Phusion Projects, LLC

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IN THE MATTER OF PHUSION PROJECTS, LLC, JAISEN FREEMAN, CHRISTOPHER HUNTER AND JEFFREY WRIGHT CONSENT ORDER, ETC. IN REGARD TO ALLEGED VIOLATIONS OF SECS. 5(A) AND 12 OF THE FEDERAL TRADE COMMISSION ACT Docket No. C-4382; File No. 112 3084 Complaint, February 6, 2013 – Decision, February 6, 2013 This consent order addresses allegations that Respondents labeled, advertised, promoted, offered for sale, sold and distributed a fruit-flavored, carbonated alcoholic beverage, Four Loko, to consumers. The complaint alleges that Respondents’ made false and misleading representations that a 23.5-ounce can of Four Loko contains the alcohol equivalent to one or two beers and could safely be consumed in its entirety on a single occasion. In fact, a 23.5-ounce can of Four Loko contained alcohol equal to more than four regular beers. The consent order prohibits the respondents from offering for sale, selling, or distributing Four Loko or any other flavored malt beverage in a container that provides more than 1.5 ounces of ethanol unless the label clearly and conspicuously discloses the equivalent number of beers that such alcoholic content represents. The consent order further prohibits the respondents from misrepresenting the alcohol content of any alcohol beverage prpoduct, and requires respondents to keep copies of any relevant advertisements and substantiation for any advertising claims. Participants For the Commission: Janet Evans and Carolyn Hann. For the Respondents: Megan E. Alvarez, Alan P. Bielawski, Matthew R. Dornauer, and Andrew J. Strenio, Jr., Sidley Austin LLP.

COMPLAINT The Federal Trade Commission, having reason to believe that Phusion Projects, LLC, a limited liability company, and Jaisen Freeman, Christopher Hunter, and Jeffrey Wright, individually and as officers of the company (“respondents”), have violated the provisions of the Federal Trade Commission Act, and it appearing to the Commission that this proceeding is in the public interest, alleges:

PHUSION PROJECTS, LLC 213 Complaint 1. Respondent Phusion Projects, LLC (“Phusion Projects”) is a Delaware corporation with its principal office or place of business at 1658 North Milwaukee Avenue, #424, Chicago, Illinois 60647.

2. Respondent Jaisen Freeman is a Co-Founder and Managing Partner of Phusion Projects. Freeman oversees the company’s daily operations. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of Phusion Projects, including the acts or practices alleged in this complaint. His principal office or place of business is the same as that of Phusion Projects. 3. Respondent Christopher Hunter is a Co-Founder and Managing Partner of Phusion Projects. Hunter oversees all marketing and promotional materials for the company. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of Phusion Projects, including the acts or practices alleged in this complaint. His principal office or place of business is the same as that of Phusion Projects.

4. Respondent Jeffrey Wright is a Co-Founder and Managing Partner of Phusion Projects. Wright oversees the company’s manufacturing and production functions. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of Phusion Projects, including the acts or practices alleged in this complaint. His principal office or place of business is the same as that of Phusion Projects. 5. Respondents have labeled, advertised, promoted, offered for sale, sold, and distributed Four Loko to consumers. 6. Four Loko is an 11% or 12% alcohol by volume (“ABV”), fruit-flavored, carbonated malt beverage sold in 23.5 ounce (“oz”) cans that are not resealable. Four Loko is a “food” within the meaning of Sections 12 and 15 of the Federal Trade Commission Act (“FTC Act”). Until approximately November 2010, Four Loko also included added stimulants such as caffeine, taurine, and guarana.

VOLUME 155 Complaint 7. The acts and practices of respondents, as alleged herein, have been in or affecting commerce, as “commerce” is defined in Section 4 of the FTC Act.

8. Respondents have disseminated or caused to be disseminated advertisements, packaging, and promotional material for Four Loko including, but not limited to, the attached Exhibits A through D. These materials contain the following statements and depictions:

A. Four Loko Packaging (Exhibits A1 and A2) [image of Four Loko XXX Limited Edition can] [image of Four Loko Lemon-Lime can] B. DrinkFour Website: “Photo Contest” (Exhibits B1 through B4) “. . . Here at Four, we like it when you guys and girls flip out, get weird, and go all crazy. We like it even more if you have a camera around to capture your most ridiculous, out of control, sexy, fun, cuddly, zany, spicy, demented, screwball moments while drinking Four. If you’re daring enough to submit a photo so provocative, absurd, uncivilized, titillating, uninhibited, or fierce that we deem it the ‘Photo Contest Winner,’ we’ll send you your pick of one of our hot new T-Shirts!” * * * [photo depicting two young men holding cans of 23.5 oz Four Loko, one drinking from the can] * * * [photo depicting young woman in a straw hat consuming Four Loko directly from a 23.5 oz can] * * * [photo of three young men, one of whom is holding a can of Four Loko] PHUSION PROJECTS, LLC 215 Complaint “first guy drank 1 [can], second guy drank 2, third guy drank 3, fourth guy was on the ground.” C. Retail Instructions and Display “The CRUSHING the Competition LOKO and Earthquake rollout Incentive Salesman Four LOKO Placements May 24th - June 30th . . .

must be placed in singles door Must be merchandised with proper pricing” * * * – (Exhibit C1) [Photo of Actual Display in Retail Store in Washington, D.C.] – (Exhibit C2) D. Promotional Material: “Four Loko” (Exhibits D1 through D3) [Four Loko Block Party photo] * * * [Marketing Sheet] Four Loko is a crazy fruit punch flavored blend . . . packed into a HUGE 23.5 oz CAN.

