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ADVERTISING
INTERPRETATION AND ENFORCEMENT POLICY OF THE FEDERAL
TRADE COMMISSION
Summary of Remarks by Mary L. Azcuenaga
Commissioner
Federal Trade Commission
before the
AMERICAN ADVERTISING FEDERATION
1994 National Government Affairs Conference
Ms
Azcuenaga was speaking before the American Advertsing Federtion about the
Federal Trade Commission's efforts to enforce Section 5 of the FTC Act.
Advertising
has always had its detractors and proponents. George Orwell once described
advertising as "the rattling of a stick inside a swill bucket,"
while Thomas Jefferson said that "[a]dvertisements contain the only
truths to be relied on in a newspaper." Marshall McLuhan characterized
advertising as the "greatest art form of the 20th century,"
whereas Alexander Solzhenitsyn wrote "Freedom! to spit in the eye and
in the soul of the passerby with advertising." These disparate views
of advertising aside, our legal system has recognized that advertising has
an important role in ensuring that consumers receive the information they
need to make informed choices when they purchase goods and services.
The
Commission's mandate under Section 5of the Fair Trade Commission Act is
twofold: to prevent unlawful restraints on advertising and to prevent
unfair or deceptive advertising. Although the Commission occasionally uses
its unfairness authority in connection with advertising, the vast majority
of the Commission's advertising cases involve deception, which may well be
unintentional, and its more sinister cousin, advertising fraud, which
usually involves knowledge of the falsity of a claim.
The
Commission regulates dvertising practices in the pay-per-call industry,
which uses 900 numbers to provide consumers with information on everything
from dial-a-porn to dial-a prayer. In 1992, Congress enacted the Telephone
Disclosure and Dispute Resolution Act to address problems in the
pay-per-call industry. The Act mandated that the Commission issue rules
regarding practices for the pay-per-call industry, including its
advertising.
The
Commission promulgated its Pay-Per-Call Rule in compliance with the Act.
The Rule requires that the cost of the call be disclosed in all advertising
and mandates that some advertisements include additional disclosures,
depending on the nature of the pay-per-call service, such as whether it
offers a sweepstakes or information on federal programs.
The Rule
also contains special provisions concerning advertising for pay-per-call
programs directed to children.
The Rule
requires that advertisers include a parental permission disclosure in any
pay-per-call advertisement directed to persons under the age of 18. The
statute and Rule also prohibit directing advertisements for pay-per-call
services to children under the age of 12, unless the service advertised is
a bona fide educational service. The Pay-Per-Call Rule became effective on
November 1, 1993.
The
Commission also maintains a strong enforcement program against deceptive or
unsubstantiated advertising claims. The Commission has brought a number of
cases alleging deceptive advertising by the diet industry. The Commission
has accepted six consent agreements from very low calorie diet companies as
well as three consent agreements with low calorie diet companies settling
charges that they had made deceptive representations about weight loss and
maintenance of weight loss.
Environmental
or green marketing claims have continued to be a focus of a number of
Commission actions or investigations. The cases have involved a variety of
environmental claims, such as claims that products are good for the ozone
layer, biodegradable or recyclable.
The
Commission's decision to challenge an advertisement as deceptive often
involves a great deal more than viewing the ad and following what might be
referred to as gut reactions. In deciding whether an advertisement conveys
a claim to reasonable consumers, the starting point is always the
advertisement itself: Does it convey the claim with sufficient clarity that
the Commission can make a determination without the need for extrinsic
evidence of actual consumer interpretation of the ad? In addressing this
issue, the Commission does not have unfettered discretion.
One
advertising journal recently carried a review of the opinion of the Court
of Appeals for the Seventh Circuit in the Kraft case that was headlined,
"Advertisers Beware: The Seventh Circuit Gives FTC Free Rein in
Deciding Whether Advertising is Deceptive." This sounds like Jurassic Park after the power went off,
doesn't it? In fact, the Seventh Circuit ruled that the Commission could
use its own "reasoned analysis" to determine what claims are
conveyed, but only so long as the claims "are reasonably clear from
the face of the advertisement." This standard is consistent with the
test the Commission laid out in the Thompson Medical case. In that case,
the Commission said that it could rely on its own facial analysis if the ad
is clear enough to permit the Commission to "conclude with
confidence" that the claim is conveyed to reasonable consumers.
The law is
very clear: objective claims must be true and adequately substantiated.
Implied claims pose a more difficult issue, since the meaning of an
advertisement is often hard to determine. The Commission is permitted by
law to rely on its own expertise in analyzing what implied messages, if
any, are conveyed by particular advertisements. Because implied claims may
be difficult to identify and assess, the Commission often seeks and reviews
extrinsic evidence bearing on the issue. Extrinsic evidence comes in many
forms, all of which are potentially useful. But some types of extrinsic
evidence are more reliable and useful than others.
In an
ideal world, when the Commission evaluates a particular advertisement, it
will have available the results of well controlled copy tests bearing
directly on consumers' understanding of that ad and on whether the
particular deceptive interpretation the Commission is concerned about is
taken by a significant number of consumers. Short of this, however, other
extrinsic evidence may still be of value: focus group or open ended tests
of the advertisements in question, general measures of consumer knowledge
or background beliefs about the issues raised in the advertisement, tests
of similar advertising material, or tests of generic issues of advertising
interpretation in other contexts all may be useful to the Commission in its
consideration of the meaning of particular advertisements.
Three
examples of the generic issues that may arise in interpreting
advertisements are: First, what is the relationship between claims made in
headlines versus claims or qualifications made in the text of an ad?
