This Note analyzes whether the FTC legally could have undertaken action against the Joe Camel advertising campaign. Part I reviews the history of the FTC's statutory authority to regulate unfair business practices. Part II recounts the efforts of the FTC to apply its power to the regulation of commercial advertising and the congressional response it provoked. Part III examines the current understanding of the FTC's authority and considers an application of those powers against the Camel advertisements. Finally, Part IV explores constitutional limitations that may constrain FTC action in this area. This Note concludes that, under existing regulatory standards and and understanding of the limited constitutional protection afforded advertising for products like cigarettes, a ban on Joe Camel advertising could withstand both statutory and constitutional challenges.
I. History of the FTC's Power to Regulate Unfair Business
Practices
A. The Original FTC Act
The statutory basis for the FTC's regulatory power over commercial
advertising derives from Section Five of the Federal Trade Commission
Act,(note 10) which provides in relevant
part: "Unfair methods of competition . . . and unfair or deceptive acts or
practices in or affecting commerce, are declared unlawful."(note 11) Originally, however, the FTC's grant of
authority was limited to "unfair methods of competition,"(note 12) which reflected the early understanding of the
FTC's mission as dealing primarily with antitrust regulation.(note 13) The vagueness inherent in the term "unfair"
vested considerable discretion in the FTC to determine what practices
would come within its purview. Congress was well aware of this vagueness
when it passed the Act and hoped that under judicial supervision, the FTC
would formulate a working definition through application.(note 14) A House Conference Report summarized the
legislative understanding:
It is impossible to frame definitions which embrace all unfair practices. There is no limit to human inventiveness in this field. Even if all known unfair practices were specifically defined and prohibited, it would be at once necessary to begin over again. If Congress were to adopt the method of definition, it would undertake an endless task.(note 15)Reflecting the limitation in the early statutory language and the common understanding of its main mission,(note 16) much of the FTC's early unfairness work was focused on practices that were harmful to other competitors within a market, as opposed to practices that affected consumers directly.(note 17) Efforts by the FTC to expand its regulatory authority beyond competing business concerns were rebuffed by the courts. In FTC v. Raladam Co., the Supreme Court struck down an FTC attempt to prevent a manufacturer from advertising its product as a scientific cure for obesity.(note 18) The Court saw the problem as one of jurisdiction because the FTC had not found that any of Raladam's competitors had been harmed by the practice.(note 19) Dismissing the idea that the FTC's jurisdiction extended beyond cases where harm to competitors had been demonstrated, the Court stated: "Unfair trade methods are not per se unfair methods of competition . . . . The unfair methods must be such as injuriously affect or tend thus to affect the business of (an offending company's) competitors."(note 20)
This narrow view of the FTC's jurisdictional mandate faded somewhat in FTC v. R.F. Keppel & Bro., Inc.(note 21) In Keppel, the FTC had sought to bring to a halt a candy manufacturer's practice of including lottery-type inducements within the candy's packaging as violative of public policy because it encouraged gambling by children.(note 22) The jurisdictional issue arose because any of the manufacturer's competitors were free to include the same inducement in their packaging, so the practice was not "unfair" in the sense of placing other manufacturers at a competitive disadvantage.(note 23) Nonetheless, the Supreme Court sustained the FTC action, ruling that the FTC's jurisdiction was not limited to actions likely to have anticompetitive consequences.(note 24) Eschewing the idea that the concept of unfairness could be constrained within "fixed and unyielding categories,"(note 25) the Court instead looked to whether "the practice is of the sort which the common law and criminal statutes have long deemed contrary to public policy."(note 26) The Court has subsequently noted that Keppel "sets the standard by which the range of FTC jurisdiction is to be measured today."(note 27)
B. Confirmation of a Greater Consumer Protection Role:
From Wheeler-Lea to Sperry
While the courts were allowing the FTC greater latitude in asserting its
unfairness jurisdiction, Congress was also taking steps to expand the
Commission's jurisdiction. These efforts culminated in the Wheeler-Lea
amendment to the Federal Trade Commission Act.(note 28) The amendment gave the FTC authority to
regulate "unfair or deceptive acts or practices," and was designed to
relieve the FTC of the burden of demonstrating competitive harm in
unfairness proceedings,(note 29) as well as
to allow the Commission to focus more directly on consumer injury than it
had previously done.(note 30) This more
expansive view of the FTC's consumer protection role was recognized by the
Supreme Court in FTC v. Sperry & Hutchinson Co.,(note 31) where the Court held that the FTC was empowered
to sit "like a court of equity" in determining whether a given practice
was unfair.(note 32) The Court further
noted that Wheeler-Lea had "charged the FTC with protecting consumers as
well as competitors,"(note 33) thus laying
to rest any doubt that the FTC's regulatory power extended beyond merely
policing competition among rivals and encompassed actions impacting
consumers directly.
