Foote, Cone & Belding Advertising, Inc

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IN THE MATTER OF FOOTE, CONE & BELDING ADVERTISING, INC.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3116. Complaint, Sept. 30, 1983-Decision, Sept. 30, 1983 This consent order requires a Chicago, Ill. advertising agency affliated with Amana Refrigeration, Inc., among other things, to cease representing that only Amana microwave ovens passed independent laboratory testing conducted in 1980 and that Amana microwave ovens rated "best quality" in a 1980 consumer survey. The order prohibits misrepresentations concerning the purpose, content or conclusion of any test or survey and requires the agency to maintain accurate records which substantiate and/or contradict any claim made for products covered by this order. Further, the agency must have a reasonable basis for all future quality, safety or comparative performance representations made for microwave ovens. Appearances For the Commission: Andrew Sacks and Joel Winston. For the respondent: Elroy H Wolffand Philip J Crihfield, Sidley & Austin Washington, D.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that Foote, Cone & Helding Advertising, Inc., a corporation, hereinafter sometimes referred to as respondent, has violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Foote, Cone, & Belding Advertising, Inc. is a corporation organized, existing and doing business under and by virtue ofthe laws of the State of Delaware with its offce and principal place of business located in Chicago, Ilinois. PAR. 2. Respondent is now and at all times relevant to this complaint has been an advertising agency of Amana Refrigeration, Inc. PAR. 3. Respondent has caused to be prepared and placed for publication and has caused the dissemination of advertising and promo- 1274 Complaint tional material, including but not limited to the advertising referred to herein, to promote the sale of Amana microwave ovens. PAR. 4. Respondent's dissemination of advertisements for Amana microwave ovens mentioned herein constitutes maintenance ofa substantial course of trade in or affecting commerce, as Hcommerce " is defined in the Federal Trade Commission Act. PAR. 5. In the course and conduct ofits business, and for the purpose of promoting sale and distribution of Amana microwave ovens, and other consumer products, respondent has prepared, disseminated and caused the dissemination of advertising in national magazines and newspapers distributed by mail and across state lines, and in radio broadcasts transmitted by radio stations located in various States of the United States and in the District of Columbia, having suffcient power to carry such broadcasts across state lines. PAR. 6. Typical statements and representations in said advertisements, and promotional materials, prepared and disseminated as previously described, but not necessarily inclusive thereof, are found in advertisements attached hereto as Exhibits A, B, C and D. PAR. 7. Through the use of the statements and representations referred to in Paragraph Six and other representations contained in advertisements not specifically set forth herein, respondent has represented, and now represents directly or by implication, the following claims:

1. An independent laboratory tested Amana microwave ovens and ovens of five other manufacturers in four of the tests required for exemption from displaying a warning label. Only the Amana ovens passed all four tests.

2. A survey of microwave oven owners found that owners of nine other brands of microwave ovens rated Amana ovens "best quality. PAR. 8. In truth and in fact the direct or implied representations found in Paragraph Seven are false, for the following reasons: 1. The independent laboratory tested ovens of six manufacturers in addition to Amana. Ovens of one other manufacturer-Panasonicpassed all of the tests.

2. The survey relied upon did not find that owners of nine other brands of microwave ovens rated Amana Ubest quality" more often than they rated their own brand "best quality . As many or more owners of all other brands for which the data were tabulated rated their own brand "best quality . The vast majority of owners of other brands did not rate Amana "best quality" in the survey. In addition the data relied upon reported results for owners of only four other brands of microwave ovens.

PAR. 9. At the time respondent made the representations alleged in Complaint 102 F.

Paragraph Seven, respondent did not possess and rely upon a reasonable basis for making such representations. Therefore, respondent' making and dissemination of said representations, as alleged, constituted and now constitute unfair and deceptive acts or practices. PAR. 10. Through the use of the advertisements referred to in Paragraph Six, and other advertisements not specifically set forth herein respondent has represented, directly or by implication, that it possessed and relied upon a reasonable basis for the representations set forth in Paragraph Seven at the time of the initial dissemination of the representations and each subsequent dissemination. In truth and in fact, respondent did not possess and rely upon a reasonable basis for making such representations, and respondent knew or should have known that it did not possess and rely upon a reasonable basis at the time of dissemination. Therefore, respondent's making and dissemination of said representations, as alleged, constituted and now constitute unfair and deceptive acts or practices. PAR. 11. As the representations referred to above are false, and respondent knew or should have known that they were false at the time of their dissemination, such representations are deceptive, misleading, and unfair.

