Opinion ID: 2192361
Heading Depth: 2
Heading Rank: 1

Heading: The FTC Approach

Text: Understanding the debate requires a review of the evolving approach by the FTC to determinations of what is deceptive. In its brief here the Agency has staked out a position under an approach utilized by the FTC in some cases prior to its decision in Cliffdale Associates, Inc., 103 F.T.C. 110 (1984). To that decision the FTC appended a copy of a letter dated October 14, 1983, to the United States House of Representatives, describing the FTC's enforcement policy in deception cases (the FTC Policy). Writing in 1964, one observer of FTC enforcement against false advertising described the level of consumer intelligence selected by the FTC against which it will consider an advertisement. I.M. Millstein, The Federal Trade Commission and False Advertising, 64 Colum. L.Rev. 439, 458 (1964) (Millstein). It may be said, concluded Millstein, that the FTC has selected an extremely low intelligence level, and that the courts have not significantly disturbed the [FTC's] determinations in this respect. Id. [3] Illustrating Millstein's conclusion is Gelb v. FTC, 144 F.2d 580 (2d Cir.1944). There a divided panel sustained an order prohibiting the manufacturer of Clairol from representing that the product's effect on coloring hair was permanent. There [was] no dispute that [Clairol] imparts a permanent coloration to the hair to which it is applied, but the [FTC] found that it has `no effect upon new hair,' and hence concluded that the representation as to permanence was misleading. Id. at 582. Referring to Gelb as a farfetched conclusion[ ], a former director of the FTC's Bureau of Consumer Protection has observed that [p]ast [FTCs] occasionally have carried to astonishing lengths their mandate to protect the credulous against deception. R. Pitofsky, Beyond Nader: Consumer Protection and the Regulation of Advertising, 90 Harv. L.Rev. 661, 676 n. 58 (1977). See also Charles of the Ritz Distribs. Corp. v. FTC, 143 F.2d 676, 679-80 (2d Cir. 1944) (prohibiting use of the trademark Rejuvenescence for a foundation make-up cream because the average woman ... might take `rejuvenescence' to mean that this `is one of the modern miracles' and is `something which would actually cause her youth to be restored.') (quoting testimony of FTC's expert). The foregoing cases are not entirely representative of the pre-1984 body of false advertising law, even in the Second Circuit. In FTC v. Sterling Drug, Inc., 317 F.2d 669 (2d Cir.1963), the court affirmed the refusal by a district court to issue an injunction enforcing an FTC order against the manufacturer of Bayer aspirin. Funded by an FTC grant, an independent medical team had conducted a comparative study of five proprietary analgesic compounds, including Bayer aspirin. The conclusions of the study were published in the Journal of the American Medical Association and were quite favorable to Bayer aspirin. Its advertisement in print media began by stating `GOVERNMENT-SUPPORTED MEDICAL TEAM COMPARES BAYER ASPIRIN AND FOUR OTHER POPULAR PAIN RELIEVERS.''FINDINGS REPORTED IN THE HIGHLY AUTHORITATIVE JOURNAL OF THE AMERICAN MEDICAL ASSOCIATION REVEAL....' Id. at 673. The FTC contended that these portions of the ad deceptively implied that Bayer aspirin was endorsed by the federal government and by the American Medical Association. The Sterling Drug court restated certain well-established rules. [A]dvertising falls within [the FTC Act's] proscription not only when there is proof of actual deception but also when the representations made have a capacity or tendency to deceive, i.e., when there is a likelihood or fair probability that the reader will be misled. Id. at 674. The court further said that the cardinal factor is the probable effect which the advertiser's handiwork will have upon the eye and mind of the reader. It is therefore necessary in these cases to consider the advertisement in its entirety and not to engage in disputatious dissection. The entire mosaic should be viewed rather than each tile separately. Id. [4] With respect to a reader of the ad, the Sterling Drug court said that [u]nlike that abiding faith which the law has in the `reasonable man,' it has very little faith indeed in the intellectual acuity of the `ordinary purchaser' who is the object of the advertising campaign. Id. Nevertheless, the court held that our hypothetical, sub-intelligent, less-than-careful reader would not be led to believe that the Government endorsed the product itself, as opposed to having supported the study. Id. at 675. The court further held: To assert that the ordinary reader would conclude from the use of the word `authoritative' that the study was endorsed by the Journal and the Association is to attribute to him not only a careless and imperceptive