This is the third of a three part series by former food law lab student Nadia Arid. More updates from the HLS-UCLA Conference on Food Marketing to Kids tomorrow.
As mentioned in Parts I and II of this series, technological and informational developments have occurred in recent decades that have made regulations on marketing to children significantly more feasible and more appealing. Not only has the food and beverage industry created standards for what can be considered nutritional and lower calorie snacks, but the recent hike in obesity and public health issues in the United States has increased public support of limits on the advertising of unhealthy foods to children, and emerging research has begun drawing clearer connections between marketing strategies and the consumption of unhealthy foods. The political climate seems to be ideal for a movement to limit these marketing tactics. Yet, the FTC has still failed to act. One explanation may be the lingering legal considerations that the FTC must face in promulgating rules that would regulate marketing tactics by the food and beverage industry. This last part of the series will explain why common legal challenges to restrictions on food marketing do not apply in the case of marketing unhealthy foods specifically to children.
Justifying Regulation Under a “Deceptive Practices” Framework
In response to the FTC’s attempts to regulate marketing to children in the late 1970s (described in Part II of this series), Congress passed the FTC Improvements Act of 1980, which states that the FTC “shall not have any authority to promulgate any rule in the children’s advertising . . . on the basis of a determination by the Commission that such advertising constitutes an unfair act or practice.” While the FTC has treated this response by Congress as a death knoll for any attempts to regulate children’s advertising, the Act only limited one piece of the FTC’s two-pronged approach to rulemaking, as authorized under Section 18 of the FTC Act. Regulations on advertising to children may be off limits to the FTC under an “unfair practices” approach, but they are still fair game under the FTC’s authority to propose rulemaking to prohibit deceptive practices. The FTC Policy Statement on Deception sets forth the FTC’s criteria for determining that a deceptive practice has occurred. The determination is made based on three key elements: (1) “there must be a representation, omission or practice that is likely to mislead a consumer;” (2) that issue is analyzed from the perspective of a consumer acting reasonably in the circumstances; and (3) “the representation, omission or practice must be material.” A rule by the FTC restricting unhealthy food advertisements targeted at children would meet all of the requirements necessary under the FTC’s deceptive practices authority.
First, marketing of unhealthy foods is likely to mislead children. There is no requirement that the action is in fact misleading, but rather that it is likely to mislead a consumer, which means that even advertising that is not explicitly untrue can be deemed deceptive. Advertising strategies employed by the food and beverage industry have become increasingly more sophisticated in terms of avoiding blatantly untrue statements, but under the deceptive practices prong, the FTC can still make a case for limiting advertising aimed at children if the advertising is likely to mislead through unconscious associations and subtle forms of priming or psychological manipulation. Public health and psychological research demonstrates that children lack “the rational capacity to resist” the influence of “advertising for energy-dense, nutrient-poor food.”
Second, rulemaking on the issue of advertising directed at children will be analyzed from the perspective of the children affected by the advertising, making it easier to support this type of regulation. FTC regulations against deceptive practices are analyzed from the perspective of a reasonable consumer in those circumstances, and as such, the FTC will determine whether a marketing strategy is misleading or deceptive based on the “sophistication” of the audience. In the Policy Statement on Deception, the FTC stated the following: “When representations or sales practices are targeted to a specific audience, such as children, the elderly, or the terminally ill, the Commission determines the effect of the practice on a reasonable member of that group.” For marketing targeted to children, the FTC would analyze the practice from the perspective of children, taking into account their cognitive ability, brain development, and social and emotional responses to visual stimuli. In fact, in a 1964 case, the FTC concluded that “deceptive advertising claims beamed at children tend to exploit unfairly a consumer group unqualified by age or experience to anticipate or appreciate the possibility that representations may be exaggerated or untrue.” Even more research exists now than it did in the 1960s to support that claim.
Third, regulations on food marketing to children will pass the materiality test as articulated by the FTC. A “material misrepresentation or act of deception is “one which is likely to affect a consumer’s choice of or conduct regarding a product.” The FTC has further clarified that a finding of materiality is a “finding that injury is likely to exist because of the representation, omission, sales practice, or marketing technique” and that “[i]njury exists if consumers would have chosen differently but for the deception.” Public health and psychological research demonstrates that children lack “the rational capacity to resist” the influence of “advertising for energy-dense, nutrient-poor food.” This influence on children translates into material choices because children and teens will either use their own money to purchase advertised products or they will convince their parents to purchase the products (known as the “pester power” effect)—these mechanisms are described at more detail in Part I of this series. By relying on this research and other studies that have recently been published on this issue, the FTC can build a solid case to demonstrate that materiality and injury exist in the case of marketing of unhealthy food aimed specifically at children.