PAR. 12. The use by respondent of the aforesaid false, unfair, or deceptive statements, representations, acts, and practices, and the placement in the hands of others of the means and instrumentalities by and through which others may have used the aforesaid statements representations, acts, and practices, have had the capacity and tendency both to mislead consumers into the erroneous and mistaken belief that said statements and representations are true and complete and to induce such persons to purchase Amana microwave ovens by reason of said erroneous and mistaken belief. PAR. 13. The aforesaid acts or practices of respondent, herein alleged as aforesaid, were and are all to the prejudice and injury ofthe public and of Amana Refrigeration, Inc.'s competitors, and constituted and now constitute unfair or deceptive acts and practices in or affecting commerce and unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act, as amended. :: !;;:: ::

1274 Complaint EXHIBIT A FCB :::-C-'- C,-IENT AHANA RE:::UGt:;t7:0N ",'C. 3() ?"OOUC1 R.DARANGE uMBE TITLE.E TORTURE !t:ST AS ?RODUC::J 'G7H :0 5 ADO :"9 (S,X: ,,,sa Of" S7El. 3AL:") :lat '.;;as a ;- o,-r. n.:': p"e onto he door of: he Alana 1idarange. )n e or: e saf t:, t es:s utabllshed by the U. S. G.;ver=ent. 10;' unta .:' : est 5 a: 1I 'I"''''' ovens have :" pas s :" . .. ex "rlp t ::rc di 5 ?.:a y :1'; :.. e sa:',,:" warning label. iU ndepende''H 1.. b pu r ., "'"o r .a rui 5 "i ",1::- O"i! v e ,,'lens t:"rou of the t es:s. (SF:: O-AS,,) 0n':l Amana p..sse-: 011 The Aman.. K.darange. Suit: 'Je t: e, h" n has t A!",na. ' a'f' :05 DEAU:3. "!AG LH/J 1.,1/1110.

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Complaint 102 F.

EXHIBIT B FL'B c:-c:. Client M'.A. A R.EFR::GO:?A7ION I GATe t I ! , 80 PRODUCT RADARHGE ;M8E. E2:: TITLE L="G TORTURE US-; AS I'RODUC:u o",Po,C"-1 :5Q/:10'lADIO ;pSO- 111l9 (SFX; CRAS;! OF 51=:::L BALL) :h3t .35 a 5- pOiJf1d Sf eel Je': dX'DPIH!.d Ollto " door; of he ""3na it d.. range. An d "t . 5 1J S r; of the safer:' tests "-5 llshed by r e U. S. Gover.",e VolClllt3r)' ces.:s "hat ,Her""'''V,, D"ems have to pass ;0 be e e""H: rom displaying the safe y warning bbel. Ar1 :."dependent :..0 ;our: 5 ila ;04" brands of !Iler,,"..ve O"'''IIS uough of ,he t est:s. They alammed h" steel ball at tfH' fron of ,he oven door (S,;.. CRASH) They opened the doors, and sl.aQl!l,,d en.. ball into "he seal of the ovens. (Sf:': CRASH) They. sla""ed it inco the sea of the doot's. (SFX: CRASH) And with "'P to !Z5 pounds of :orr:e, they r:los.,d th., door!l onto a steel rod. (Sf:: CRASiJ) Only ,I'Hla p.a.Isedal14 tests. Only ;:he Amana ;td..,ange s built (:;ugh clough to take it. s buil:: better.r thall cthas ", be. (SF:: cusa) That s the Amana 'Jay.

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EXHIBIT D EVN OWNERS OF THE NINE OTHER LEAING MICROWAVE OVENS RATED BEST QUALIn:

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ITS"OTA I__,.

