By Cindy Skrzycki
Dec. 9 (Bloomberg) -- Advertisements promising miracle weight loss, full heads of hair, and rich investment returns prove the power of marketing and how desperately we don’t want to be fat, bald or poor.
Now the Federal Trade Commission, which oversees U.S. advertising, including celebrity and customer endorsements, is proposing to change 28-year-old guidelines so the industry will have to be more specific about what consumers can expect from a product. Until now, it was enough to offer broad disclaimers such as “results not typical.”
“The advertiser would be required to say what is expected, what is the ordinary result,” said Mary Engle, the agency’s associate director for advertising practices. “If the average loss is 10 pounds, they should say that.”
Eliminating general disclaimers would be a major change for the part of the $149 billion advertising industry that pays for testimonials in print, television and online media. Consumer groups and state attorneys general say the proposal is overdue.
Companies in many product categories use celebrity and customer testimonials. Weight-loss companies, in particular, often use testimonials to show consumers what they can achieve.
“A visual is very compelling in our industry,” said Kim Matthews, general counsel for Jenny Craig Inc. in Carlsbad, California, a weight-loss company owned by Nestle SA.
The company uses Queen Latifah, television actress Valerie Bertinelli and pro-basketball player Baron Davis, as well as its own customers with before and after pictures that state “results not typical.”
Dozens of Actions
Matthews said Jenny Craig knows to the pound what the average person can expect to lose over defined time periods because of the company’s extensive research.
Even companies that can back up their claims aren’t eager to change the guides. Though labeled advisory, the FTC has used them in dozens of enforcement actions over the past decade when ads were found to be deceptive.
“To require advertisers to say you have to know the typical experience places a difficult, if not impossible, burden on advertisers,” said Anthony DiResta, an attorney at Reed Smith LLP in Washington representing the Word of Mouth Marketing Association in Chicago and the New York-based Association of National Advertisers, which represents 400 companies.
DiResta said that while results from a dishwasher detergent might be measurable, it would be much harder to calculate how well a high-protein drink will work for everyone on a weight-loss program.
Millions Recovered
The FTC began a routine review of the guides early last year. The proposal was issued Nov. 28, with new comments due by Jan. 30.
Engle of the FTC said the agency has recovered millions of dollars for consumers in cases involving endorsements that didn’t support advertising claims.
The FTC won a case in 2006 against the marketers of the “Q- Ray Ionized Bracelet” that called for up to $87 million to be refunded to consumers. The court rejected the company’s argument that testimonials could support their pain-relief claims.
As much as another $12.8 million was recovered for consumers when the FTC settled a case last year with the marketers of a popular dietary weight-loss supplement called Xenadrine EXF. The supplement used print and television ads with endorsers who said they lost weight without dieting or exercise.
Diet, Exercise
Endorsers dieted and exercised rigorously and were paid $1,000 to $20,000, the complaint alleged. The settlement prohibited any misrepresentation of endorsers’ actual experience and required disclosure of any relationship affecting the credibility of a testimonial.
The agency also based its proposal on comments filed by the Council of Better Business Bureaus, of Arlington, Virginia. In 2006, the council said, consumers filed more than 10,000 complaints against companies that used testimonials to advertise weight loss, vitamins, food supplements, business opportunities and work-at-home jobs.
“Consumers are influenced by consumer testimonials and frequently believe they will likely achieve similar results despite the presence of ‘results not typical’ disclaimers,” the comments said.
Two FTC studies found that a significant number of those polled believed what ads promised even if there were prominent general disclaimers. When consumers were offered specific information on “actual expected results,” fewer believed “that the experiences depicted are generally representative.”
Apply to All
The American Association of Advertising Agencies and the American Advertising Federation, two industry trade groups that believe the current guidance works well, said the FTC studies were too narrow and couldn’t be applied to all product categories and age groups.
Former House Majority Leader Dick Armey, a Republican from Texas who now is chairman of a Washington research group called FreedomWorks, wrote the FTC last year urging it to leave the old guidance alone. He said he saw a Nutrisystem Inc. weight-loss testimonial that he found inspirational.
Nutrisystem declined comment on its practices.
“I was under no illusions that it would be as easy for me to lose 20 pounds as it was for Dan Marino,” a retired professional football quarterback who appeared in the ad, Armey wrote.
He said he’s now 35 pounds lighter with initial help from Nutrisystem. The FTC, Armey said, is “bothering itself unnecessarily on this thing about disclaimers.”
(Cindy Skrzycki is a regulatory columnist at Bloomberg News.)
To contact the writer of this column: Cindy Skrzycki at cskrzycki@bloomberg.net
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