New FTC Asserts Itself

Federal Trade Commission chairman Jon Leibowitz had unimpeachable sources that directed him to a questionable advertising claim by Kellogg: His kids.
“They said, ‘Daddy, is it true that my attentiveness will be improved by 20 percent if I eat Frosted Mini-Wheats?’” said Leibowitz, who pointed out that his kids are old enough to know better and brought the subject up half-kiddingly. Still, Leibowitz (pictured) took the issue seriously enough to charge Kellogg with false advertising over that claim. Last week, the company settled with the FTC. Details were not disclosed.
Leibowitz, who was sworn in as chairman on March 3, said he was consciously making a statement about the FTC’s position on advertisers, a position which many speculate will be more proactive than in the past. “This is a signal that we’re going to be bringing cases against major corporations,” he said. “If you want to make sure advertising is truthful, you have to go after not only the bottom-feeders but America’s best-known corporations.”
Leibowitz’s appointment isn’t the only change at the FTC. Many speculate that all five commissioners will be replaced, which is unusual, even with a new administration.  “The big news is the turnover of the FTC,” said Doug Wood, a partner at ReedSmith, the New York law firm. “The story is that they will be more aggressive.” Wood said he expects the same from the FDA and the FCC as well. While more government oversight for advertising and marketing tends to be the norm during Democratic administrations (particularly when the party also controls both houses of Congress), the target this time is new media, one of the few remaining areas of growth for the advertising industry this year. Among the FTC’s initiatives for 2009:
• Behavioral targeting. The Internet Advertising Bureau is working with marketers and ad agencies to come up with a proposal to solve the question of how to target consumers online without invading their privacy. Mike Zaneis, vp of public policy for the IAB, couldn’t offer a firm date on when the proposal will be ready, but said, “We can see the light at the end of the tunnel.” Zaneis said the appointment of Leibowitz as chairman has meant a change, but Leibowitz, who has been a commissioner since 2004, was a known quantity. “The FTC is certainly changed and there’s a new sheriff in town,” Zaneis said. “But he was a factor before.”

• Endorsements. The FTC is considering holding marketers and media agents accountable for any product endorsement by bloggers, word-of-mouth marketers or even consumers on social media on behalf of a company for which they have received payment or free products. The FTC is expected to vote on that proposal this summer.
• Mobile advertising. The FTC this month held a “mobile town hall” with representatives from Verizon, Yahoo, Google, Nokia and other companies looking at, among other topics, preventing texting spam. The FTC also plans to expedite the review of its Children’s Online Privacy Protection Rule to determine whether it should cover mobile media.
Elsewhere, the FDA is taking a look at search ads for pharmaceutical brands (which it claims skirt the letter of the law by not providing disclaimers even though search advertising is often limited to 70 characters or fewer). As for big Congress-driven initiatives like banning advertising to children or further limiting direct-to-consumer ads for prescription drugs, industry watchers don’t expect much movement for a while. The economy seems to have hijacked the Obama administration’s agenda for now.
“They’re not so focused on those things right now,” said Ron Urbach, a partner at Davis & Gilbert in New York and a longtime FTC watcher. “They’re trying to save the world, if you will.”