Federal Trade Commission

The Federal Trade Commission (FTC) is a five-person, independent government agency that has as its primary goal the protection of consumers from unfair or deceptive business practices. The FTC originally was created in 1914 to prohibit unfair competition, but Congress later expanded the commission's powers to include regulation of false and deceptive advertising. The commission's basic authority stems from Section 5 of the Federal Trade Commission Act (“FTC Act”), which states that “unfair or deceptive acts or practices in or affecting commerce are hereby declared unlawful” (5 U.S.C. §45 [a] [1]).

Historically, the FTC was known for timidity and delay; with the consumer movement of the 1960s and 1970s, however, Congress enlarged both the agency's budget and its powers. As a result, the FTC aggressively went after some of the nation's most prominent advertisers, and by the late 1970s was viewed by many as the most powerful U.S. regulatory agency. In the 1980s, however, the FTC's influence declined after the Reagan administration significantly reduced the agency's funding. The FTC again increased its enforcement efforts in the 1990s, targeting the tobacco industry for the “Joe Camel” campaign and other advertising designed to appeal to children, as well as a number of national advertisers for false advertising in the form of program-length “infomercials.” Since 1996, the agency has cracked down on Internet fraud and emphasized through enforcement actions, working papers, and law enforcement initiatives that the FTC's consumer protection mandate extends to Internet, as well as traditional, retailers.

Through its Bureau of Consumer Protection, the FTC works to shield consumers against false, unfair, misleading, or deceptive advertising. The FTC defines advertising broadly, exercising jurisdiction over much more than just standard, paid-for product publicity advertisements. Public relations practitioners must be aware that the FTC considers all activities or communications meant to draw public attention to a product, service, person, or organization for purposes of trade as “advertisements” and therefore subject to regulation. This definition therefore includes press and video releases, sales brochures, direct mail, product labels, and promotional contests, as well as standard media advertisements.

The former R.J. Reynolds cigarette advertising mascot, “Joe Camel,” plays pool and smokes cigarettes in an advertisement for Camel cigarettes that covers a billboard in a field. The FTC and antismoking advocates pressured R.J. Reynolds to eliminate the “Joe Camel” campaign in 1997, accusing the company of using a cartoon character to attract young smokers.

© Joel W. Rogers/CORBIS.

Since 1983, the FTC has defined deceptive advertising as “a material representation, omission, or practice that is likely to mislead a consumer acting reasonably under the circumstances.” Three elements should be noted about this definition. First, a literally true statement may qualify as deceptive if by omitting a fact it thereby creates a misleading implication. So, for example, the FTC ruled that Thompson Medical's advertising campaign for its Aspercreme ointment was deceptive because the advertisements implied that the cream contained aspirin, when it did not (In re Thompson Medical Co., 104 F.T.C. 313 [1984]).

Second, an advertisement will be considered deceptive if it is likely to mislead a reasonable consumer with the characteristics of the target market, even if the ad does not in fact deceive anyone. In [Page 323]evaluating an advertisement directed at children or the elderly, for example, the commission will take into consideration any special susceptibilities of those groups. However, an advertiser will not be responsible for misinterpretations made by consumers who act foolishly or interpret an advertisement in an irrational manner.

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