Kraft, Inc. v. Federal Trade Commission

MANION, Circuit and Before FLAUM CURRAN, Judge.* Judges, District and FLAUM, Judge. Circuit Kraft, (“Kraft”) us review asks Inc. the Federal Trade Commission an order of “Commission”) finding that (“FTC” or Federal Trade 5 and of the violated §§ (“Act”), U.S.C. Act §§ Commission Kraft, in an The FTC determined that misrepresented campaign, advertising had of calci- regarding the amount information Singles American in Kraft um contained (“Sin- Food Process Cheese Pasteurized in content the calcium gles”) relative in imitation cheese milk and five ounces to cease Kraft FTC ordered slices. The misrepresen- making these and desist petition Kraft filed this tations and or- enforce the Commission’s review. We der.

I. compete categories of cheese

Three mar- process slice individually wrapped slices, imitation food process cheese ket: Process slices. slices, substitute “dairy slices, as known also food cheese natural slices,” at least 51% contain must 21 C.F.R. regulation. by federal cheese slices, by cheese 133.173(a)(5). Imitation § natural cheese contrast, or no little contain water, vegetable primarily and consist agents. fortifying oil, flavoring agents, healthy as slices are While nutrient in some food slices process cheese considered they are as a whole categories, carry the must “nutritionally inferior” and 101.3(e)(4). Id. § label “imitation.” between; fit somewhere slices Substitute cheese the natural short of they fall * Wisconsin, designation. sitting by Curran, Judge ern District J. District Honorable Thomas East- Court for the States District of the United process

tent of yet cheese food slices are misleading; are those claims nutritionally superior to imitation slices. prospective material to consumers. , 101.3(e)(2). Id. at Consistent with § Two facts are critical to understanding usage, refer to we both imitation and sub- allegations against First, Kraft. al- , stitute slices as “imitation” slices. though Kraft does use five ounces milk in making each process Single, Kraft roughly cheese food 30% of the 1980s, calcium early slices. contained the milk In the is lost began during processing. Second, losing major- vast increasing market share to an num- ity of imitation slices sold in the ber of United imitation slices that were advertised States contain 15% U.S. Recom- expense equally as both less nutritious Daily (RDA) mended Allowance of calcium dairy Singles. as slices like Kraft respond- ounce, per roughly the same amount con- ed advertisements, with a series collec- tained in Singles. Kraft Specifically then, tively known as the “Five Ounces of Milk” the FTC complaint alleged that the chal- campaign, designed to inform consumers lenged advertisements implied made two Singles cost Kraft more than imitation claims, (1) neither of which was true: slices they because are made from five a slice Singles of Kraft contains the same ounces of milk rather expensive than less amount of calcium as five ounces of milk ingredients. The ads also focused on the (the claim); “milk equivalency” (2) and calcium Singles content of Kraft in an ef- Singles Kraft contain more calcium than do fort to capitalize growing on consumer in- most (the imitation cheese slices “imitation adequate terest in consumption. calcium claim).1 superiority” complaint The FTC a against filed The two case, of ads at sets issue in this Kraft charging that this advertising cam referred “Skimp” as ads and the paign materially misrepresented the calci “Class Picture” nationally ran print in um content and relative calcium benefit of and media broadcast between 1985 and Kraft Singles. The FTC Act makes it un 1987. The Skimp ads designed engage lawful to deceptive unfair or communicate the nutritional benefit of practices, commercial 15 U.S.C. or to Singles § Kraft by referring expressly to induce purchase consumers to certain prod their milk and calcium content. The broad- ucts through advertising misleading that is cast version of this ad on which the FTC in a respect. material Id. focused following §§ contained the copy: audio Thus, an advertisement is under (voice Lady over): I admit I thought it. the Act if likely consumers, it is to mislead of skimping. you Could look into those acting reasonably circumstances, under the big eyes blue skimp and on her? So I in a respect. material Thompson Medical buy Singles. Kraft Imitation slices use Co., (1984), F.T.C. aff'd, 791 hardly any milk. But Kraft has five (D.C.Cir.1986), denied, per ounces slice. Five ounces. her So get little bones calcium they need to (1987), Inc., Assocs., No, Cliffdale grow. she doesn’t know what that Federal Trade Com big thing Kraft means. Good I do. mission Policy Deception, Statement Singers: Singles. Kraft More milk 103 F.T.C. 174 (appended to Cliff- makes ’ém ... more milk makes ’em Assocs.) dale Policy “FTC [hereinafter good. In implementing this stan Statement1”]. (voice Lady over): Skimp on her? No dard, the Commission examines the overall way. impression net engages an ad and in a three-part inquiry: what claims are con (television ad); See CX 62C & Z-72 CX 62 veyed ad; (2) in the are (print ¶ those claims false ad); Z-33 Complaint 5 Exs. A- and claims, 1. Because Kraft concedes that these inquiry if alleged mentioned —whether made, false, step the second of the afore- are false—is appeal. not before us on calcium, along to milk and with the failure image corre- D; 44.2 The visual IDF shows, among process- other copy to mention that calcium is lost to this sponding glass a until pouring implied Single milk into things, ing, that each Kraft contains “five glass a mark on the denoted reaches of calcium as five the same amount ounces also shows The commercial milk, ounces.” copy the altered audio and that phrase bears the glass which pouring into subscript confusing disclosure were in- gradually be- and which slice” “5 oz. milk conspicuous dispel thus insufficient to package label on part comes Further, impression. the AU conclud- revised January Singles. conveyed falsely sets of ads ed that both ad, five ounces changing “Kraft has claim; he the imitation deter- five per to “Kraft made slice” mined that reasonable consumers would 276F, slice,” IDF see CX CX ounces away impression net that Kraft take added), in March (emphasis calcium than contain more disclosure, “one % ounce added Singles contain five because Kraft slices of the calcium of ounces five slice has 70% of milk and imitation slices have ounces in the television subscript milk” AU, According no little milk. print footnote and as a commercial material because both claims were ads. important concerns. He implicated health emphasized ads also The Picture Class Kraft to cease and desist therefore ordered of Sin- content Kraft the milk and calcium making any these claims about from but, Skimp ads, did not unlike the gles process individually wrapped slices comparison to imitation express make an food, cheese, or substitute cheese imitation this ad version of examined slices. The cheese. group of school children depicts FTC the decision, the AU’s The FTC affirmed taken, picture and having class their Kraft, In re with some modifications. copy: following audio tains the 1991). (Jan. 30, to Inc., As No. 9208 FTC over): see (voice you Can Announcer found that Skimp the Commission missing picture? in this what’s equiva- conveyed the milk four elements Well, study says that half government the word “has” (1) the use of lency claim: get all in America don’t the school kids per ounces phrase “Kraft has five in the growing for recommended the calcium precise slice”; (2) amount repetition im- why Kraft kids. That’s (3) (five ounces); Single in a of milk Kraft made from ounces portant. Kraft is five link the “so” to refer- of the word they’re the use of milk slice. So concentrat- calcium; govern- the reference ed with calcium. Calcium the ence to milk with strong being and bones (4) image ment recommends the visual healthy teeth! glass up to a five-ounce into a poured im- mark, Say superimposition Cheese! and the Photographer: Singles. It also age package onto a Cheese! Kids: that con- elements two found additional over): (voice Say Sin- Kraft Announcer claim: Singles, veyed the love gles. ’Cause kids Kraft slices to imitation express reference their bones. right down to lan- comparative the use of combined ad); (television Z-ll CX 2751 & CX “but”); any,” (“hardly guage ad); 38. IDF (print see also 62 Z-55 CX containing very little milk glass image of ads also included Picture The Class slices, fol- to imitation during the reference mentioned subscript disclaimer above. being glass filled image of a by the lowed trial, lengthy the Administrative After a reference during mark the five-ounce (AU) Judge concluded that both Law based The Commission Singles. the'milk ads made Skimp Class Picture impression its own findings on these all of the AU Specifically, claim. equivalency it unnec- and found of the advertisements of references juxtaposition found that complaint exhibit counsel’s record are References to the abbreviated CX— testimony transcript of follows: Tr.— finding decision IDF—initial evidence; essary Hospital Corp. to resort to extrinsic it did L.Ed.2d Am. note, however, the available extrinsic (7th Cir.1986), denied, evidence was consistent with its determina- 481 U.S. 107 S.Ct. tions. (1987). However, 95 L.Ed.2d 815 argues as a threshold matter that two re The Commission then examined the Class decisions, Corp. Supreme cent Bose Court again, without resorting Picture ads —once Union, v. Consumers 485, 510-11, 466 U.S. to extrinsic found that evidence —and 1949, 1965, (1984), 104 S.Ct. substantially copy contained similar to the and Peel v. Attorney Registration and copy Skimp conveyed in the ads that Comm’n, Disciplinary 496 U.S. impression equivalency. reject- of milk It 2281, 110 (1990), compel L.Ed.2d 83 us ed, however, the AU’s de findings to review the FTC’s factual superi- Class Picture ads made an imitation novo because they implicate Kraft’s first claim, ority determining the ads nei- speech rights. amendment commercial expressly compared Singles ther to imita- slices, any images tion nor contained visual A reviewing deferential standard in FTC prompt comparison, such a and that findings long predates Bose and Peel. support available extrinsic evidence did not Co., Colgate-Palmolive FTC v. finding. the AU’s 374, 385, 1035, 1043, 13 L.Ed.2d (1965), Court held that FTC next found that the claims were while the “deceptive advertising” words to consumers. It set material concluded that legal forth a standard equivalency the milk that derives its final claim is a health-relat- meaning judicial construction, ed claim that reasonable consumers would given great weight by is “to important find be that Kraft believed that reviewing courts” because it purchase claim induced consumers to “rests so heavily Singles. pragmatic judg on inference and presumed The FTC that the imita- light ment” and in frequency tion of the claim was material because which the it found that Kraft Commission handles these cases. intended to make that 385, Id. at However, 85 S.Ct. at 1043. claim. It also found that materiality Colgate-Palmolive preceded that claim the extension was demonstrated evidence protection of first amendment to challenged that ads commer led to increased see, e.g., Virginia Pharmacy speech, cial despite sales a substantially higher price Virginia v. Bd. Citizens Consumer Coun than for imitation slices. cil, Inc., 748, 770, 96 1817, 425 U.S. S.Ct. Finally, the FTC modified the AU’s 1829, (1976), subse cease and by extending desist order its quent cases examining the contours of that coverage “individually wrapped slices right. cheese¡ cheese, imitation and substitute “any product cheese, cheese” to that is a Bose was a libel case holding appel- product, pheese, related cheese late courts have a responsi- constitutional substitute cheese.” The Commission found bility to review de novo a lower court find- serious, deliberate nature of the ing of fact defamatory that a statement violation, transferability combined with the Bose, was made with actual malice. 466 to products, 510-11, violations other cheese U.S. at 104 S.Ct. at The justified a broader order. Kraft filed this judges, expositors Court declared that petition to set-aside Constitution, the Commission’s order independently must decide or, alternatively, modify scope. to whether evidence the record is sufficient strip allegedly speech to libelous of first

