Alcohol Companies to Supply Data on Their Self-regulatory Activities to FTC

Eight major alcoholic beverage companies will have to supply certain information on their self-regulatory activities to address concerns about alcohol advertising and underage drinking, as a result of orders from the Federal Trade Commission. The Commission is seeking the information to respond to a Congressional request for a report on alcohol advertising and underage drinking, particularly industry self-regulatory programs. The information will assist the Commission in evaluating the effectiveness of self-regulatory efforts, especially efforts directed to those under 21. The Commission also announced today settlements of charges that television ads for Beck's beer and Kahlua White Russian violated federal law. According to the agency, Beck's ads depicting young people drinking on a boat while engaging in acts that pose a substantial risk of falling overboard and drowning violated the FTC Act. In order to settle the charges, Beck's would be prohibited from disseminating these and similar ads in the future. Kahlua White Russian ads claiming that the Kahlua White Russian pre-mix cocktail is a low alcohol beverage were false, the FTC charged. The Kahlua settlement would prohibit future misrepresentations of alcohol beverage content in advertising.

Jodie Bernstein, the Director of the FTC's Bureau of Consumer Protection, stressed the importance of industry self-regulatory efforts to address concerns about alcohol advertising and underage drinking. "The FTC is seeking information to evaluate how well existing self-regulatory efforts are working to discourage advertising that is attractive to those under 21," she said. "Their responses will greatly assist the Commission in reporting to Congress."

Bernstein also commented on the two cases announced today. "Alcohol advertisers should not run ads that encourage young people to combine drinking with risky activities," she said. "The potential for injury is simply too high." With regard to Kahlua White Russian, Bernstein stated, "Ads for Kahlua White Russian falsely claimed that the beverage was 'low alcohol.' Ads that under-represent alcohol content pose a substantial risk to consumers, and should not be disseminated."

Orders for Special Reports to Eight Alcohol Beverage Industry Members

The Congress, in its November 1997 conference report on the FTC's budget for Fiscal Year 1998, directed the Commission to focus its investigative and advertising monitoring efforts on alcohol advertising and marketing practices that may impact underage consumers. This direction also states that the Commission should encourage the development of industry self-regulatory responses to problematic practices, and to report its finding to the Committees on Appropriations.

The FTC orders require eight major advertisers of beer, wine and distilled spirits to file "special reports" on their advertising and marketing practices on the manner in which the companies implement provisions of self-regulatory codes designed to prevent targeting alcohol advertising to underage consumers. The orders seek information about the advertisers' compliance with the Beer Institute, Distilled Spirits Council and Wine Institute codes.

Information requested by the orders includes:

• Company's compliance with self-regulatory code provisions on the content and placement of advertising.

• Enforcement mechanisms under the codes to resolve complaints regarding possible code violations.

• Information about self-regulatory efforts to restrict those under the legal drinking age from viewing company web sites that promote beverage alcohol products.

• Company public service activities to discourage underage drinking.

• Company efforts to ensure that product placements in movies and television are directed to an adult audience.

• Company efforts to ensure that any marketing activities on college campuses are directed to an adult audience.

• Information on the appeal of certain advertising techniques and themes to those under the legal drinking age.

The orders request that the "Special Report" be filed with the Commission not later than October 5, 1998.

Beck's North America, Inc.

The Beck's television ads challenged by the FTC showed a sailing boat at sea. Almost all of the young adults were holding bottles of beer, with one passenger holding a bottle of beer and standing precariously on the bowsprit (a spar extending almost horizontally off the bow of the boat), and others sitting on the edge of the bow.

The complaint outlining the charges against Beck's North America, Inc., states that the conduct depicted in the ads is inconsistent with the Beer Institute's own Advertising and Marketing Code and also may have violated federal and state boating safety laws. In addition, boating safety experts such as the U.S. Coast Guard stress that the risks associated with such activities while boating are greatly increased by the consumption of alcohol, the FTC said. In the boating environment, even low and moderate blood alcohol levels sufficiently affect coordination and balance to place boat passengers at increased risk of falling overboard and thus drowning. The complaint charges that these ads constituted unfair acts or practices in violation of the FTC Act because they were likely to cause substantial injury to consumers.

The proposed settlement would prohibit the company from broadcasting TV ads that depict a person having consumed or consuming alcohol on a boat while engaging in activities that pose a substantial risk of serious injury or that depict certain activities that would violate federal boating safety laws.

Beck's is located in Greenwich, Connecticut.

Kahlua White Russian

Television ads for Kahlua White Russian, a pre-mixed cocktail, claimed that the product was a low alcohol beverage, the agency said in a complaint charging that Allied Domecq Spirits and Wine Americas, Inc. and Allied Domecq Spirits and Wine USA, Inc. d/b/a/ Hiram Walker, violated federal law.

According to the agency's charges, Allied's Kahlua White Russian pre-mixed cocktail is not a low alcohol beverage. It has a significant alcohol content (5.9 percent alcohol by volume), equal to or greater than numerous other alcohol beverages. For example, a Kahlua White Russian has substantially more alcohol ounce for ounce than many beers, malt liquors and wine coolers. Alcohol, Tobacco and Firearms (ATF) limits "low alcohol" claims for beer and malt liquor to products with less than 2.5 percent alcohol by volume. The Commission's complaint alleges that the low alcohol beverage representation was false.

The consent order settling the charges would prohibit Allied from representing that any beverage alcohol product containing 5.9 percent alcohol by volume is a low alcohol beverage and from otherwise misrepresenting the alcohol content of its products. The order would not prohibit Allied from making truthful comparative claims about the alcohol content of Kahlua White Russians and any other alcohol product. The Commission encourages comparative advertising as an important means of informing consumers about the relative merits of competing products, as long as it is truthful and non-deceptive.

ATF assisted the FTC's investigation of the Kahlua White Russian matter. ATF requested that the Kahlua ads be withdrawn and they were.

Allied Domecq Spirits & Wine Americas and its wholly owned subsidiary Hiram Walker are both located in Southfield, Missouri.

The Commission votes to issue the orders and to accept the proposed consents for public comment were 4-0. Commissioner Mozelle W. Thompson issued a statement on the Beck's case. "I believe that the advertisements at issue were deceptive as well as unfair because they imply to the young consumers they target that consuming alcohol while boating is appropriate and/or safe. In my view, a reasonable young consumer could be deceived by not appreciating the danger involved in imitating such behavior," Commissioner Thompson said.

An announcement regarding the proposed consent agreements will be published in the Federal Register shortly. The agreements 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 is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaints, proposed consent orders, the analyses to aid public comments and the Commission's order to alcohol beverage companies are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202) 382-4357); TDD for the hearing impaired 1-866-653-4261. Consent agreements for public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.