II. The FTC's Efforts to Regulate Commercial Advertising
and the Congressional Response
A. Efforts to Develop Standards of Unfairness
When the FTC's jurisdiction was thought to be limited to anticompetitive
activity injurious to competition, the concept of direct unfairness to
consumers was almost by definition of minimal practical import. However,
with the passage of the Wheeler-Lea Amendment and the broadened
understanding of the FTC's authority, the bounds of the term "unfair" and
the power it granted took on added significance. Although the FTC did not
immediately begin a vigorous enforcement of its unfairness mandate,(note 34) by 1964 it had developed three
criteria to consider when probing for consumer unfairness: (1) whether the
practice injures con-sumers, (2) whether the practice violates established
public policy, and (3) whether the practice is unethical or
unscrupulous.(note 35) In Sperry,
the Supreme Court tacitly approved these criteria,(note 36) and Congress made explicit the power of the FTC
to promulgate standards of unfairness with the passage of the
Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, which
authorized the FTC to prescribe "interpretive rules, general statements of
policy, and substantive trade regulation rules with respect to unfair or
deceptive acts."(note 37)
B. Enforcement of the Unfairness Standard in the
Advertising Context
The FTC's application of unfairness concepts to commercial advertising
began in earnest with the Cigarette Rule,(note
38) which served as the forum by which the FTC articulated the general
unfairness standards listed above. There, the FTC concluded that the
failure to include health warnings on cigarette advertising was unfair
under these criteria.(note 39)
Throughout the 1970s, the FTC utilized its broadened mandate to successfully bring a number of actions against advertisers, often on the basis that their advertisements were unfair because they either posed a risk of physical harm to children or enticed children to engage in risky or dangerous activities. In In re General Foods Corp., for example, the FTC won a consent decree from the maker of Post Grape Nuts to take off the air an advertisement showing a known naturalist picking and eating berries, in part on the ground that the ad would "have the tendency or capacity to influence children to engage in behavior which is harmful or involves the risk of harm."(note 40) A similar result was reached in In re Mego International, where the FTC initiated action against the manufacturer of a Cher doll on the grounds that an ad showing a child using an electric dryer without the parent visible on-screen could cause children to use "electrical personal grooming devices without the close and watchful supervision of an adult."(note 41) Given the significant grant of definitional discretion delegated to the FTC by the Magnuson-Moss Act, advertisers had little hope of prevailing once an action had been initiated, and often found it most advantageous merely to settle.(note 42)
III. Application of the FTC's Unfairness Standard to Joe
Camel Advertising
Although the FTC's three-part unfairness test has never been formally
codified, courts have utilized the three factors to review FTC unfairness
rulings,(note 43) and FTC action against
Joe Camel advertising would properly be analyzed under these terms.