II. Court, protection. amendment how- reviewing ever, Our standard for explicitly question left unresolved the findings has traditionally been limited to higher of whether this standard review deferential, highly substantial evidence Id. speech extended to commercial cases. Dentists, FTC v. Indiana Fed’n test. 22, at 504 n. 104 S.Ct. at 1961 n. 22. Kraft 447, 454, 2009, 2015, 476 U.S. 106 S.Ct. 90 asserts that the Court has since answered

317 regu Colgate-Palmolive done in and this case. that a state question. Peel held attorneys from advertis The former involved review of court deci prohibiting lation sions, or certification violated ing specialty generally and courts lack the Com and, plu significantly, first amendment expertise mission’s the field of this issue reviewed rality of four Justices advertising. posited While it could be 108, Peel, 110 at novo, at S.Ct. 496 U.S. de grant to more defer is counter-intuitive Marshall, Bose), while Justice (citing 2291 courts, than to ence to the Commission providing a fifth writing separately, findings Commission are well-suited to def at 111— vote, did so as well. Id. apparently may require erential review because (concurring opin 117, 2293-96 110 S.Ct. “exceedingly complex and resolution of Thus, de ion). arguably extended Peel issues.” v. technical factual Zauderer Of subcategory con review to another novo Disciplinary Counsel of fice of speech, commercial stitutionally protected 645, Ohio, 626, 471 U.S. 105 S.Ct. Court of advertising. 2265, 2279, (1985); L.Ed.2d 652 see also 85 Nonetheless, apply novo we decline de Colgate-Palmolive, one, impli For in this context. review addition, In the determina S.Ct. at 1042. clear as Kraft of Bose are not as cations tendency an ad has a tion of whether suggests, FTC v. Brown & Williamson see impressionistic one more deceive is an 41 n. 3 Corp., 778 Tobacco than a closely akin to a of fact (D.C.Cir.1985)(refusing extend Bose to law. conclusion of National Comm’n context); also speech see the commercial FTC, 570 F.2d Egg Nutrition v. Fact Henry Monaghan, P. Constitutional denied, (7th Cir.1977), cert. 439 U.S. Review, 85 Colum.L.Rev. L.Ed.2d 113 Benefi com (1985), suggests that and Bose itself (3d Corp. cial high speech might not warrant the mercial denied, Cir.1976), for libel of review established er standard (1977). 1679, 52 L.Ed.2d 377 S.Ct. Bose, 466 U.S. at 504 n. cases. chal- the restriction important, Most (commercial gen speech at 1962 n. completely different lenged in Peel is susceptible less erally considered challenged here. than the one animal regulation than oth chilling effect of state Peel, prophylactic was whether a the issue Although might speech). one er forms of lawyers, com- to all regulation applicable operating in tan and Peel argue that Bose category of prohibiting an entire pletely effectively Colgate-Palmo overrule dem misleading speech, commercial potentially intend live, think that Court we do not Peel, 496 muster.3 passed constitutional Rodriquez Quijas de result. ed that 108-09, (plurality); 2292 110 S.Ct. at U.S. at Inc., 490 Express, Shearson/American (concurrence). 2293 110 S.Ct. at id. at 1917, 1921-22, 104 477, 484, 109 S.Ct. U.S. Here, contrast, by the issue is whether (1989) (“If precedent a L.Ed.2d 526 order, cease and desist FTC individualized case, yet in application a has a direct Court deceptive particular set of prohibiting a in rejected some appears rest on reasons to muster. See passes constitutional decisions, Appeals line of other [Courts] 645-46, Zauderer, 105 S.Ct. at directly con the case which follow should advertising under (assessing deceptive trols, Supreme] Court leaving to [the different and qualitatively Act a the FTC deci overruling its own prerogative assessing the va- complex task than more Moreover, important sions.”). there are advertising regu- attorney lidity of a state appellate sort of distinctions between in lation). the restriction at issue find We Peel and in Bose and conducted review (concurrence), Peel, at 2296 n. n. disputes this characterization 3. Kraft reviewing change the Court was the fact that was not arguing Court does advertising finding regulation applicable agency general specific awith confronted regulation While it itself. state than the lawyers rather than an administrative rather to all regula- examined the state the Court is true that single entity, applicable such order Peel, Peel, 107 n. U.S. at applied” to "as tion challenges here. the one (plurality); at 117 id. n. 15 110 S.Ct. at 2291 Peel and the one here sufficiently Thompson question,” distinct advertisement in Medical, justify differing appellate 788-89, levels of re- F.T.C. but the Com- to review de mission also relies on other forms of extrin- Accordingly, decline view. we novo the FTC’s and, findings including with the sub- sic evidence consumer testimony, mind, expert opinion, stantial evidence test in tests of ads. copy turn to the Statement, Policy facts of this case. 103 F.T.C. at 176 n. 8. quarrel approach Kraft has no with this III. determining when comes to whether an arguments ap- Kraft makes numerous conveys express claims, ad but contends peal, principal but its claim is that the FTC required, that the FTC should be as a mat requiring erred as a matter of in not law, law rely ter of on extrinsic evidence deception. extrinsic evidence of consumer subjective analysis rather than its own in evidence, (1) Without such Kraft claims involving all cases allegedly implied objective the FTC had no basis for argument claims.4 The basis for this determining actually if its ads claims, contained implied by definition, are not implied alleged, claims that the This, self-evident from the face of an ad. FTC’s order chills constitutionally protect- combined with the fact that per speech. ed commercial Alternatively, ceptions shaped by a host of external Kraft contends that substantial evidence including their social and edu variables — support does not the FTC’s that the backgrounds, cational the environment in ads equiva- Class Picture contain the milk ad, which prior experi view the lency Finally, claim. Kraft maintains that advertised, see Rich product ences with the if it alleged equiva- even did make the Craswell, Interpreting Deceptive Ad ard lency claims, and imitation superiority vertising, sub- 672-74, 65 B.U.L. Rev. support stantial evidence does Pollay, Deceptive Advertis Richard FTC’s that these claims were mate- ing and Consumer Behavior: A Case for rial to consumers. We address each con- Legislative Reform, and Judicial tention turn. U.Kan.L.Rev. —makes implied review of a five-member inherently commission unreliable.

A. Commissioners, argues, are simply incapable determining implicit what mes determining sages what claims are likely perceive con consumers are veyed by advertisement, challenged worse, Making an ad. matters Kraft as Commission relies on two sources of predis infor serts that the Commissioners are viewing mation: posed implied own of the ad and to find claims because the extrinsic practice evidence. Its is to view claims have been identified the com and, the ad first if it is plaint, rendering virtually unable its own to it impossible for determine with confidence claims are what them to reflect the of perceptions unbiased conveyed ad, challenged Comment, consumers. See The Use and to turn to Medical, extrinsic evidence. Thompson Reliability Survey Decep Evidence in of 788-89; Assocs., Cases, 104 tive Advertising F.T.C. 561, 62 Or.L.Rev. Cliffdale 110, (1984); 103 Policy (1983) (“since F.T.C. 164-66 FTC 572 the commissioners are Statement, 103 F.T.C. at 176. highly attorneys very special The most trained convincing extrinsic survey evidence is a ized advertising, views of lack the “of what thought upon consumers reading perspective accurately identify the mean- Express directly "Miser,” represent the fact at while another identifies the car as the implied issue oblique while claims do so in an depicts rolling through countryside past it way. Medical, Thompson or indirect another, gas proclaims one station after illustrate, following. 788. To consider the inexpensive operate. that the car is Both ads Suppose gets poor gas a certain automobile deceptive make claims: the first does so ex- mileage, say, gallon. per 10 miles One adver- pressly, impliedly. the second does so gets gallon tisement boasts that it 30 miles

