The pictures of Federal Trade Commission Chairman James C. Miller III and FTC Commissioner Michael Pertschuk were inadvertently switched in a story in Sunday's Business & Finance section.
For years, the makers of Anacin promoted their product as the best pain reliever on the market because it contained an ingredient "most recommended by doctors" for curing minor aches and ailments.
However, the company failed to disclose that the significant ingredient was found in dozens of other products as well--because the ingredient was aspirin. As a result, the Federal Trade Commission found the ads misleading and deceptive and ordered the campaign halted.
Similarly, the FTC ordered the makers of Fresh Horizons bread to change its advertisements that promoted the bread for its high-fiber content and said it contained five times the amount of fiber as a slice of whole-wheat bread.
What the ad failed to mention was that the fiber was not grain fiber commonly found in most bread, but wood fiber derived from the pulp of trees. The commission found that this omission was misleading and deceptive.
Will the FTC still be able to stop these types of advertisements if the agency's new chairman, James C. Miller III, has his way and persuades Congress to limit the FTC's ability to crack down on deceptive and unfair ads?
That is the question now being vigorously debated among top commission officials as a result of Miller's novel advertising proposals, unveiled 10 days ago when the chairman appeared before the Senate Commerce Committee to testify on the future of the FTC.
With the agency's legislative authority due to expire this fall, Congress is considering a series of proposals to curb its consumer protection and antitrust powers.
Among the most controversial is Miller's own plan to place dramatically sharp restrictions on the types of advertising cases the commission can bring. It is the first time in the agency's 68-year-history that any FTC chairman has asked Congress for a reduction in the agency's powers.
Miller believes the commission should not be permitted to challenge any deceptive advertisements--such as misleading product claims--unless the commission can first prove that the promotion was so false and exaggerated that a "reasonable" consumer was actually harmed. Additionally, Miller no longer would allow the commission to challenge claims based on opinion rather than fact, such as claims that a product "tastes like cola" when consumers find it doesn't.
Under current law, Miller notes, any advertisement can be found deceptive "if it has a tendency or capacity to deceive." Under that definition, Miller concludes, "virtually any advertisement can be found to be deceptive." As a result, Miller adds, the commission has brought to trial a series of unreasonable and trivial cases.
For example, Miller cites a 1977 decision that the makers of Poli-Grip falsely claimed that the denture adhesive helps denture wearers eat foods such as apples without discomfort or embarrassment. "This product is cheap, frequently purchased and easy for consumers to evaluate for themselves"--particularly if after applying the adhesive the user eats an apple and finds his dentures smiling back, says a position paper prepared by Miller's staff.
As a result, Miller concludes, "the FTC is not needed to police the marketplace" in this type of case because consumers will be able to find the deception easily on their own--and with relatively little affect on their pocketbooks.
Another action drawing Miller's criticism is the commission's order to Kroger Co. to stop its comparative "Price Patrol" ads in which housewives routinely compared the price of 100 to 150 items at different local supermarkets to see if Kroger's prices were lower than those of its competitors. Miller complains that even though the ads were very informal and made no claims that the surveys were scientific, the commission objected because the surveys were not statistically sound.
This interpretation of the advertisement was made solely by "the subjective judgments of the commissioners, who have almost always been lawyers with no special background in advertising or other aspects of the communications business," states a new position paper being prepared by Miller's top aides.
Even if this interpretation was correct, the paper adds, "there was no evidence that consumers were likely to have been injured because the commission conceded that Kroger's prices were frequently below or equal to those of its competitors."
To prevent further questionable cases, the only solution is to change the law, Miller argues. The changes would still permit the "good cases" to be brought, says Tim Muris, Miller's choice to head the FTC's bureau of consumer protection, which monitors advertisements. For example, Muris says, under Miller's proposals the FTC would still be able to attack Listerine if it repeated earlier false claims--since banned by the commission--that the mouthwash killed bacteria, and as a result prevented and helped cure colds and sore throats.
"As the commission found, a reasonable consumer would have been deceived to his or her detriment because many consumers considered it relevant in their purchasing decisions whether or not a mouthwash would cure or prevent colds," Muris states.
However, some of Miller's colleagues on the commission disagree with Muris's assessment and predict that if Miller's proposals are passed, it will be very difficult, if not impossible, for the commission to bring many of the "good" advertising cases it has brought in the past.
As commissioner Patricia Bailey noted in a recent internal memo on Miller's proposals: "It is no trivial matter to alter 44 years of jurisprudence. If the prohibition on deceptive practices is altered, no matter how benign the intentions of those making the change, the natural assumption of the legal community, including state and federal judges, will be that Congress must have intended somewhow to change the actual effect of the law. The inevitable result will be that at least some deceptive practices which are now illegal under current law will become legal, as judges and lawyers are cast adrift from precedent to search for the new law's meaning."
Additionally, notes Commissioner Michael Pertschuk, who served as FTC chairman during the Carter administration, "although it may theoretically be possible to develop a case under Miller's guidelines, it may be as a practical matter impossible to bring. For the expense of developing the evidence Miller wants--especially at the time when we have limited resources--will be prohibitive."
It's unclear whether Miller would consider the Anacin and Fresh Horizon ads as "good cases."Nonetheless, Pertschuk notes, in the Fresh Horizon's bread case, it would be nearly impossible for the commission to prove that consumers were harmed by the omission that the fiber was made of wood pulp, because there is no evidence that wood fiber is worse than grain fiber. Still, Pertschuk notes, people should know when they are eating something unusual.
Similarly, in the Anacin case, Pertschuk says that before the commission could file suit it would have to determine that consumers bought the product only because of the ad and that they were adversely affected by their decision--paying substantially more than they would have if they had bought regular aspirin.
Pertschuk also takes issue with Miller's assessment of the Kroger case. "It was not trivial or crazy," he says. For one thing, he argues, the survey was not a random selection as Kroger implied, because the people who selected the products to be surveyed were the same employes who priced Kroger's products, and therefore were in a position to bias results. Additionally, Pertschuk argues, the ads failed to note that Kroger did not include in its survey meats and produce--"despite the fact that such products constitute a substantial proportion of each grocery bill." Evidence also indicated that prices for these products were higher than those of its competitors, Pertschuk notes.
As a result, Pertschuk argues, "Kroger unfairly disadvantaged its competitors, and the consumer who may have been convinced to go miles out of his or her way to take advantage of Kroger's bargains."
The split between Miller and his fellow commissioners--which until now has been kept relatively quiet--is likely to intensify this week when all are called to testify before a House subcommittee. Although Miller has testified on his proposals before, the House hearing will be the first in which the other commissioners are asked to present their views.