Lawfulness under the antitrust laws administered by the FTC of a voluntary Code of Advertising Standards…

1190 FEDERAL TRADE COMMISSION DECISIONS
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91 F.T.C.

Lawfulness under the antitrust laws administered by the FTC of a voluntary Code of Advertising Standards proposed by the Wine

Institute, File 783 7006.
Opinion Letter
March 31, 1978
Dear Mr. DeLuca:

This is in response to your letters of September 23 and October 11, 1977, requesting an advisory opinion regarding the lawfulness under the laws administered by the Commission of a voluntary Code of Advertising Standards proposed by the Wine Institute. The Wine Institute is a trade association of the California wine industry representing wineries accounting, in 1976, for more than half of all wines sold in the United States. You have stated that the purpose of the Code is to encourage advertising reflecting the industry’s concern with maximum social responsibility and high standards in wine advertising. You also request Commission advice regarding proposed circulation of the Code by the Institute, if approved, to nonmember wineries .and other wine associations for their information and solicitation of various media organizations for their adoption of a code embodying the principles contained in the subject Code of Advertising Standards.

The Commission understands that adherence to the Code by the wine producer members of the Institute will be completely voluntary. Individual members will determine for themselves whether to comply with the Code and whether their advertising conforms to its requirements. No sanctions will be imposed, directly or indirectly, for noncompliance with the Code’s provisions. The Institute has given assurances to the Commission that its by-laws concerning suspension, expulsion or termination of membership or the imposition of fines and penalties, have no application to voluntary compliance or noncompliance with the proposed advertising Code. The Code does not apply to wholesalers or retailers of wine products and, as represented, is nondiscriminatory among wine producers insofar as limitations upon advertising opportunities are concerned.

The Commission has not considered, and therefore expresses no opinion regarding, the ethical concerns addressed by the Code. Accordingly, the advice rendered by the Commission pertains solely to the propriety of the proposed actions under the antitrust laws. In the Commission’s view, the antitrust laws do not prevent a completely voluntary forbearance by industry members from the use af adurnutininan thaw an nnn ntieen A w+ ~--!-N-- -- -4d

ADVISORY OPINIONS 1191 undue restraint of trade ensues. The Wine Institute’s objective of encouraging the promotion of wine products by domestic wine producers in a socially responsible manner may well be laudable. Particular care must be taken, however, to assure that limitations on advertising, even voluntary ones, do not operate anticompetitively or in such manner as unreasonably to restrict competitive alternatives or foreclose competitors in any market.

In addition to reviewing the submitted proposal to assure that effective competition in the domestic wine industry not be adversely effected, the Commission has considered possible downstream consequences, as well, of Code provisions that could secondarily operate to limit particular media markets or the commercial opportunities of persons associated with affected aspects of media advertising. To assure that limitations of this nature are minimized, the Institute has informed the Commission that the Code will be amended to eliminate a specific age designation for show models and personalities by omitting the words “are or” from Guideline 4(a), as well as in Guideline 4(c) to add the words “children’s or juveniles’ ” before “magazines.” The Commission has decided it should interpose no objection to presentation of the proposed Code by the Wine Institute to its members. This decision is based on the Institute’s assurance that no coercion, direct or indirect, will attend the decision by any member as to whether it will or will not comply with the provisions of the Code, the Code’s clearly noncommercial purposes and the limited nature of secondary restrictive effects on persons or entities engaged in businesses allied to advertising or to wine distribution and sale. The Commission, however, maintains the right to withdraw its approval in accordance with § 1.8(b) of the Rules of Practice in the event implementation of the Code results in coercion or competitive foreclosure or should the public interest otherwise so require. In view of the foregoing considerations, the Commission has decided to reserve opinion at this time concerning overtures to nonmember wine producers to adopt the Code, including unsolicited initial contacts with specific nonmembers for such purpose. A basic qualification to the Commission’s affirmative opinion regarding presentation of the Code by the Wine Institute to its members is that the Code be completely voluntary. Nonmembers of the Institute will be free to communicate interest in the Code if they so desire and the Code will undoubtedly receive sufficient publicity to enable their doing so. A special problem is presented by the Institute’s proposal to request media organizations to adopt parallel advertising guidelines. Such activity on the part of the Wine Institute, if fully successful, could as a practical matter render compliance with the Code’s provisions compul sory rather than voluntary from an individual wine producer’s _ perspective. Because pressures in this direction possess a significant potential for coercively inducing modifications in the advertising practices of competitors that could be commercially advantageous to those responsible for formulation of the Code, Commission approval cannot be extended to this aspect of the proposal.

By direction of the Commission.
Supplemental Letter Relative to Request
October 11, 1977