319 general replace tise in can ing given myriad an advertisement Kraft’s view public”). affecting of external variables perceptions. Here, the Commission found by point argument Kraft buttresses implied solely claims based on its own intui- ing in an to the use of extrinsic evidence reading (although tive of the ads it did analogous brought under context: cases by examining reinforce that conclusion 43(a) of the Act. 15 U.S.C. Lanham § evidence). proffered extrinsic Had the 1125(a). hearing deceptive adver Courts § fully properly Commission relied on tising Act, pro claims under that which evidence, argues available extrinsic private right vides a of action for would conclusively have found that con- advertising, generally require extrinsic perceive equiva- sumers do not proof conveys an an advertisement lency and imitation claims in See, e.g., A Avis Rent Car implied claim. 381, ads. System, Corp., v. Inc. Hertz 782 F.2d (2d Cir.1986); Tambrands, Inc. v. War 386 arguments may While Kraft’s have Co., 1190, ner-Lambert F.Supp. 1198 673 policy, they some force as a matter of are generally see (S.D.N.Y.1987); Ivan L. Pres unavailing Courts; as a matter of law. Deceptive Advertising ton, False or Under Court, including have uni Analysis Act: Factual Lanham of formly rejected imposing require such a Evidence, 79 Findings Types of FTC, Colgate-Palmolive, see ment on the 508, (1989). Rep. 526 Trademark Were 391-92, (FTC 380 U.S. at 85 S.Ct. at 1046 case, reviewing in all a Lanham Act court required surveys to conduct consumer have relied on extrinsic likelihood would determining that a commercial has a before perceptions. While evidence of consumer National Bakers tendency mislead); justified on disparity is sometimes Servs., FTC, 365, (7th Inc. v. 329 F.2d 367 grounds advertising “expertise” —the Cir.1964); FTC, Rhodes Pharmacol Co. v. presumably possesses of it than FTC more 382, rev’d in (7th Cir.1953), 208 F.2d 387 courts, Corp. see American Home Prods. 940, 361, part, 348 U.S. L.Ed. 99 Johnson, 160, 172 v. Johnson & 577 F.2d n. FTC, Corp. v. (1955); Zenith Radio 736 Cir.1978) (2d justi 27 maintains this —Kraft Bris 29, (7th Cir.1944); accord 143 F.2d 31 illusory fication one in that FTC FTC, (2d tol-Myers v. Co. 738 F.2d 563 special expertise discerning has no con denied, Cir.1984), 105 perceptions. Pitofsky, sumer Robert American (1985); L.Ed.2d 966 Beyond Nader: Protection Consumer FTC, Corp. v. Home Prods. 695 F.2d Regulation Advertising, and the Manage (3d Cir.1982); Simeon 687 n. 10 Harv.L.Rev. Ernest Gell 1137, 1146 n. Corp. v. ment Deception Be horn, Consumer Proof Cir.1978); Brown & Wil (9th Commission, the Federal Trade

fore Corp., 40-41 liamson Tobacco Indeed, (1969). U.Kan.L.Rev. Medical, Thompson (D.C.Cir.1985); proof inexpertise abounds: FTC’s to do so as well. F.2d at and we decline advertising up makes a small false cases may rely on hold that the Commission We workload, see part Commission’s analysis to determine its own reasoned Weston, Deceptive Advertising Glen E. ones, claims, implied including what and the Federal Trade De Commission: advertisement, challenged so conveyed in a Emptor, cline Caveat Fed.B.J. reasonably clear long claims are as those (1964), 571 most commissioners have little advertisement. the face of the from advertising, see prior experience in Paul H. se rule has two Kraft’s case for a Expertise:. A Exam LaRue, Legend FTC First, faulty premise on the flaws. it rests ined, (1971), 1 16 Antitrust Bull. and the subjec- inescapably implied that claims are average very is tenure of commissioners fact, implied unpredictable. The Federal Posner, tive brief. See Richard A. continuum, ranging from Commission, 47, fall on a Trade claims 37 U.Chi.L.Rev. 86 barely discernible. the to the (average years). tenure four obvious of Medical, at 788-89. exper- Thompson aside, of That evidence no amount 320 they Commission does not license to incapable predicting

The have follow that are fishing expedition on a go pin liability particular to on claim likely whether a is be barely imaginable for claims advertisers perceived by a reasonable number of falling at end of spectrum. the this How- sumers. ever, when confronted with that claims are implied, yet conspicuous, extrinsic evidence unnecessary because is common sense and The crux of Kraft’s first ar- amendment experience provide administrative Com- gument subjec- is FTC’s current adequate with to makes mission tools its approach tive chills some truthful commer- findings. Colgate-Palmolive, 380 U.S. speech. cial Kraft acknowledges the novel- 391-92, (FTC 85 need not at S.Ct. at 1045 argument, ty of its but asserts that survey a consumer com- conduct issue warrants consideration in light Zauderer, misleading); mercial 471 U.S. cf evolving speech commercial doctrine. Once 652-53, (implied 105 at S.Ct. at 2282 claims regarded unprotected as by the first require are self-evident do not Chrestensen, amendment, see v. Valentine survey public conduct a State before 62 S.Ct. 86 1262 L.Ed. misleading). advertisement (1942), noted, speech, commercial has implied reasonably claims Kraft made are brought sphere since within been advertisements, clear the face of the Phar- protection. Virginia constitutional hence the Commission was not re- Bd., macy 425 U.S. at 96 at S.Ct. quired surveys to utilize consumer reach- Society strong 1829-30. has a “in interest ing its decision. the free flow commercial information” Second, Kraft’s reliance on Lanham Act id. a free economy, critical to market one, misplaced. decisions is all For not and it is interest this applying rely courts the Lanham Act on amendment protect- first vindicates in extrinsic evidence when confronted ing speech. Brown & Wil- commercial claims, see, e.g., Better Business implied liamson, However, 778 F.2d at 43. Bureau, Directors, Inc., Inc. v. Medical “[fjalse, deceptive, or misleading advertis- (5th Cir.1982); American 681 403 ing” does not serve that thus interest and Prods, Johnson, Home Johnson & category “re- speech commercial (S.D.N.Y.1987), F.Supp. but more R.M.J., In re subject mains to restraint.” do, importantly, they when it is because 191, 200, 929, 936, equipped—unlike are ill the Commis- (1982). L.Ed.2d 64 deceptive advertising. See, detect sion—to by relying its contends e.g., Sandoz Corp. v. Pharmaceuticals judgment subjective ad, own that an while Richardson-Vicks, Inc., true, implies literally message, false (3d Cir.1990); Procter Co. v. & Gamble nonmisleading, protected speech FTC chills Inc., Chesebrough-Pond’s F.Supp. are predict because advertisers unable to U1 F.2d 114 (S.D.N.Y.), affd, particular the FTC will find a whether ad (2d Cir.1984). And the Commission’s ex- misleading. sophis- Advertisers can run cases, pertise advertising pre-dissemination surveys ticated protestations notwithstanding, Kraft’s un- implied present, and find no doubtedly gen- exceeds that as a of courts have the Commission determine in own advertising eral matter. That false cases subjective per- view that consumers would percentage constitute small of the FTC’s implied Indeed, ceive an claim. overall workload does negate fact precisely significant happened maintains that what devoted resources are troubling, here. more terms, cases in Even Kraft main- such nor does it absolute the ads expertise tains that most account vulnerable to institutional factual, gains through chilling comparative effect investigations, rulemak- ings, and like Five Ounces of Milk campaign, consent orders. The Commission- personal experiences Virgi- obviously greatest ers’ to consumers. quite benefit Pharmacy, nia Bd. perceptions, affect their it State but does not at 425 U.S. of 763-65, Thus, (noting 96 S.Ct. at 1826-27 that the Zauderer teaches that consumer surveys compelled are not comparative advertising by “free flow” of is the first amendment when alleged deception the al- “indispensable” intelligent to consumer de- though implied, conspicuous. is In both cisionmaking). The net result Com- here, Zauderer and piece an omitted of subjective approach mission’s will be an information—the key definition of a good” influx of soft designed “feel ads tractual Zauderer, term in the effect of unpredictable avoid FTC decisions. See processing on nutrient content here—led to Schmidt, Burns, Richard M. Jr. & Robert C. potential deception, consumer and in both Consequences: False Advertis- Proof true, cases the ads were literally yet impli- ing and the Doctrine Commercial of edly misleading. implied Kraft’s Speech, 56 U.Cin.L.Rev. reasonably were clear from the face of the Note, The Risk Chill: A Cost ads and unpredictable not to Kraft. Our Governing Regulation Standards strengthened conclusion is by the fact that 43(a) Advertising False Under Section speech commercial generally is considered Act, the Lanham 77 Va.L.Rev. susceptible less to the chilling effect of (1991). way chilling to avoid this ef- regulation other, than traditionally more fect, Kraft, according require is to recognized speech, forms of politi- such as rely objective Commission to indicia of Bose, cal discourse. See 466 U.S. at 504 n. perceptions in finding implied 22, 104 at (“danger S.Ct. [minimal] governmental claims. regulation of false or

