FTC to subpoena 44 companies' kids-ad data: QSR chains seen as targets of youth obesity probe for Congress that could yield lawsuits

Nation's Restaurant News,  May 7, 2007  by Gregg Cebrzynski

Tags: FTC, U.S. Congress

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WASHINGTON -- Quick-service chains that target children may come under unprecedented scrutiny this year by the Federal Trade Commission and Congress, which could act to regulate kids-marketing practices if FTC subpoenas for corporate documents uncover practices the regulators deem questionable.

The FTC's possible findings also are seen as having the potential to inspire new rounds of liability lawsuits by consumers against food marketers.

The agency, following a congressional mandate to investigate the marketers' methods for targeting children and adolescents in light of child-obesity concerns, is preparing to issue compulsory "information requests" to 44 unnamed major companies for comprehensive details of their marketing practices.

Those subpoenas are expected to be served by midsummer, after the FTC's May 18 deadline for public comments. Disclosure of the trade commission's initiative in the Federal Register included the FTC's warning that the destruction by companies of any records deemed relevant to its investigation could result in criminal prosecutions.

The number of quick-service chains or other types of food marketers that would be subpoenaed is not known. However, the FTC made it clear that big advertising spenders would be likely targets, which could put McDonald's, Burger King, Wendy's and others under the agency's scrutiny.

The FTC wants to know the types of food marketed to children and adolescents, including food labeled "better for you," and the traditional print and broadcast media used to target them. It also seeks information about other media the companies are using, such as in-store marketing, events, package promotions, viral marketing, guerrilla marketing, word-of-mouth and product placement in TV shows, movies, video games and music.

In addition, the agency is looking for "any marketing policies, initiatives or research in effect or undertaken by the companies relating to the marketing of food and beverage products to children and adolescents," the Federal Register notice stated.

By gathering all of that information, the FTC would be able to give Congress and the public "a complete picture" of how food marketers target children and adolescents, it said.

However, if that picture fans the flames of controversy about the nation's youth obesity crisis, the FTC's findings also could provoke litigation by consumers who blame food marketers for children's ills, legal experts say.

The FTC indicated that it would report aggregate results of its probe to Congress and would not reveal company-specific data except for information that is already public.

"We're ready to respond to any subpoena if we get it," said Keva Silversmith, vice president of communications for Burger King. "We're prepared to share this information."

BK is committed to educating customers about nutrition, especially when it comes to products for children and adolescents, he said, and is "always looking" to add nutritious items to the menu.

McDonald's and Wendy's did not respond to requests seeking comment.

Experts on advertising and the law are well aware of the FTC initiative's implications for restaurant chains and other food marketers.

"Companies need to take this very seriously," said Tony DiResta, a partner in the advertising practice of the Reed Smith law firm in Washington, D.C. "Clearly, government legislators and regulators have identified nonadults as a vulnerable class of citizens deserving special protection."

The cost and time that would be required to fulfill the FTC's requests is uncertain because the agency has not said how detailed the information must be, he said.

If the FTC just wants to know bottom-line ad expenditures for a particular brand, he said, then the FTC to subpoena big-spending food marketers for congressional probe on advertising to kids (Continued from page 129)

costs to compile it would be reasonable and would not take too much time.

However, if companies have to break out the money spent in each specific form of marketing, including traditional media and marketing via the Internet, buzz marketing and word-of-mouth, "that could be unbelievably burdensome," he said.

Although the scope of the FTC's investigation encompasses every facet of marketing to children and adolescents, the agency is "proceeding extremely cautiously" as it seeks the information, DiResta said.

"The FTC promotes self-regulation, so they don't want to look like a regulatory agency that runs contrary to big business," he said. "They're really trying to allow business to operate practically."

That doesn't mean food marketers have nothing to worry about once the FTC makes its report to Congress, DiResta said.

"It certainly can add fuel to the fire about whether advertising practices need to be legislated or regulated," he said, and it would "provide fodder" to attorneys who bring obesity-related lawsuits against food marketers.