1274 Decision and Order DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy of a draft of complaint which the Bureau of Consumer Protection proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondent with violation of the Federal Trade Commission Act; and The respondent, its attorneys, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondent has stating itsviolated the said Act, and that complaint should issue charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Respondent Foote, Cone & Belding, Advertising, Inc. is a corporation organized, existing and doing business under and by virtue ofthe laws of the State of Delaware, with its offce and principal place of business located at 401 N. Michigan A venue, in the City of Chicago State of Ilinois.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

ORDER It is ordered That respondent Foote, Cone & Belding Advertising, Inc., a corporation, its successors and assigns, and its offcers, agents representatives, and employees, directly or through any corporation subsidiary, division or other device, in connection with the advertis- Decision and Order 102 ing, offering for sale, sale, or distribution of any Amana microwave oven or Amana combination microwave and convection oven for consumer or commercial use in or affecting commerce, as Hcommerce" is defined in the Federal Trade Commission Act, do cease and desist from:

A. Representing, directly or by implication, that only Amana ovens passed independent testing conducted by an independent laboratory in 1980.

B. Representing, directly or by implication, that in a 1980 consumer survey, owners of nine other brands of microwave ovens rated Amana best quality.

It is further ordered That respondent, its successors and assigns and its offcers, agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the advertising, offering for sale, sale, or distribution of any product specified in Part II(C) of this Order, in or affecting commerce, as ttcommerce" is defined in the Federal Trade Commission Act, do cease and desist from:

A. Misrepresenting in any manner, directly or by implication, the purpose, content, sample, reliabilty, results or conclusions of any survey, opinion research, or test.

E. Failing to maintain records:

1. Of all materials that were relied upon in disseminating any representation covered by this order, insofar as the text of such representation is prepared, authorized, or approved by any person who is an offcer or employee of respondent, or of any division, subdivision or subsidiary of respondent.

2. Of all test reports, studies, surveys, or demonstrations in its possession or control that contradict any representation made by respondent that is covered by this Order.

Such records shall be retained by respondent for three years from the date that the representations to which they pertain are last disseminated, and may be inspected by the staff of the Commission upon reasonable notice.

C. Part II of this Order shall apply to the following products for consumer use: all microwave ovens; all other ranges, cooktops, or ovens; all refrigerators, freezers, or combination refrigerator/freezers; all garbage compactors; all clothes washers and dryers; all air 1274 Decision and Order conditioners; all heating equipment and heat pumps; and all dehumidifiers.

A. It is further ordered That respondent, its successors and assigns and its offcers, agents, representatives and employees, directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, offering for sale, sale, or distribution of any microwave oven, or combination microwave and convection oven for consumer use in or affecting commerce, as ncommerce" is defined in the Federal Trade Commission Act, do cease and desist from representing, directly or by implication, the quality and/or safety of any such product, or from comparing any such product as to quality and/ or safety to any product or products of one or more competitors unless, at the time of such representation, respondent possesses and relies upon a reasonable basis for such representation, consisting of reliable and competent evidence that substantiates such representation.

B. To the extent the evidence of a reasonable basis consists of scientific or professional tests, analyses, research, studies or any other evidence based on expertise of professionals in the relevant area, such evidence shall be "reliable and competent" for purposes of Part III(A) only if those tests, analyses, research, studies, or other evidence are conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession or science to yield accurate and reliable results. Provided, however That in circumstances where the scientific or professional tests, analyses, research, studies, or any other evidence based on expertise of professionals in the relevant area was not directly or indirectly prepared, controlled, or conducted by respondent, it shall be an affrmative defense to an alleged violation of Part III of this Order for Respondent to prove that it reasonably relied on the expert judgment of its client or of an independent third party in concluding that it had a reasonable basis in accordance with Part of this Order. Such expert judgment shall be in writing signed by a person qualified by education or experience to render the opinion. Such opinion shall describe the contents of such evidence upon which the opinion is based.

Provided further That nothing in this Order shall be deemed to deny or limit respondent with respect to any right, defense, or other affrmative defense to which respondent otherwise may be entitled by law in a compliance action or any other action. Decision and Order 102 F. It is further ordered That respondent notify the Commission at least thirty (30) days prior to any proposed change in respondent such as dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other change in the corporation which may affect compliance obligations arising out of the Order.

It is further ordered That respondent shall forthwith distribute a copy of this Order to each of its operating divisions. It is further ordered That respondent shall, within sixty (60) days after this Order takes effect, fie with the Commission a report, in writing, setting forth in detail the manner and form in which it has complied with this Order.

VII It is further ordered That this Order shall take effect on the day that an order ofthe Commission to cease and desist in Amana Refrigeration, Inc. Docket 9162 (102 F. C. 1262 (1983)), has become final and effective, and this Order shall be effective only for such period of time as the Order in Docket 9162 is effective. .......... _.

LJ.n.L 1285 Complaint