misleading product advertising ... will Kraft’s challenge first amendment chill non-deceptive accurate and commercial expression”); Supreme holding doomed Court’s Bates State Bar Ari- zona, 433 U.S. Zauderer, S.Ct. which established that no first (1977). Because we con- amendment concerns are raised when fa clude that the Commission was not re- cially apparent implied claims are found quired rely evidence, on extrinsic we without resort to extrinsic evidence. See need not examine the extrinsic evidence Zauderer, 652-53, at 105 S.Ct. at proffered by says Kraft that it contravenes Home, accord American 695 F.2d at note, findings. We Commission’s how- Zauderer, 688 n. 10. In lawyer adver ever, thoroughly that the Commission did tised that clients who retained him on a evidence, fact, examine this after albeit contingent-fee basis pay would not have to implied and found that it did refute legal if their lawsuits unsuccess fees findings claim and that some of the evi- ful, disclosing without these clients was dence based on unsound consumer costs, charged though would be for even testing methodologies. these are terms of art unknown to most holding Our does not diminish the force thus, laypersons; implied hiring the ad matter, argument policy of Kraft’s as a lawyer proposition was a no-lose and, indeed, body the extensive of commen- potential clients. The state sanctioned Zau tary subject compelling on the makes a engaging derer in misleading advertis argument that reliance on extrinsic evi- ing, challenged and he that sanction on dence should the rule rather than the be grounds. first approving amendment lines, exception. Along those Commis- action, the state’s Court de adopt sion would be well-advised to a con- clared, possibility “When the deception survey position sistent on consumer meth- case, is as self-evident as it is we ap- odology and the —advertisers require need not the State to ‘conduct a pears, go and round on this issue— round survey public [may] of the ... before it any uncertainty so that is reduced to an determine that absolute minimum. had a [advertisement] ” Zauderer, tendency to mislead.’ B. 652-53, (quoting 105 S.Ct. at 2282 Col 391-92, gate-Palmolive, 380 U.S. at Alternatively, argues 1046). support substantial evidence does not finding important that the Class Picture ads conclude that there were FTC’s similar- (Recall convey equivalency milk claim. Finally, ities between these two ads. AU, unlike the concluded support interpretation its own that the Class ads did not Picture contain the Commission examined available extrin- claim, superiority leaving only imitation evidence, sic evidence and this in the Com- equivalency finding appeal.) the milk view, findings. mission’s its bolstered merely Kraft claims that the Commission Kraft asserts that the literal truth of the extrapolated analysis Skimp from the are made from they Class Picture ads — ads to the Class Picture ads without consid- do have a five ounces of milk and high ering significant differences between the illogical concentration of calcium —makes it stated, example, two. The Commission deception. render a of consumer copy the Class Picture ads “contain difficulty argument with this is that substantially elements similar to the literally even true statements can have mis ‘Skimp’ convey ad elements that the im- Zauderer, leading implications. pression In re equivalency.” of milk 2282; see also U.S. 105 S.Ct. at Inc., Kraft, slip op. FTC No. at 22. Medical, Thompson 197; Re 791 F.2d at points out that the Class Picture ads Corp., movatron Int’l 292- contain one of the four elements of (1988), aff'd, (1st 884 F.2d 1489 Cir. Skimp ads —the reference to five ounc- Prods., 1989); American Home 695 F.2d at es juxtaposed of milk with a reference to Here, average consumer is not calcium content —that to the contributed likely to know that much of the calcium in equivalence milk finding. FTC’s And (30%) five milk process ounces of is lost in Kraft adds that the reference to five ounc- ing, which leaves consumers with a mis es of milk slice merely and to calcium leading impression calcium about content. large states that each slice has a amount of The critical fact is not that reasonable con content, calcium because of its milk a com- might sumers believe that a % ounce slice pletely true inference. The ads do not actually of cheese contains five ounces of imply actually state or that each slice milk, might but that reasonable consumers tains five ounces of milk or its calcium actually believe that a % ounce slice con equivalent. Indeed, Kraft asserts that no calcium five ounces of milk. tains the reasonable consumer could think that a % ounce of slice of cheese contains five ounc- C. es of milk. Kraft next asserts the milk We find substantial evidence in the equivalency and support record to finding. FTC’s Al- claims, made, if even are not material though downplays the nexus in the A consumers. claim is considered material calcium, ads milk between the ads em- if it important “involves information that is