A. Consumer Injury
Consumer injury is the most important of the three factors to consider
when evaluating a possible unfairness action because a finding of consumer
injury can, even absent the presence of the other unfairness criteria,
suffice to warrant a finding of unfairness.(note 44) To bring about an unfairness determination, an
injury must be: (1) substantial, (2) not outweighed by any countervailing
benefits to consumers or competition, and (3) one that consumers
themselves could not reasonably have avoided.(note 45)
1. Substantiality of the Injury
To determine whether Joe Camel advertising causes a substantial injury, it
is necessary to delineate with some precision exactly what "injury" there
is. To be sure, smoking itself causes injury. Estimates are that over four
hundred thousand deaths per year can be directly traced to smoking.(note 46) However, to make the inferential
step from saying that smoking causes injury to saying that Joe Camel
advertising can be banned as unfair because it causes injury requires a
somewhat different conclusion. It would have to be shown that advertising
causes consumption of cigarettes, thereby causing the injury, and that Joe
Camel advertising is somehow different from and more harmful than other
types of cigarette advertising.
Whether advertising of cigarettes causes an increase in their consumption has been a subject of significant scientific and marketing literature.(note 47) Results of these studies have shown a correlation or relation between advertising and cigarette consumption, but have not conclusively demonstrated that advertising causes an increase in demand for cigar-ettes.(note 48) Certainly, this is consistent with the position of the tobacco industry, which claims that its advertising is aimed solely at affecting brand choice among individuals who already smoke.(note 49) However, the FTC need not have conclusive evidence of the causal connection for its finding to be upheld. Courts give significant deference to an FTC factual finding,(note 50) and thus would likely uphold an FTC conclusion that there is a causal link between cigarette advertising and consumption.
Another somewhat related basis by which the FTC could conclude that cigarette advertising causes an increase in consumption is the theory that it targets children and adolescents. This has been a particular focus of the scientific literature,(note 51) and it would allow the FTC to consider other relevant factors, such as the fact that the cigarette industry is unique in its requirement of finding new smokers. Each year one million smokers quit and almost four hundred thousand die from tobacco-related illnesses.(note 52) In the absence of new smokers, the industry would be unable to sustain itself. Further, the decision whether to start smoking is made at a particularly early age: 99 percent of all smokers start before age twenty, and 60 percent start before age fifteen.(note 53) Given these facts, along with the astronomical amount of money spent on cigarette advertising,(note 54) it is simply not credible that the sole purpose of cigarette advertising is to convince those already smoking to switch brands, especially given the low elasticity of brand preference relative to advertising in the cigarette category.(note 55)
The idea of focusing on injury to children would further provide a basis for singling out Joe Camel advertising. Joe Camel has been demonstrated to appeal to children. For example, in a recent study, six-year-old children were shown to be as familiar with the Joe Camel logo (i.e., these children could match a picture showing just Joe Camel, with no reference to brand or product, with a picture of a cigarette) as they were with a Mickey Mouse logo.(note 56) Further, Joe Camel recognition rates were significantly higher than those for the Marlboro Man.(note 57) In another study, teenagers exposed to Joe Camel advertising were shown to have higher recall and recognition of the ad than adults, and also found the ads more appealing than adults did.(note 58)
In sum, it has been shown that children see, remember, and respond positively to Joe Camel. Further, Camel brand-share among the undereighteen market has risen from half a percent before Joe Camel to almost 33 percent now.(note 59) Sales to the under-eighteen market have been estimated to account for about one-quarter of all Camel sales.(note 60) R.J. Reynolds claims that the ads are targeted to smokers in their early twenties,(note 61) but documents from a recent case suggest that the industry is aware of the effect its advertising has on children.(note 62) The FTC has noted that "unwarranted health and safety risks" are among the types of injuries which may warrant a finding of unfairness.(note 63) If the FTC found that Joe Camel advertising caused consumer injury by causing children to smoke, the deferential nature of judicial review of administrative fact findings suggests this would be upheld.
