Thank you Alan for that kind introduction. I also would like to thank the Chairman of ICPHSO, John Liskey, for inviting me to your conference. I always appreciate the opportunity to address organizations that are concerned about the health, safety, and well-being of our nation's consumers. ICPHSO has been instrumental in providing a forum for industry and government to exchange ideas, and learn about emerging safety trends, both here and abroad.
I am delighted to be here today to discuss how the Federal Trade Commission evaluates advertising and marketing claims. Let me begin with an overview of our general requirements. Then I will discuss marketing practices that specifically feature safety and health claims.
Our general rules relating to advertising are actually quite simple: first, you must tell the truth and not mislead consumers; and second, the claims you make must be substantiated before they are made. In addition, you must not engage in "unfair" practices -- that is, advertising or marketing that causes substantial, unavoidable consumer injury without offsetting benefit to competition or consumers.
Let me take just a minute to expand on some of the concepts that underlie these general requirements.
With respect to our Deception Analysis, there are several principles to keep in mind. First, the Commission reviews advertising from the perspective of a reasonable consumer in the target group. For example, if you are advertising to children, we will review the advertisement from the perspective of a reasonable child.
Second, the Commission is concerned about both express and implied claims made in advertising -- which, in your case, would be those claims that relate to the safety characteristics of your products. In fact, most of our advertising-related litigation revolves around the questions of what are the implications of the advertising and are those implications substantiated.
Third, the deceptive interpretation of the ad does not have to be the only interpretation for the ad to be found deceptive. Most advertising may be interpreted in a variety of ways. If a deceptive interpretation is a reasonable one, the company may be held liable. We also will hold advertising agencies liable, along with their clients, when the agencies knew or should have known the claims they helped disseminate were deceptive. I should also note that we consider "advertising" in a broad sense. In addition to traditional television, print, and radio advertising, we also review a product's labeling and packaging, point of sale displays, and statements in brochures.
And finally, you can deceive a consumer by what you don't say as well as what you do say. If you omit information from your advertising and marketing that is material in light of the representations made in the ad, then it is deceptive.
Let me turn now to our Advertising Substantiation Policy. This is probably the most important single requirement for almost all advertising. Under this doctrine, every objective product claim, whether express or implied, must be supported by evidence providing a reasonable basis for the claim. If you make a safety claim in your advertising, whether it relates to a toy, a car seat, lawn equipment, or beauty aids, that safety claim must be supported.
The amount and type of evidence required to support a reasonable basis claim depends on a number of factors, including what experts in the relevant scientific or technical field believe is reasonable. For some claims -- for example, representations about the health benefits of a particular product -- an advertiser may be required to possess clinical testing or other scientific evidence that substantiates the claim. To qualify as a reasonable basis, the tests or studies relied upon to support the claims must have been conducted and evaluated in an objective manner. In addition, the tests must have been done by qualified persons, using procedures generally accepted in the scientific community as giving accurate and reliable results.
In other words, in these cases we are looking for carefully conducted evidence that the product works as promised -- we are not looking for a collection of newspaper and magazine articles talking about theories by which a product might improve a consumer's health. Unfortunately, sometimes that's all we receive when we request substantiation.
Finally, let me discuss our Unfairness jurisdiction. Generally, an unfair act or practice is one that causes substantial consumer injury that is not reasonably avoidable and is not outweighed by any countervailing benefits to consumers or competition.
With respect to unfair advertising, the classic example was the promotion of razor blades by placing the products themselves in the comics section of the Sunday paper. The Commission alleged that this practice created a substantial and unjustified risk of injury to children. A more recent use of this authority occurred with respect to the marketing of 900 number services to children -- for example, advertisements encouraging calls to Santa Claus or the Easter Bunny on 900 lines. The Commission challenged the advertising of these services to children under 12 on the theory that the children were committing their parents' money, but the services had failed to implement any procedures for parental control. Subsequent legislation prohibited these practices entirely.
Beyond these principles of general applicability, there are some specific advertising principles you should also be aware of.
When you use a demonstration to promote a product's qualities or performance, that demonstration must accurately reflect the product's qualities or performance. We have renewed our enforcement activity in this area in recent years. Just last month, we settled a case against a toy company and its advertising agency, alleging the use of hidden wires to enhance the visual performance of the toy. And, for the first time in a deceptive toy advertising case, we required the company to pay refunds to all eligible consumers.