phasize visually verbally five and, hence, likely to consumers to affect go milk ounces of into a slice of Kraft of,' regarding their choice or conduct Singles; image is linked to calcium Assocs., 103 F.T.C. at product.” content, strongly implying that the consum- Cliffdale five, Statement, Policy F.T.C. at gets er the calcium found ounces of 175, 182. The Commission is entitled to milk. The fact that the Commission listed reason, apply, presumption within of ma four implied elements claim in teriality, Colgate-Palmolive, Skimp ads does .not mean that those 392, and types it does so with three present same elements must all be in the claims; (2) express implied claims: Class Picture ad to reach that same conclu- Furthermore, sion. where there is evidence that Class Picture ads claim; contained one seller intended to make the reinforcing other element n claim, equivalency health, milk phrase significantly claims that involve “5 oz. image safety, slice” inside the glass of a or other areas with which reason superimposed Singles package, on the able consumers would be concerned. Medical, it was Thompson 816-17; reasonable for the Commission to 104 F.T.C. at Statement, 103 at 182- FTC and the Policy Attorney FTC F.T.C. California General’s situations, independently company 83. Absent one of these Office notified the and early investigations Commission examines the record in 1986 that had been finding materiality or immateri- makes a of initiated to determine whether the ads con- ality. Id. veyed milk equivalency claims. Not- withstanding warnings, these Kraft contin- Here, that both claims the AU concluded rejected pro- ued to run the ads and even calci- presumptively material because posed allayed alternatives that would have significant um a health concern to con- is concerns over their nature. upheld sumers. The Commission this con- this, believe, From the FTC inferred —we clusion, although applied presumption it reasonably thought Kraft the chal- materiality only superi- the imitation —that lenged equivalency milk claim induced con- ority claim. Kraft asserts the Commis- purchase sumers to and hence that supported by determination is not sion’s the claim was material to consumers. See disagree. substantial evidence. We Associates, 103 F.T.C. at Cliffdale determining equiv milk that the Statement, Policy F.T.C. consumers, alency claim was material to 182. showing surveys the FTC cited Kraft regard supe With to the respondents rated calcium content imitation 71% claim, riority extremely very important applied pre in the Commission factor buy Singles, sumption materiality their decision to Kraft after evi female, respon challenged of all dence that Kraft intended the that 52% 40% dents, (Recall reported significant personal convey message. con ads to this adequate consumption. convey calcium intent to a claim is one of three cerns about categories qualifying presumption noted that ads were for a FTC further Medical, materiality. See, Thompson targeted e.g., to female homemakers with chil 816-17.) milligram pre It found this dren and that the 60 difference 104 F.T.C. sumption in the fact that the between the calcium contained five ounc buttressed challenged copy in ad led to increased sales of es of and that contained a Kraft though they percent cost 40 Single up Singles, make most of the RDA even would Finally, the deficiency girls aged in than imitation slices. calcium shown 9- more in that Kraft’s consumer sur Finally, the FTC found evidence the FTC determined veys to rebut this infer designed record that Kraft the ads with the were insufficient Kraft’s sur capitalize particular calcium ence in criticized intent on consumer vey methodology because it offered limited deficiency concerns. options to consumers. response Significantly, further the FTC found evi- materiality neither Kraft asserts that materiality dence of in Kraft’s conduct: de- supported by substantial evi- spite repeated warnings, persisted is survey evi- challenged It contends that running the ads. Before the dence. ran, the Commission relied ads even television raised a red dence on which ABC calcium, only equiva- not milk flag when asked Kraft substantiate shows important to consumers. Materi- lency, the milk and calcium claims in the ads. maintains, turns on whether agency ality, Kraft in a Kraft’s ad also warned subject than the itself, the claim rather legal memorandum to substantiate the claim, Moreover, deci- of the affects consumer running the ads. matter before accordingly, the group sion-making; Commission in October a consumer warned would have Skimp had to show that consumers Kraft that it believed the ads were Nonetheless, knowledge that Sin- differently with potentially deceptive. high- acted gles rather than recommended that contain 100% level Kraft executive 70% of milk. See FTC calcium in five ounces copy the ad remain unaltered because (claim Statement, at 175 growing Policy for the first “Singles business is “likely affect if it is years large part due in to the is material time four regard or decision with 63B; Finally, conduct copy.” IDF 191. consumer’s CX product”). inquiry to a With the defined in the ads and the tween manner, However, relevant evidence on claim se. increase point survey showing Kraft consumer corresponded directly sales with the ad —a respondents stop buy- would 1.7% campaign indisputably reversed that ing Singles if of the effect of informed sagging sales and market share of Kraft processing definitively on calcium Singles compe- that had been attributed to content— disproves materiality. regard to With its Moreover, tition from imitation slices. conduct, argues persisted in Kraft it run- Kraft's increase in market came at a share ning thought it the ads the ads because Singles priced roughly time when were 40% whole, equivalency a not the milk claim Thus, higher than imitation slices. the se, that, contributed to increased sales reasonably Commission inferred that event, any responded warnings by in to superiority message, imitation as a central making good attempt modify faith to ads, theme contributed to increased repeats arguments ads. Kraft these in at- sales and market share. tacking finding that FTC’s superiority claim was material to consum- IV. ers, claiming the evidence adduced showed only that Kraft intended to use the ads to The Commission’scease and desist order differentiate from imitation slices prohibits running Skimp Kráft from (cid:127) content, on based milk and not on calcium and Class Picture as well as from content, and that sales increased as a re- advertising any. calcium or nutritional general theme; inferring sult of this supported by claims not reliable scientific superiority the imitation claim contributed only evidence. This order extends not pure conjecture. to increased sales is product contained in the ad- (Kraft Singles), vertisements but to all arguments

Kraft’s lack merit. The FTC products, Kraft cheeses and cheese-related found placed evidence that consumers solid Barrel, Velveeta, which include Cracker great importance consumption on calcium Philadelphia Brand Cream Cheese. reasonably and from this inferred that a Kraft contends this order is too broad and quantifying claim the calcium in Kraft Sin- gles be would be material must set-aside or modified because it to consumers. It rationally constitutionally protected commercial exaggera- concluded that a bans 30% speech, rationally tion of calcium nutritionally content was a is not related to significant claim that would affect Kraft’s violation the Act. consum- purchasing finding er decisions. This was supported by expert agreed witnesses who A. prefer that consumers would a slice of arise, First amendment infirmities ac cheese with of the calcium in five 100% Kraft, cording sweep ounces of milk over one with 70%. by banning speech order: commercial (Stewart); (Ja- Tr. 1176-78