2. Countervailing Benefits
The FTC has said that it will look at whether a practice is "injurious in
its net effects" in making a determination of unfairness.(note 64) In other words, if a practice causes injury, it
will still not be found to be unfair if the costs of a remedy would exceed
the costs brought about by the practice. However, in the case of Joe Camel
advertising, it is difficult to discern any tangible countervailing
benefit. The Supreme Court has noted that much of the value of commercial
speech is found in its informational value.(note 65) Yet to characterize Joe Camel as providing any
"informational value" is to stretch that term farther than it was perhaps
meant to be stretched. Further, by the omission of almost all specific
product information (other than that required by law) and the substitution
of cartoon imagery, the informational value of Joe Camel has been reduced
to an absolute minimum. Indeed, it would not be difficult to characterize
these omissions as having a negative informational value, since they
obfuscate the factual data that one would expect to play a role in
consumer decision making.(note 66)
Countervailing societal benefits, therefore, do not outweigh the injury
caused by Joe Camel.
3. Ability of Consumers to Avoid Injury
The basis of the FTC's focus on the ability of consumers to avoid injury
is the belief that the market is "self-correcting . . . we rely on
consumer choice-the ability of individual consumers to make their own
private purchasing decisions without regulatory intervention-to govern the
market."(note 67) To the extent that Joe
Camel advertising entices children or adolescents to begin smoking, this
"market correction" concept does not apply. Once a child begins smoking,
he is exposing himself to a drug that is more addictive than heroin,(note 68) and which causes many deaths each
year as well as illnesses ranging from cardiovascular disease to many
forms of cancer.(note 69) It may be true
that adults can rationally make this kind of choice, and we certainly do
not want to reduce the adult population to viewing only that which is
suitable for children,(note 70) but when an
advertisement for a product that is illegal for children to use uniquely
appears to target children, and indeed, is more effective at promoting
that product to children than to adults, it seems logical to expect that
many children will be lured in. Once they become smokers, the odds are
they will stay smokers.(note 71)
B. Established Public Policy
Although the FTC focuses primarily on consumer injury when making an
unfairness evaluation,(note 72) it will
also look to public policy.(note 73)
Occasionally, violation of public policy will serve as evidence that an
injury is present, but more often it is used to ascertain whether an FTC
finding of injury to consumers is in accord with legislative and judicial
determinations in the area.(note 74) Public
policy analysis thus serves primarily as a supple-mental, rather than an
independent, criterion of unfairness evaluation.
Insofar as Joe Camel advertising encourages children to smoke, one need look no further than the laws against selling tobacco products to minors to find a public policy supporting an unfairness action.(note 75) This is not to say that these laws show evidence of an independent ground for an unfairness action. If the states want to prevent children from seeing Joe Camel ads, they are certainly as capable of trying to prohibit them as is the FTC, at least in the abstract. Rather, it merely suggests that the general and well-established policy against underage smoking is an indication that the FTC can focus on the injury Joe Camel has on children as (illicit) consumers of cigarettes.
C. Is the Practice Unethical or Unscrupulous?
Although the element of unethical or unscrupulous conduct was included by
the FTC in its Policy Statement, the FTC noted that "[c]onduct that is
truly unethical or unscrupulous will almost always injure consumers or
violate public policy as well."(note 76)
For that reason, the FTC will not rely on this element as a basis for a
finding of unfairness, but that does not mean that the FTC will need to be
blind to the obvious unscrupulousness of advertising cigarettes to
children, or the (perhaps) even more egregious action of denying it while
doing it.(note 77)
IV .Constitutional Implications of an FTC Unfairness
Proceeding Against Joe Camel
Assuming that a ban on Joe Camel advertising is within the statutory power
of the FTC, the constitutional implications of such an action must be
considered. To do this, it will be helpful to trace the development of the
Supreme Court's understanding of the unique position of commercial speech
within the First Amendment spectrum.