Withstanding Judicial Review
In addition to being justified within the FTC’s own mandate and authority, a regulation by the FTC on the issue of marketing to children would have to be able to survive under judicial review. As described by the Third Circuit, the standard of judicial review established by Congress for FTC rulemaking is relatively deferential:
A court may set aside the FTC conclusion if it is not supported by substantial evidence in the rulemaking record taken as a whole, or if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. The substantial evidence standard is applied only to the FTC’s factual determinations, while the arbitrary and capricious standard is applied to all other determinations. The arbitrary and capricious standard is very deferential … [and] the court must determine whether the decision was based on consideration of relevant factors and whether there has been a clear error of judgment.
While this may not have been the case back in the 1970s when the FTC last visited this issue, substantial evidence now exists connecting food advertisements to the consumptions habits of children and to the recent childhood obesity epidemic in the US. Because of the deference granted to agencies, characterizing this kind of regulation as arbitrary and capricious would be significantly more difficult now given the recent developments in research dedicated to this health issue. Furthermore, regulations promulgated under deceptive prong avoid causation problems that are typically associated with the unfairness prong because a deceptive practice inquiry focuses on the deceptive act itself rather than on the injury to the consumers. While it may be difficult to connect specific health issues directly to consumer choices, the evidence is much clearer and more convincing on the issue of the psychological and emotional effects of marketing tactics aimed at children.
Avoiding First Amendment Commercial Speech Issues
A common legal argument against restrictions on marketing or advertising is that these practices are forms of “commercial speech” protected by the First Amendment. The Supreme Court has stated that “public and private benefits from commercial speech derive from confidence in its accuracy and reliability.” Accordingly, the type of rulemaking proposed here would not fall under a First Amendment analysis—statements that are false, deceptive, or misleading are not accurate or reliable and are thus not protected under the First Amendment. In compliance with the First Amendment, the government has the power to regulate three types of deceptive material: actually misleading, inherently misleading, and potentially misleading speech—the first two can be banned outright while the third type of speech can only be limited by requiring parties to “remedy the misleading nature of the speech.”
In the case of marketing to children, however, scientific research shows that children are unable to “recognize the persuasive intent of ads and tend to accept them as accurate and unbiased,” as described in detail in Part I of this series. Informational remedies, such as qualifying disclosures, written disclosures, and fine print, would be ineffective in overriding misleading images or information presented to children. In fact, it can also be argued that the speech, because it is specifically targeted at children who are unable to distinguish between puffery and fact, is inherently misleading based on research on cognitive functions of children. Thus, the speech can either be considered inherently misleading or potentially misleading without a proper remedy short of a ban. Either way, the FTC would be justified in proposing regulations that limit advertisements of unhealthy foods targeted to children without running afoul the First Amendment.
The time has come for the Federal Trade Commission (FTC) to revisit the idea of regulating marketing strategies by the food and beverage industry to release the stronghold that the industry currently has on the purchasing and consumption behaviors of children in the United States. Part I of this series described the pernicious effects of food marketing on children to demonstrate that some level of intervention has become necessary—in recent years, the research has become increasingly more determinative of the fact that advertisements targeted at children have a negative effect on the health of children and have contributed to the nation’s obesity epidemic. Part II then discussed the complicated relationship that the FTC has had with child-centered marketing to suggest that the agency’s reluctance to get involved in this arena may be more reactionary and emotionally charged than policy-based. The analysis in Part II also explained how Congress could be uniquely positioned to encourage the FTC to take a chance on this issue once again. Now in this third and final installment, the issue of legality is discussed—aside from the FTC’s institutional hesitation in getting involved in the issue of marketing to children, common arguments against that form of intervention have mostly been legal in nature. Based on an analysis of the FTC’s mandate, the standard of judicial review applied to the agency’s actions, and other constitutional issues that may arise, it has become clear that the law can no longer be used as an excuse to not act to limit the deceptive practices of the food and beverage industry.
With these considerations in mind, Congress should step in to encourage the FTC to intervene against the food and beverage industry in order to promote the health and free choice of children currently subjected to advertising for unhealthy foods. The case for restrictions is legally sound and backed by strong evidence—there is only one question left now for the FTC and Congress: what are you waiting for?