See Tr. 3668-64 only potentially -misleading, is the order Likewise, coby). materiality presump- non-deceptive advertising chills some de applied tion superiority to the imitation serving protection. of constitutional Kraft supported by claim was substantial evi- acknowledges sweeping bans of this dence. This rested on internal com- variety comport prac with traditional FTC pany showing documents that Kraft de- see, tice, Assocs., e.g., signed the ads supe- to deliver an imitation Cliffdale repeatedly upheld at and have been 32B, 120, 122A, riority message. See CX against challenges in first Although produced 4S. Kraft amendment study re- past. Co., Bristol-Myers 738 F.2d at futing finding, the Commission dis- 562; Norris, FTC, study Jay v. 598 F.2d counted that after Inc. its meth- (2d Cir.), denied, odology U.S. flawed. concedes Skimp Singles, ads increased sales of 100 S.Ct. 62 L.Ed.2d 406 but Nutrition, contends that carry Egg the Commission cannot National Comm’n 163; demonstrating linkage Prods., burden of be- F.2d at American Home and imitation equivalency v. Roebuck & Co. n. Sears F.2d Cir.1982); (9th verifiable, claims are true and there no FTC, 399-400 is Indus., actually evidence that these claims misled Inc. Litton (9th Cir.1982); consumers, advertising Brown & William- medium and the at 40-41. Corp., 778 F.2d inherently deception. Tobacco It Al- son conducive again relies on nonetheless readily remedial measures ternative Peel, 496 recent decision Commission, Court’s to the such as modi- available (plurality); prominent to the ads or disclo- fications (concurrence), at 2293 id. sures, thus, contends, the order attacking order. the FTC’s .reasonably necessary than is broader Moreover, prevent deception. Kraft as- Illi- by the sanctioned State Peel was put serts the order the onus on it to come letterhead that advertising on his nois for in up nonmisleading with alternatives which specialist, certified trial he was a travention of Peel. prohibiting law- regulation state violated a or advertising any certifications yers from argument. begin reject We Kraft’s To first concluded that specialties. The Court with, determined that the the Commission only potentially Peel’s advertisement was actually misleading, poten not ads (some might incor- misleading consumers misleading, justifying a tially thus total a state-sanc- this was rectly assume that Peel, challenged the ads. 496 ban on See certification), inherently mis- not tioned 100, 110 (“[misleading at S.Ct. at 2287 v. Ohio State leading, compare Ohralik entirely”). advertising may prohibited be 1912, 447, 56 Ass’n, S.Ct. 98 Bar Moreover, the even if we were to assume (door-to-door solicitation L.Ed.2d misleading potentially order bans some misleading), inherently legal services only constitutionally defective speech, it is categorically can be only the latter and reasonably no than neces if it is “broader Peel, 108- 496 U.S. at by the state. banned [deception].” at sary prevent the Id. at 2292 & n. n. 110 S.Ct. 110 & that it at 2291. We conclude at 2293 at 110 S.Ct. (plurality); id. sufficiently pass constitutional is narrow potentially (concurrence). Restrictions on regulation prophylactic the muster. Unlike contrast, can no misleading speech, by be category Peel, an entire which banned pre- reasonably necessary to than “broader at issue speech, the restriction commercial categori- may not [deception]” the vent cease and desist is an administrative here restrictive speech if less cally prohibit such company’s one toward order directed 107-108, at are available. Id. alternatives specific predicated on a ads and cheese R.M.J., 455 (citing at 2291 In re 110 S.Ct. deceptive practices. past 937). Because 102 S.Ct. at U.S. at reiterate, to Illinois order does were available the FTC’s such alternatives To requirement), Skimp Court ads and (e.g., prohibits a disclosure it things: two categorical (as ban violated currently held that this de Picture ads the Class amendment, Peel, U.S. at 108-110 first future requires it Kraft to base signed) and (plurali- n. 17 at 2292 & n. 110 S.Ct. & sci claims on reliable and calcium nutrient (con- 111-12, at 2293 110 S.Ct. ty); at id. Kraft mischaracterizes evidence. entific was currence), that the burden and added on com categorical ban decision as advertiser, state, up to come not the on in fact it identifies speech mercial when regulation. Id. at restrictive a less with claims that two nutrient particularity (plurality) 109-11, at 2292-93 110 S.Ct. misleading actually found Commission (state regulation draft a narrower must It further only claims. prohibits those may and Peel potential consumer correct sup (minor) burden on Kraft places interim); using continue letterhead reliable nutrient claims with porting future (concurrence). at 2296 id. any use Kraft free to This leaves data. chooses, including the it advertisement asserts that its advertisements long itas Picture so Skimp Class misleading, like the letter- only potentially specifically elements Peel, milk either eliminates because head statement by identified contributing FTC as subject not the challenged advertise- deception or corrects this inaccu ments. The FTC has discretion to issue impression by adding prominent, rate orders, un multi-product “fencing-in” so-called See, ambiguous orders, disclosures. e.g., beyond Remova that extend violations of the tron, 884 F.2d at 1497. We note one addi prevent Act to violators from engaging in consideration further alleviating tional first deceptive practices similar in the future. concerns; Kraft, any amendment like party Colgate-Palmolive, 380 U.S. at order, may advisory 1048; to an FTC seek Sears, S.Ct. at 676 F.2d 391-92. opinion from the Commission to whether Such an order sufficiently must be clear any future comply advertisements comprehensible with its violator, to the order, 2.41(d), 16 C.F.R. proce “reasonably and must be § to a relat[ed]” specifically dure has been cited courts violation of the Act. Colgate-Palmolive, reducing 394-95, as one method of advertiser un 380 U.S. at 85 S.Ct. at 1048. Kraft certainty. Colgate-Palmolive, challenge does clarity the order’s 1047-48; precision U.S. at 85 S.Ct. at Jay Nor but its reasonableness. ris, 1251; 598 F.2d at National Comm’n In determining whether a broad Nutrition, Egg 570 F.2d at Fed fencing-in order bears a “reasonable rela (2d Corp. ders tionship” Act, to a violation of the the Cir.), denied, cert. 97 S.Ct. Commission considers the deliberate (1976). 