A. Development of the Commercial Speech
Doctrine
Constitutional protection for commercial speech is of relatively recent
origin.(note 78) Traditionally, it was held
by the Court to be outside the purview of the First Amendment.(note 79) In Virginia State Board of
Pharmacy v. Virginia Citizens Consumer Council, however, the Court
extended First Amendment protection to consumer speech, holding that
"truthful information about entirely lawful activity" could not be
completely suppressed by a state.(note 80)
Taking note of the "common sense differences" between commercial speech
and other forms of expression, the Court extended a lesser degree of
protection to commercial speech than core political speech receives.(note 81) For example, it suggested that
protection of commercial speech hinged on its truth and expressed
tolerance for labeling requirements and consumer warnings.(note 82)
The Court refined its test for evaluating restrictions on commercial speech in Central Hudson Gas & Electric Corp. v. Public Service Commission.(note 83) The Court in Central Hudson articulated a four-part test to evaluate restrictions on commercial speech. First, the speech at issue "must concern lawful activity and not be misleading" to come within the protection of the Constitution at all.(note 84) Second, if the speech is protected, the government must assert a substantial interest in restricting it.(note 85) Third, the restriction must directly advance the asserted interest.(note 86) Fourth, the restriction must be no more restrictive than necessary to advance the interest.(note 87)
B. Subsequent Reductions in the Protection Afforded
Commercial Speech
The Central Hudson test, though purportedly derived from the
Virginia Pharmacy analysis, was in fact seen by some as a
substantial lessening in the protection afforded commercial speech.(note 88) In Posadas de Puerto Rico Assoc.
v. Tourism Co. of Puerto Rico,(note 89)
the Court dealt yet another blow to the strength of the commercial speech
doctrine. Posadas involved a ban on advertising for casino gambling
construed by the Superior Court of Puerto Rico to apply only to ads
directed to residents of Puerto Rico, as opposed to tourists.(note 90) Casino gambling was a legal activity in Puerto
Rico for both tourists and residents, so the ads clearly came within the
first prong of the Central Hudson test.(note 91) The casinos argued that, since the underlying
activity was legal, advertising for the activity could not be suppressed
completely.(note 92) The Court flatly
rejected this, stating, "[T]he greater power to completely ban casino
gambling necessarily includes the lesser power to ban advertising of
casino gambling."(note 93) Taken to its
logical extreme, this argument would in effect permit the state to ban
almost any type of commercial advertising, at least that which does not
relate to the exercise of a constitutionally-protected right.(note 94)
Another significant lessening in the scrutiny of commercial speech regulations occurred in Board of Trustees v. Fox.(note 95) Relying on the "subordinate position [of commercial speech] in the scale of First Amendment values,"(note 96) the Court in Fox concluded that the fourth prong of Central Hudson did not require a legislature to use the least-restrictive means when restricting commercial speech, but instead required only that a "fit" be established between the end sought and the means used to achieve it.(note 97) Since the means analysis had been the main vehicle through which the Court had invalidated restrictions on commercial speech,(note 98) the weakening of this part of the Central Hudson test represented a significant retreat from vigorous application of the test.
C. Application of the Central Hudson Test to Joe Camel
Advertising
1. Is the Speech Related to Lawful Activity and Not
Deceptive or Misleading?
Cigarette smoking is, of course, a lawful activity. The type of
"deception" arguably involved in cigarette advertising-depicting cigarette
smoking as associated with healthful, active lifestyles, while failing to
discuss the health risks associated with smoking-is not likely to be
considered deceptive or misleading, absent overtly false health claims
made in a given ad.(note 99) Advertising
cigarettes to children, on the other hand, would certainly not be related
to lawful activity. However, given that the tobacco industry continues to
deny that its advertising targets children, it is unlikely that this
rationale could be used to deny Joe Camel advertising the protection of
the First Amendment, and the first prong of the Central Hudson test
would be cleared.
2. Is the Government Interest Substantial?
The interest in preventing children from taking up smoking is certainly a
substantial interest, given the harmful effects of smoking itself and the
greater governmental interest in protecting the welfare of child-ren.(note 100) Generally, the Supreme Court has
recognized that suppressing demand for activities that are detrimental to
"the health, safety, and welfare of its citizens" qualifies as a
substantial government interest,(note
101) so a court would almost certainly find the interest asserted here
substantial.
3. Does the Regulation Directly Advance the
Interest?