If you use consumer testimonials -- for example, "I lost 30 pounds in three weeks with the Product X pill" -- Commission law in this area is clear. An advertiser cannot use a testimonial to make a claim the advertiser itself cannot substantiate.
In addition, the Commission's guides on testimonials and endorsements make clear that, unless clearly limited, we will interpret consumer endorsements as a claim that the endorser's experience is representative of what consumers generally will achieve. The advertiser must either have substantiation for this claim or clearly limit the endorsement. Expert endorsements must be based on the actual exercise of the endorser's expertise. This must include testing or evaluation of the product at least as extensive as someone with the same degree of expertise would normally use to evaluate the product.
For both experts and consumers, if there is a material connection between the endorser and the product that consumers would not ordinarily expect, this connection must be disclosed. For example, if the consumer was paid for a favorable evaluation of the product, this should be revealed. Similarly, if the expert is also an officer of the company, these facts should be disclosed.
The Commission's approach to national advertising encourages self- regulation coupled with vigorous law enforcement. We support voluntary industry programs that protect consumers and ensure a level playing field for affected businesses. And we encourage self-regulation by the media in screening advertising for fraud and deception. We owe it to both consumers and honest competitors to provide enough general guidance so that everyone knows what the rules are. By the same token, however, we will back that guidance with enforcement and move aggressively against deceptive and unsubstantiated claims.
With that overview, let me turn now to some specifics. I'm sure I don't need to tell you that safety has become the hot marketing tool for the 90's. Indeed, I see there will be a presentation tomorrow entitled, "Safety Makes Cents." Consumers increasingly care about the safety characteristics of the products they buy, and often will specifically seek out products that offer particular safety features. Safety claims can certainly be part of a successful and profitable marketing strategy. The rules that guide the Commission when we evaluate the truthfulness of any particular advertising claim or marketing campaign apply equally when we analyze a health or safety claim. The claim must be truthful, non-deceptive, and substantiated.
Let me give you a few examples of cases that we have recently brought where health or safety was featured prominently in the product's advertising. Last fall, the Commission issued a complaint charging three manufacturers of add-on braking devices with making deceptive safety claims for the products. Specifically, we alleged that the companies claimed, falsely, that their products were equivalent to, and offered the same safety benefits as, anti- lock braking systems -- commonly known as "ABS"-- that are factory installed equipment on many cars. In reality, these add-on aftermarket devices are substantially different in design and operation from true ABS equipment, and do not provide the same safety benefits. Our lawsuit against these companies asks the administrative law judge to prohibit the challenged misrepresentations and require substantiation for all future performance and safety claims.
Continuing on the automobile theme for a moment, we also recently settled a case with an antifreeze manufacturer. We charged the company with making deceptive and unsubstantiated safety, as well as environmental, claims about its product. Specifically, we alleged that the company claimed that its specially formulated antifreeze was absolutely safe for people and pets. The company's advertisements featured the tag line "It's not just antifreeze. It's safety freeze," and prominently depicted small children and pets. In fact, the antifreeze is not completely safe, and the company did not have documents to substantiate this claim. The company did have substantiation, however, to claim that its product is safer than traditionally-formulated antifreezes. As a result, our settlement in this case was appropriately narrow (allowing the use of substantiated "safer" claims). In pursuing this matter, our concern was how to correct the exaggerated safety claims for this product, but without unduly stifling innovation in the development of safer products. This agency certainly understands the importance of encouraging manufacturers to innovate new and safer products.
Because cases that involve deceptive safety or health claims clearly have the greatest potential for serious consumer injury, we will often impose remedies in these cases that go beyond our standard "you will comply with the law in the future." For example, we have often required companies to send consumers who have purchased the product a safety notice to alert the consumer of our action and to correct any misimpression about claimed safety benefits. We have also required companies to modify trade names where the name clearly communicates a safety claim, and disclosure alone cannot cure that impression. For example, in the add-on brake case I just mentioned, the companies use the initials "ABS" as part of their product name. Our complaint seeks to prohibit this use. We also have required companies to include corrective disclosures in future advertising and packaging materials.