50 L.Ed.2d 79 ness violation, (2) and seriousness of the reasons, For these we hold spe- that the degree the of transferability of the viola prohibitions imposed cific on Kraft in the products, tion to other any history cease and FTC’s desist order not broad- prior of Thompson Medical, violations. reasonably er necessary prevent than Sears, F.T.C. see also 676 F.2d and hence deception not of violative the Here, at 391-92. the AD found that Kraft reemphasize first amendment. We wish to engaged had not in long-term pattern the of this assuage any limits order to deceptive advertising, and that was an might Kraft compliance. have fears about response isolated incident in significant (i.e., subject The of Kraft’s ads the milk competitive pressures Kraft; hence, on the Singles) and calcium content of is obviously opted AD for a narrow order. The FTC legitimate perfectly subject of commer- disagreed; it concluded that viola Kraft’s advertising. only cial It is the manner of serious, deliberate, tions were easily presentation needs rectification. to other products, transferable Kraft thus Kraft is free to continue advertising the warranting a fencing-in broad order. milk and calcium prod- content in its cheese support We find substantial evidence to ucts, and it can avoid future violations scope the of the order. The Commission correcting misleading the elements identi- based its of seriousness on the size could, fied FTC’s decision. Kraft ($15 annually) (two million and duration example, redesign Skimp and Class Pic- years) and one-half campaign of the ad ture ads so that calcium content is accu- on difficulty most consumers would (i.e., presented rately Single “each Kraft judging face in the truth or falsity of the equivalent the calcium contains of 3.5 ounc- implied calcium claims. Although Kraft milk”) es prominent, or it could add disputes the Commission’s fig- $15 million unambiguous disclosures about calcium ure, arguing many it covers non-deceptive processing, loss either of which would unchallenged advertisements, that does put compliance in full it with the order. obviate fact that this expen- was an sive, campaign nationwide highly ef- B. Moreover, fective results. proper- the FTC Alternatively, argues Kraft ly found that it is expect unreasonable to scope of the order “reasonably is not most perform consumers to the calcula- to Kraft’s related” violation of the Act tions necessary to compare the calcium con- products it extends to because that were tent of Kraft with five ounces fencing-in the nutrient infor- for a given the fact that order and that Kraft failed particular point. on milk cartons is not based to rebut this mation serving. five ounce Finally, the FTC concluded that these outweighed factors prior Kraft’s lack of previously, the Commission also As noted violations. Kraft maintains that the Com conduct was found that Kraft’s deliberate simply mission brushed aside its clean running persisted in the chal- because it though prior record even violations, are despite repeated lenged copy warnings ad highly probative propensity to commit copy that the might from outside sources future violations. This contention is also misleading. implicitly Thompson be without merit because it is the circum Medical, 834-35. Kraft chal- whole, stances of the violation as a and not finding, arguing lenges responded merely presence any or absence of one warnings by acting good these faith to factor, justifies a broad order. See modify and further that it commis- Dietsch, Porter & Inc. v. post-dissemination survey sioned a deter- (7th Cir.1979), denied, complaints any mine had mer- whether survey insignif- it. This found that (1980); Sears, Co., Roebuck & 676 F.2d at respondents percentage icant detected Hence, reasonably the FTC concluded alleged reject claims. We these conten- seriousness, deliberateness, apparent claims were tions. transferability prece took violations ad, from the face of the but even if any dence prior over the absence of Kraft, somehow eluded the Commission violations. reasonably steady concluded that warnings put stream of should have V. surveys on notice that its somehow reasons, foregoing peti- For the Kraft’s inadequate or defective. Kraft made three tion to set-aside the order is modifications to the but two of them Denied the Commission’s order is implemented very at the end of the ENFORCED. campaign, years more than two after it had MANION, concurring. begun. dilatory response provided This sufficient basis for the Commission’s opinion I concur While clusion. court, I am concerned that FTC can by simply avoid extrinsic evidence conclud- The Commission further found that the ing deceptive, implied that a claim is facial- readily violations were transferable to oth- ly apparent. expertise, While FTC has products given general er Kraft cheese surveys provide at least some similarity between and other Kraft pur- objective determination of what cit- cheeses. contends that FTC considered chaser thinks and should be support ed no evidence to since, all, among the consumer is after transferability placed and therefore trying protect. those we on Kraft to show lack of transfer- burden Moreover, procedure current ability products to other violation of the the FTC’s Act, nonmisleading, protected to' chill Administrative Procedure 5 U.S.C. threatens 556(d), Although regulations. speech. and the not all commercial FTC’s own § Ger-Ro-Mar, 3.43(a); protection, speech 16 C.F.R. see also has constitutional § 33, Cir.1975). FTC, (2d developed this court decided 36 law has since Inc. v. rely interpre the FTC’s that the FTC could on its own We conclude Serv., transferability of ads in National Bakers was also reasonable. tation 365, (7th FTC, 329 F.2d 367 Cir. Kraft’s other cheeses contain calcium and Inc. v. 1964), FTC, provide any v. Kraft failed to evidence to Rhodes Pharmacol Co. Cir.1953), (7th justify excepting products part F.2d rev’d in these from the L.Ed. 736 order. This did not shift the U.S. 75 S.Ct. burden (1955), merely recognized Corp. v. Kraft but that counsel and Zenith Radio Cir.1944): (7th presented prima the FTC case facie has recognized Court that a free flow of such evidence if “implied claims [are] indispensible information is to decisionmak- reasonably clear from the face of the ads ing enterprise system. in the free unpredictable.” and not Op. at 321. Rath- Virginia Pharmacy Virgi- State Bd. v. er leaving judges than to hew the contours Council, Inc., nia Citizens Consumer issue, of this would be FTC well-ad- 96 S.Ct. 48 L.Ed.2d 846 vised to take this court’s suggestion apply— (1976). jeopardizes But the FTC this flow expertise develop a consumer sur- by relying on the FTC commissioners' sub- vey methodology that advertisers can use jective interpretation to determine whether to ascertain whether their ads contain im- ad, literally true, implies while a false plied, deceptive messages. message. Advertisers will be unable to predict whether particu- the FTC will find misleading.