It is this element of the Central Hudson test that would appear to
pose some difficulty for a ban on Joe Camel advertising, since studies
have yet to establish any direct causal link between advertising and an
increase in cigarette consumption, nor has Joe Camel been conclusively
shown to have the effect of causing children to smoke. However, the Court
in Posadas showed significant deference to the legislative judgment
that advertising increased demand for gambling among Puerto Rican
residents. "[T]he Puerto Rico Legislature obviously believed . . . that
advertising of casino gambling aimed at the residents of Puerto Rico would
serve to increase the demand for the product advertised. We think the
legislature's belief is a reasonable one."(note 102) Indeed, the Posadas Court opined that
the mere fact of litigating against a ban is probative of the belief (of
the litigant) that the advertising will increase demand for a product.(note 103) The courts allow similar
deference to FTC findings of fact, upholding them unless they are not
supported by evidence.(note 104) A court
would likely find, therefore, that a ban on Joe Camel would directly
advance the interest of preventing children from starting to smoke.
4. Is the Regulation No More Broad Than is
Necessary?
The requirement of this prong of the Central Hudson test is not, as
has been indicated, that the regulation be the least restrictive means of
achieving a desired governmental objective, but rather that there be a
"fit that is not necessarily perfect, but reasonable," or proportional to
the objective.(note 105) Incremental
regulation of cigarette advertising has already been attempted,(note 106) and while it is conceivable that
other means short of a ban could be used, the Court has said "[w]e think
it is up to the legislature to decide whether or not such a
`counterspeech' policy would be as effective."(note 107)
It is important to note that a ban on Joe Camel advertising would not prevent R.J. Reynolds from speaking out on issues related to cigarette smoking, nor would it even prevent them from advertising just as heavily for Camel cigarettes as they do now. The only effect would be to remove from the "stream of commercial information"(note 108) an ad campaign demonstrated to primarily appeal to children and adolescents. While there can be no doubt that this is a selective regulation, the Court in Posadas was faced with a situation where only a certain type of advertising for casino gambling-that aimed at Puerto Rican residents-was banned, while advertising for exactly the same gambling was allowed, as long as it was aimed at tourists. Indeed, if a general ban on cigarette advertising were sought on the theory that it appealed to children, that might serve to weaken the argument that the means sought were proportional to the ends desired, since a significantly greater amount of speech-speech that has not been linked as greatly to children as has Joe Camel-would be banned. Further, this would have the less desirable (and certainly more constitutionally burdensome) effect of inhibiting the dissemination of information about cigarette smoking to adults, including those who may want to receive information about lower-tar and lower-nicotine brands, and to expectant mothers, who may not find out about the harmful effects of tobacco as easily without the advertising.
Conclusion
A ban on Joe Camel advertising is within the statutory power of the FTC
pursuant to its power to regulate unfair advertising practices. It would
also withstand constitutional scrutiny under the Central Hudson
test for evaluating regulations on commercial speech. Further, given the
objective of reducing demand for cigarettes by keeping children from
starting to smoke, a selective ban on Joe Camel advertising is preferable
constitutionally to a more general ban on cigarette advertising, because
it will not prevent the dissemination of advertising and information about
cigarettes generally, but will instead focus solely on a particular ad
campaign which has been shown to hold greater appeal for children than it
does for adults.
Both groups [the tobacco industry and smoking control advocates] enthusiastically cite and publicize research papers whose conclusions support their own policy and political interests and attack the methodology or funding of studies which do not please them. Few witnessing these debates are in any position to assess the credibility of the arguments advanced, with the ascendant view at any given time likely to more reflect presentational skill than the substance of the research under discussion.
Simon Chapman, The Limitations of Econometric Analysis in Cigarette Advertising Studies, 84 Brit. J. Addiction 1267 (1989). It is therefore relevant that it was a group of anti-smoking researchers that recently observed, "[D]ata on the direct effects of cigarette advertising on demand for cigarettes are inconclusive. Econometric studies show little or no effects of cigarette advertising on overall demand for cigarettes." Michael Klitzner et al., Cigarette Advertising and Adolescent Experimentation With Smoking, 86 Brit. J. Addiction 287, 288 (1991).
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