Second, how do consumers interpret a general statement that is later
followed by more specific information? Are they likely to view the specific
information as qualifying information that limits the claim, or as supporting
material that strengthens or broadens the general statement? Third, how are
consumers likely to interpret vague statements that are never qualified
explicitly in an ad?
Headline
vs. text: The Commission has ruled that an advertisement with a deceptive
headline can be deceptive even if qualifications are made in the text that,
if read and understood, would cure the deception.
Yet, like
many principles in deception law, it must be applied with discretion. By
its very nature, a headline, often with only a single phrase of text, is
unlikely to provide much in the way of nuance in meaning. If the truth is
complicated, any headline that effectively draws the reader's attention to
the subject of the intended truthful claim is likely to suggest a variety of
possible deceptive meanings as well. If this occurs, advertisers should
take care that the text of the advertisement clearly and prominently steers
the consumer to the truthful claim and away from any deceptive ones. The
more effectively this is done, the less likely it is that the headline
considered alone will be deceptive. Of course, here, as elsewhere, credible
extrinsic evidence could lead to a different conclusion.
In
evaluating the impact of a headline, another principle of advertising interpretation
comes into play: the meaning of an advertisement should be construed in the
context of the advertisement as a whole, not by individual elements of the
ad taken out of context. The Commission will consider the "net
impression" created by an advertisement.
In
deciding whether to challenge an advertisement containing a possibly
deceptive headline, that is adequately qualified in the accompanying text,
it may be appropriate to consider the following questions: (1) How likely
is it that consumers would take a deceptive meaning rather than a truthful
meaning from the headline, taken alone? (2) How well does the language of
the text steer consumers toward the truthful meaning and away from the
deceptive meaning? and (3) How clear and prominent is the qualifying text?
Generalities
and detail: A second and closely related issue that frequently arises is
how consumers are likely to interpret general statements in an
advertisement when the general statements are followed by more specific,
related information? For example, suppose an advertiser wants to highlight
changes that have been made in a product to make it better for the
environment and, understandably, wants to draw attention to this change?
For example, perhaps the advertisement would say: "Environmentally
friendly -- by modernizing our production facilities we have reduced
emissions of air pollutants by 90%."
At first
glance, such a claim might seem unobjectionable. Nearly every product,
however, has some undesirable effect on the environment. Perhaps the
product in our example contributes to water pollution in its intended end
use. Perhaps it is a bulky product that when disposed, takes up a
substantial amount of landfill space. Or perhaps the product's
manufacturing process is energy-intensive, and, despite its improved
environmental attributes as a product, a life cycle analysis would reveal
that its manufacture contributes heavily to air pollution. On balance,
instead of being a friend of the environment, perhaps the product is more
in the nature of an acquaintance.
The
question arises whether consumers might interpret the "environmentally
friendly" claim broadly and strongly and, therefore, be deceived. Or
would the specific information about reducing emissions of air pollutants
by 90% be interpreted to apply to air pollution in the production process?
Consumers might view the specific information not as limiting, but as
supporting, the general claim that the product is environmentally friendly.
Indeed, they might find the environmentally friendly claim more credible
than it would have been had the specific information not been added. One
consumer might view the environmental friendly claim as applying to the
entire life cycle effects of the product on the environment. Another might
view the specific information as a qualification, explaining in what
specific, limited sense the product is friendly to the environment. In
short, it is not immediately obvious whether the overall claim conveys a
primarily truthful or a deceptive message.
As usual, the
interpretation of such claims -- those involving a general statement
followed by more specific information -- may vary greatly depending on the
precise wording of the claims and the context in which they appear.
Reliable copy test evidence can help the advertiser as well as the
Commission understand what meanings are conveyed to consumers by particular
advertisements. This does not mean that advertisers copy test every
advertisement they propose to run. Such a requirement would surely be
"overkill," and its cost, in any event, would likely be
prohibitive.
The
environmentally friendly example raises a host of questions that illustrate
some of the difficulties the Commission faces in the area of advertising.
Surely it would be important to consider one final factor: that is, whether
the advertisements in question would be likely to influence consumers to
switch from competitive products that were clearly worse or clearly better
for the environment. The commision should be cautious about discouraging
firms from publicizing changes that do have significant benefits for the
environment as compared to products that consumers otherwise would buy. Not
allowing firms to capitalize on their improvements might discourage them
from making improvements in the first place. Like the advertiser developing
an advertising theme, the Commission should consider any enforcement action
in a wider context.
Vague
Generalities: A third, related generic issue arises when an advertisement
makes a vague claim. For example, suppose a firm makes a claim about a
branded product without specifically saying whether it applies to its
entire product line or just some products in the line. Examples abound:
"our clothes are made in the USA." "Our cars are
fuel-efficient." "Our frozen desserts are low in fat."
Should we assume that these claims apply to every individual item in the
product line? To most or nearly of the products in the line? Or is the
message that, on average, the products have the characteristic? Suppose,
for instance, that a car manufacturer's entire line of vehicles on average
is highly fuel-efficient, and its advertisements give examples of vehicles
that are more efficient than those of the competition. Suppose also,
however, that other models of the same manufacturer are less fuel-efficient
than the average car in the same class? Does this kind of claim mean that
the products have the characteristic in an absolute or a comparative sense?
What if examples are provided for which the claim is true? Do examples
qualify the claim thereby reducing its strength or do examples strengthen
the claim?
Many of
the questions, however, need to be worked out, often in the context of
particular advertisements. The Commission continues to seek input from the
advertising industry and from experts in consumer perceptions and marketing
concerning multiple interpretations or messages. Even without answers, a
cautious advertiser may find it useful to keep the questions in mind.
Advertising
Agency Liability: An advertising agency can be held liable for advertising
claims if the agency participated in creation of the advertising and knew
or reasonably should have known that the advertising was deceptive.
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