lar ads Pre-dissemination sur- veys showing consumers are not misled will be useless since the FTC is free to

ignore any such extrinsic rely evidence and subjective

on its judgment that consumers may unwilling be misled. Advertisers gamble with a multi-million ad dollar cam- America, UNITED STATES paign (1) essentially have two sub- choices: Plaintiff-Appellee, every mit campaign to the FTC in advance or say ads that disseminate little or nothing product about An service. White, A. Daniel WHITE and Judith A.

advertiser will not want to risk producing Defendants-Appellants. comparative which the may ads ulti- No. 91-3429. mately false, imply find to unintended mes- sages. United Appeals, States Court case, panel’s opinion correctly Seventh Circuit. concludes that Zauderer v. Disci- Office of Argued Feb. 1992. plinary Counsel, controls the Aug. 3, Decided extrinsic evidence issue. The Supreme Court did determine that surveys compelled

are not by the first amendment when “possibility deception is as self-evident as it is in Id. [Zauderer].”

471 U.S. at 105 S.Ct. at 2282. In both Zauderer, this case and piece omitted information implication led to an which turned an ad literally that was true into a potentially deceiving ad. But impor- it is

tant to note neither this case nor Zau- gives

derer ignore the FTC leave to extrin- every sic evidence in case. Unfortunately, judicial groping a dis- tinction between cases where extrinsic evi- necessary

dence is and those where it is not leaving both advertisers and the FTC uncertain. All Zauderer tells them is that

extrinsic evidence is not needed when

“possibility deception is as self-evident as it is in Id. All this court [Zauderer ].” tells them is that the FTC need rely on

Case Details

Case Name: Kraft, Inc. v. Federal Trade Commission

Court Name: Court of Appeals for the Seventh Circuit

Date Published: Jul 31, 1992

Citation: 970 F.2d 311

Docket Number: 91-1691

Court Abbreviation: 7th Cir.