These additional remedies were required as part of a recent settlement with a company making safety claims for its rubber mask. The mask was advertised as a means of respiratory protection during fires. Although the mask apparently filters out some types of hazardous gases, the mask does not filter out carbon monoxide, a toxic gas that is a frequent cause of death in home fires. The order requires the company to stop making false and unsubstantiated claims about the mask's ability to protect users from fire and smoke hazards. In addition, the order requires the company to disclose, in both its advertising and packaging, that the mask does not filter out carbon monoxide. Equally important, we also required the company to notify past purchasers of the product's significant safety limitation.
As I am sure you are aware, requiring corrective advertising can be very expensive and time consuming. In addition, deceptive and unsubstantiated advertising undermines the quality of information in the marketplace, and companies that disseminate false advertising obtain an unfair competitive advantage. So, it really is in everyone's best interest to make sure the advertising is non-deceptive in the first instance. Although we have available a variety of formal guidance to assist you, I would encourage you to contact our staff whenever you are seeking informal guidance or advice. And, speaking for myself, my door is always open. I am happy to meet with any group or individual, whether it is simply an informational visit, or to discuss a particular matter before the agency. Government and business can, and should, work together where appropriate to pursue common goals.
Some additional examples of recent Commission action include a host of cases against companies making deceptive health claims, including health claims for diet and weight loss products, dietary supplements, hearing aids, arthritis treatments, baldness cures, and acne treatments. In addition, we have brought cases against various medical centers and clinics deceptively touting varicose vein treatments, impotence treatments, stop-smoking hypnosis seminars, and dyslexia diagnosis and treatment. Again, our focus is on those claims that can cause the greatest consumer injury.
We routinely cooperate with other federal agencies, as well as state and local enforcement officials. This is particularly true in cases that involve health or safety claims, where we will rely on the expertise of such agencies as the CPSC, the EPA, and the FDA to help us analyze the validity of the underlying claim. Indeed, many of our cases are initiated by referrals from other agencies. For example, a case we settled last year with two marketers of home and office ozone generators was initiated in response to information submitted by the EPA. In that case, the companies marketed their products as the solution to "sick building syndrome," claiming their machines could clean the air of indoor pollutants, preventing allergies and relieving asthma. We alleged that these claims were unsubstantiated and, under the settlement, the companies are required to have competent and reliable scientific evidence to support such claims in the future.
A company's non-compliance with another agency's standards could, in some circumstances, also form the basis of a complaint. For example, under the Commission's unfairness jurisdiction, it might be possible to allege that a company that continues to market a product that was already the subject of, say, a CPSC recall is engaging in an unfair practice by selling an unsafe product. However, I expect that most of our cases will continue to focus only on the actual claims being made, and whether or not they are truthful and substantiated. And, as I just mentioned, we do try to coordinate our efforts with other agencies to avoid this sort of "double-whammy."
I would also like to mention briefly a few matters that are currently under investigation, to give you a sense of areas of future interest. We are currently looking at a device that claims it can improve night vision and increase the safety of night driving. Experts from the FDA have indicated preliminarily that these claims are likely false and/or unsubstantiated.
We are also looking at athletic equipment that is being marketed as a safer alternative to traditional products; food storage and thawing products that allegedly can improve food safety and reduce contamination and food-borne illnesses; and claims for baby products that can reduce the chances of Sudden Infant Death.
Let me also mention the Commission's efforts with respect to harmonization of various product labeling requirements. We are extremely mindful of the varied challenges facing global marketers today. We are working closely with other countries, particularly our NAFTA counterparts, as well as international standards organizations, to ensure consistency wherever possible. For example, we are currently revising our Care Labeling Rule to permit the use of symbols on care labels that will harmonize with those of the NAFTA countries. We will be undertaking similar harmonization for textiles, wool, and appliance labeling.
The FTC also serves as the U.S. representative to the International Marketing Supervision Network, an organization of law enforcement agencies having jurisdiction over deceptive marketing practices enforcement in many of the world's developed nations. Network members from other countries refer complaints to us concerning trans-border deceptive practices with a U.S. component, and ask for our assistance.
In conclusion, let me thank you for your time, although I'm sure some of you would have rather been sitting by the pool! I would be pleased to take any questions, and I would encourage you to visit our consumer protection exhibit.