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The Federal Trade Commission (FTC) is an independent administrative agency established by the U.S. Congress in the FTC Act of 1914 to prevent anticompetitive business practices in the marketplace. In 1938, Congress amended the Act to expand the jurisdiction of the FTC to broadly regulate “unfair and deceptive acts and practices.” Other provisions in the FTC Act give the FTC jurisdiction over false advertising for foods, drugs, services, devices, and cosmetics. The FTC has six bureaus, including the Bureau of Consumer Protection, which protects consumers against unfairness, deception, and fraud. Within that bureau, the Division of Advertising Practices enforces federal truth-in-advertising laws and includes children's advertising as a focus of enforcement.

Deception

In 1983, the FTC defined deception as a “representation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer's detriment.” The FTC evaluates potential deception in advertising using the perspective of the reasonable consumer. However, advertising that targets children is evaluated for deception using the perspective of the average child in the targeted group.

The FTC has adopted the conclusion that deception in children's advertising “exploit[s] unfairly a consumer group unqualified by age or experience to anticipate the possibility that representations may be exaggerated or untrue.” For example, in one case, the FTC brought action against a toy company over children's advertising that depicted a toy doll dancing in an unrealistic manner. The FTC found the advertisement deceptive based on the conclusion that a reasonable child would likely believe, erroneously, that the toy doll actually could dance as depicted in the advertising.

Unfairness

In 1980, the FTC defined unfairness as an act or practice that causes—or is likely to cause—substantial consumer injury that consumers cannot reasonably avoid and that is not outweighed by countervailing benefits to consumers or competition. Subsequently, Congress incorporated this definition by amendment into the FTC Act in 1994. However, FTC jurisdiction to regulate children's advertising with unfairness enforcement—as opposed to charging deception—remains limited. In 1994, Congress also amended the FTC Act to prohibit the agency from enacting any rule that “[children's] advertising constitutes an unfair act or practice affecting commerce.”

In the early 1990s, the FTC used unfairness enforcement to obtain agreements from a number of companies to limit their advertising of pay-per-call services targeted to children. In 1992 legislation, Congress authorized the FTC to make pay-per-call rules, which now restrict pay-per-call advertising targeted to individuals under the age of 18 years and ban targeting such advertising to children under the age of 12 years. In another case, the FTC closed an unfairness investigation of the R. J. Reynolds Tobacco Company in 1994, citing lack of evidence of a sufficient connection between the company's “Joe Camel” advertising campaign and underage smoking.

Other Areas of Concern

In 2000, the FTC began enforcing the Children's Online Privacy Protection Rule, which restricts online collection of personal information from children under the age of 13 years without notice and parental consent. The rule tracks provisions in the Children's Online Privacy Protection Act, passed by Congress in 1998. In addition, the FTC has issued reports to Congress regarding the marketing and advertising of alcohol products and violent entertainment (motion pictures, music, and video games) to children but recommended in those reports continued reliance on industry self-regulation with suggested improvements and continued monitoring.

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