Is FTC Exposing Businesses to Antitrust Suits with “Voluntary” Food Advertising Limit Proposal?

The Federal Trade Commission (FTC) has supported industry self-regulation, especially in the area of advertising. Why wouldn’t it, considering that trade associations or organizations such as the Better Business Bureau can create and enforce standards in a more timely fashion (and without First Amendment concerns) than government can? But, as FTC Commissioner Julie Brill wrote earlier this year in a Competition Policy International article, self-regulation can provoke antitrust concerns:

When competitors form a trade association to self-regulate, and collectively have a dominant position in the marketplace, the risk of competitive concerns grows, and the conduct must be closely examined.”

Are these concerns alleviated when the Commission itself issues “guidelines” or “reports” which encourage “voluntary” self-regulation? They are not, a reality which has unfortunately escaped much consideration in the debate over the Interagency Working Group on Food Marketed to Children‘s draft report to Congress. A situation analogous to what the food and beverage industries could be facing recently arose in another advertising context – online behavioral advertising.

As explained in a Reed Smith LLP paper, FTC in 2009 published an update to 2007 guidelines it issued “to govern self-regulatory efforts” in the area of behavioral advertising (i.e. tracking of online behavior to better target/tailor ads). Seven trade groups responded to the FTC’s not-so-subtle elbow to the ribs by forming the Digital Advertising Alliance, which drafted guidelines for the associations’ members. Violations of the guidelines could result in actions ranging from public disclosure of the matter to expulsion from the relevant trade group. Even though FTC encouraged such collaboration, the Alliance’s antitrust worries were strong enough that it formally sought an advisory opinion from FTC’s staff.

On August 15, the FTC Bureau of Competition responded, concluding that “the accountability program is unlikely unreasonably to restrain trade.” FTC assessed the program under the “rule of reason,” weighing the benefits to consumer welfare against any possible competitive harm. The opinion offered five points that weighed against antitrust concerns, including the reasonableness of the sanctions, the enhancement of consumer understanding, and the fact that “the accountability program is broadly applicable across product categories, advertisers, and web site operators.”

What does this mean for food and beverage companies that may need to collectively enforce the Interagency Working Group’s (IWG) “guidelines” for child-directed advertising? Some of the same organizations involved in the aforementioned Digital Advertising Alliance would be involved in any such self-regulatory enforcement effort, so they are no doubt pondering the same question. The antitrust concerns have already been raised with FTC, in fact, through comments filed on the IWG proposal by the American Bar Association’s Antitrust Law Section.

The comments pointed out that even if FTC does not pursue an antitrust case against self-regulation of such advertising, “state attorneys general and private plaintiffs” could easily do so. The comments also provide some hypothetical scenarios where advertisers or their trade groups could run afoul of antitrust laws, including “an industry trade association publicly adopts the Principles and requires that members follow them,” and “an industry trade group convenes a committee of its members to interpret the Proposed Principles and establishes more specific guidelines” compliance with which are recommended or required.

As the developments with the online behavioral advertising guidelines reflect, the ABA Antitrust Section’s concerns are well founded in law and fact.  FTC must assert its competition law and policy expertise and address these concerns within the Interagency Working Group as the agencies evaluate public comments to the “Proposed Nutrition Principles.”  Government should not be promulgating policies which put businesses should into antitrust litigation jeopardy.

One thought on “Is FTC Exposing Businesses to Antitrust Suits with “Voluntary” Food Advertising Limit Proposal?

  1. Bert Schwitters

    What is often overlooked in cases where government applies prohibitive and enforceable measures, is that “3rd party” interests competing with the prohibitees will profit and that the government’s measures have the effect of antitrust. Often, the government’s measures are prompted by the “3rd party” that will profit, sometimes ideologically, oftentimes commercially. The government is the arm’s length antitrustor. When food business operators are prohibited to inform the public about the health effects of their products, e.g. because inappropriate pharmaceutical-type research outcomes are requested, the pharmaceutical industry will indirectly profit, because their monopoly on “health-related information” will be strengthened. The result of Government induced prohibition is a monopoly for the generally allowed product or service. This makes government the largest unseen antitrustor.

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