mind but also a propensity for unbounded flights of fancy. This we are not yet prepared to do. Id. at 676. The FTC decision in Heinz W. Kirchner t/a Universe Co., 63 F.T.C. 1282 (1963), also forms part of the pre-FTC Policy history. The product involved there, Swim-Ezy, was a flat, inflatable rubber bladder connected to a plastic tube. The Swim-Ezy was to be worn under a bathing suit or trunks and inflated after the wearer had entered the water, thus theoretically preventing others from realizing that the wearer could not swim. Advertising referred to the product as an invisible swim aid. On that aspect of the case the FTC found no violation, on the following rationale: To be sure, `Swim-Ezy' is not invisible or impalpable or dimensionless, and to anyone who so understood the representation, it would be false. It is not likely, however, that many prospective purchasers would take the representation thus in its literal sense. True, as has been reiterated many times, the [FTC's] responsibility is to prevent deception of the gullible and credulous, as well as the cautious and knowledgeable (see e.g., Charles of the Ritz Dist. Corp. v. F.T.C., 143 F.2d 676 (2d Cir.1944)). This principle loses its validity, however, if it is applied uncritically or pushed to an absurd extreme. An advertiser cannot be charged with liability in respect of every conceivable misconception, however outlandish, to which his representations might be subject among the foolish or feebleminded. Some people, because of ignorance or incomprehension, may be misled by even a scrupulously honest claim. Perhaps a few misguided souls believe, for example, that all `Danish pastry' is made in Denmark. Is it, therefore, an actionable deception to advertise `Danish pastry' when it is made in this country? Of course not. A representation does not become `false and deceptive' merely because it will be unreasonably misunderstood by an insignificant and unrepresentative segment of the class of persons to whom the representation is addressed. If, however, advertising is aimed at a specially susceptible group of people (e.g., children), its truthfulness must be measured by the impact it will make on them, not others to whom it is not primarily directed. Id. at 1289-90. Heinz W. Kirchner was relied on in the FTC Policy. Appendix to Cliffdale Assocs., Inc., 103 F.T.C. at 178. Cliffdale Associates involved a gasoline conservation, automobile-retrofit-device called the Ball-Matic. Id. at 161. Advertising claims made for the Ball-Matic included that it would get `up to... 100 extra miles between fillups.' Id. at 167. The FTC upheld an ALJ's decision finding the claims deceptive because they were scientifically unsubstantiated. Significant to the case before us is that the FTC utilized Cliffdale Associates as the vehicle for applying the Policy to decide an actual case. The FTC said: Consistent with its Policy Statement on Deception, issued on October 14, 1983, the [FTC] will find an act or practice deceptive if, first, there is a representation, omission, or practice that, second, is likely to mislead consumers acting reasonably under the circumstances, and third, the representation, omission, or practice is material. These elements articulate the factors actually used in most earlier [FTC] cases identifying whether or not an act or practice was deceptive, even though the language used in those cases was often couched in such terms as `a tendency and capacity to deceive'. The requirement that an act or practice be `likely to mislead', for example, reflects the long established principle that the [FTC] need not find actual deception to hold that a violation of Section 5 has occurred. Id. at 164-65 (footnotes omitted). Further explaining the second element, the FTC said that [v]irtually all representations, even those that are true, can be misunderstood by some consumers, id., and that it had long recognized that the law should not be applied in such a way as to find that honest representations are deceptive simply because they are misunderstood by a few. Id. The standard for deception applied by the FTC in Cliffdale Associates and succeeding cases is the standard for determining deception now applied by the federal courts. See FTC v. Pantron I Corp., 33 F.3d 1088, 1095 (9th Cir.1994), cert. denied, 514 U.S. 1083, 115 S.Ct. 1794, 131 L.Ed.2d 722 (1995); Kraft, Inc. v. FTC, 970 F.2d 311, 324 (7th Cir.1992), cert. denied, 507 U.S. 909, 113 S.Ct. 1254, 122 L.Ed.2d 652 (1993); FTC v. World Travel Vacation Brokers, Inc., 861 F.2d 1020, 1029 (7th Cir.1988); Southwest Sunsites, Inc. v. FTC, 785 F.2d 1431, 1435-36 (9th Cir.), cert. denied, 479 U.S. 828, 107 S.Ct. 109, 93 L.Ed.2d 58 (1986); FTC v. Wilcox, 926 F.Supp. 1091, 1098 (S.D.Fla. 1995); FTC v. Patriot Alcohol Testers, Inc., 798 F.Supp. 851, 855 (D.Mass.1992).