A Report to Congress
Federal Trade Commission, 2003
Timothy J. Muris Chairman
Mozelle W. Thompson Commissioner
Orson Swindle Commissioner
Thomas B. Leary Commissioner
Pamela Jones Harbour Commissioner
Janet M. Evans, Bureau of Consumer Protection, Division of Advertising Practices Jill F. Dash, Bureau of Consumer Protection, Division of Advertising Practices Neil Blickman, Bureau of Consumer Protection, Division of Enforcement C. Lee Peeler, Deputy Director, Bureau of Consumer Protection Mary K. Engle, Associate Director, Bureau of Consumer Protection, Division of Advertising Practices
Joseph Mulholland, Bureau of Economics
Dawne E. Holz, Bureau of Consumer Protection, Office of Consumer and Business Education Michelle T. Meade, Law Clerk, Bureau of Consumer Protection, Division of Advertising Practices
Chadwick Crutchfield, Intern, Bureau of Consumer Protection, Division of Advertising Practices Executive Summary
The Conferees of the House and Senate Appropriations Committees directed the Federal Trade Commission to study the impact on underage consumers of ads for new flavored malt beverages, and whether the beverage alcohol industry has implemented the recommendations contained in the Commission’s 1999 report to Congress regarding alcohol industry selfregulation. This report sets forth the Commission’s findings on these subjects. The Commission’s investigation of flavored malt beverages (FMBs) indicates that adults appear to be the intended target of FMB marketing, and that the products have established a niche in the adult market. The investigation found no evidence of targeting underage consumers in the FMB market. FMB marketers placed advertisements in conformance with the industry standard that at least 50% of the advertisement’s audience consists of adults age 21 and over. Nevertheless, the 50% placement standard in effect in 2001 and 2002 permitted the ads to reach a substantial youth audience. This is particularly significant where the products and some ad themes may be attractive to minors. Although it is probable that some teens drink FMBs, teen drinking continued to decline during the period when these beverages were being aggressively marketed.
Self-regulation practices in the alcohol industry have shown improvement since issuance of the 1999 Report. The 1999 Report recommended that the industry adopt a third-party review system as an external check on compliance with code standards, particularly to address complaints about underage appeal. The present study provides evidence that the proceedings of the Code Review Board of the Distilled Spirits Council of the United States (DISCUS) provide a critical review of spirits company compliance with the DISCUS Code. Additionally, Coors Brewing Company now participates in a third-party review program run by the Dispute Resolution Division of the Council of Better Business Bureaus, and two other companies have stated that they will adopt alternative approaches to obtain third-party input regarding their compliance with self-regulatory standards. The Commission continues to believe that third-party review provides an important measure of credibility to self-regulation and encourages all companies to adopt some form of an external review process.
The largest improvements have occurred in the area of ad placement. In 2002, the alcohol companies surveyed achieved 99% compliance with the standard that at least 50% of the relevant ii
media audience be adults. More importantly, the industry now has committed to adhere to a 70% placement standard and to implement post-placement audits. The study also revealed added industry attention to the issue of ad content. This area is particularly sensitive, given that minors are present in nearly every venue where ads are disseminated. Company documents show many examples of ad concepts being rejected, and ad content being modified, to...