to those health claims that have been approved by FDA. These are claims about diet-disease relationships that FDA has determined are supported by "significant scientific agreement." Currently, FDA recognizes eight diet-disease relationships. These are: calcium and osteoporosis; sodium and hypertension; dietary fat and cancer; dietary saturated fat and cholesterol and heart disease; fiber- containing grains, fruits, and vegetables and cancer; fiber- containing grains, fruits, and vegetables and heart disease; fruits and vegetables and cancer; and folic acid and neural tube defects.
So, for example, a claim in an ad that says "try our high fiber bran cereal -- it's low in fat, and diets high in fiber and low in fat may reduce the risk of some types of cancer," would get a green light.
There are also some red lights. One red light would be for unqualified health claims that FDA has not found to be supported by significant scientific agreement. In other words, if FDA hasn't approved a health claim, then that claim should not be made in an unqualified way.
Although the Commission's standard for determining whether health claims are supported is whether the claims are substantiated by competent and reliable scientific evidence -- and not whether the diet-disease relationship is supported by significant scientific agreement -- I believe the two agencies' approaches are largely consistent. For example, in a case involving claims for Eggland's Best eggs, the Commission challenged advertising claims that Eggland's Best eggs would not increase serum cholesterol and, therefore, were superior to other eggs.
The Commission determined that the clinical research referred to in Eggland's advertising was inadequate to support the central message of the ad campaign because of limitations in study design and because the larger body of scientific evidence suggests strongly that dietary cholesterol does cause an increase in serum cholesterol.
The case provides a good example of the rigorous standard used by the Commission for substantiation of health claims for food products. It also demonstrates that, while there are some differences between the approaches taken by FDA and the Commission with respect to regulation of these claims, the two agencies will generally arrive at the same outcome.
Finally, there are yellow lights. The Statement gives a yellow light to carefully qualified health claims. When I say "carefully qualified," I mean claims that clearly and fully convey the extent of support for the claim and the existence of any significant contrary view within the scientific community.
On the other hand, even carefully qualified health claims get a red light if the claim is inconsistent with the larger body of evidence.
In short, the area of health claims that have not been approved by FDA is clearly a "proceed with caution" area.
To sum up the signals for health claims, FDA-approved claims get a green light. Unapproved claims that aren't carefully qualified get a red light, and so do even carefully qualified claims that are inconsistent with the larger body of evidence. A yellow light is given to claims that are carefully qualified to convey the extent of support for the claim and the existence of any significant contrary view within the scientific community.
In conclusion, the Commission's environmental marketing guidelines have been a clear success, which is due in large part to industry's willingness to follow them voluntarily. The success of our food enforcement policy statement will likewise depend on a determined effort from industry. We will do our part to help stimulate this process, by keeping a close watch on ads for consistency with our Statement. Industry's response to our environmental marketing guidelines
- which are directed at a much larger, less homogeneous group of marketers
- shows that industry can do this in the food marketing area as well.
Thanks very much.