. . .

∙ 23.5 oz can singles are experiencing exponential growth” (emphasis added) VOLUME 155 Complaint * * * [Email Solicitation to a Potential Distributor: “FOUR LOKO AND EARTHQUAKE”] “. . . Four loko [sic] is one of the fastest growing products in the country. . . . Watermelon is the top selling single serve in the SE region of 7-11. . . . ” (emphasis added) 9. Through the means described in Paragraph 8 including, but not limited to, the statements and depictions contained in the materials attached as Exhibits A through D, among others, respondents have represented, expressly or by implication, that a 23.5 oz can of 11% or 12% ABV Four Loko contains alcohol equivalent to one or two regular, 12 oz beers. 10. In truth and in fact, a 23.5 oz can of 11% or 12% ABV Four Loko does not contain alcohol equivalent to one or two regular, 12 oz beers. A 23.5 oz can of 11% ABV Four Loko contains 2.6 oz of ethanol, that is, alcohol equivalent to 4.3 regular beers, and a 23.5 oz can of 12% ABV Four Loko contains 2.8 oz of ethanol, that is, alcohol equivalent to 4.7 regular beers. Therefore, the representation set forth in Paragraph 9 was, and is, false or misleading.

11. Through the means described in Paragraph 8 including, but not limited to, the statements and depictions contained in the materials attached as Exhibits A through D, among others, respondents have represented, expressly or by implication, that an individual can safely consume a 23.5 oz can of 11% or 12% ABV Four Loko on a single occasion.

12. In truth and in fact, an individual cannot safely consume a 23.5 oz can of 11% or 12% ABV Four Loko on a single occasion. A 23.5 oz can of 11% ABV Four Loko contains 2.6 oz of ethanol, that is, alcohol equivalent to 4.3 regular beers, and a 23.5 oz can of 12% ABV Four Loko contains 2.8 oz of ethanol, that is, alcohol equivalent to 4.7 regular beers. As a result, consuming a single can of Four Loko on a single occasion constitutes “binge drinking,” which is defined by health officials as men drinking five (and women drinking four) or more standard drinks in about PHUSION PROJECTS, LLC 217 Complaint two hours. Such excessive drinking typically raises a person’s blood alcohol concentration to 0.08 percent or more. It also typically results in acute intoxication that can be harmful for a variety of reasons, including impaired brain function resulting in poor judgment, reduced reaction time, loss of balance and motor skills, and slurred speech. Therefore, the representation set forth in Paragraph 11 was, and is, false or misleading. 13. Through the means described in Paragraph 8, including, but not limited to, the statements and depictions contained in the materials attached as Exhibits A through D, among others, respondents have represented, expressly or by implication, that a 23.5 oz can of 11% or 12% ABV Four Loko is a single serving. Respondents have failed to disclose, or failed to disclose adequately, that a 23.5 oz can of 11% ABV Four Loko contains 2.6 oz of ethanol, that is, alcohol equivalent to 4.3 regular beers, and a 23.5 oz can of 12% ABV Four Loko contains 2.8 oz of ethanol, that is, alcohol equivalent to 4.7 regular beers. These facts would be material to consumers in their purchase or consumption of Four Loko. The failure to disclose these facts, in light of the representation made, was, and is, a deceptive practice. 14. The acts and practices of respondents as alleged in this complaint constitute unfair or deceptive acts or practices, and the making of false advertisements, in or affecting commerce in violation of Sections 5(a) and 12 of the Federal Trade Commission Act.

THEREFORE, the Federal Trade Commission this sixth day of February, 2013, has issued this Complaint against respondents. By the Commission, Chairman Leibowitz and Commissioner Wright not participating.

VOLUME 155 Complaint EXHIBIT A1 PHUSION PROJECTS, LLC 219 Complaint EXHIBIT A2 VOLUME 155 Complaint EXHIBIT B1 EXHIBIT B2 PHUSION PROJECTS, LLC 221 Complaint EXHIBIT B3 fnmeassars a @ are Sis > CONFIDENTIAL PRFTCODGE925 EXHIBIT B4 Seber! o Phobos Goce bers habe om a [Rotel ae COMFIDENTIAL PPFTCODEOss VOLUME 155 Complaint EXHIBIT C1 PHUSION PROJECTS, LLC 223 Complaint EXHIBIT C2 VOLUME 155 Complaint EXHIBIT D1 PHUSION PROJECTS, LLC 225 Complaint EXHIBIT D2 Catteinsted Alcoholic aleohol industry isa Cragg Fruik xs blend of Caffeine, ‘ and 1498 alcohol a 93.5 o2 can singles are experiencing exponential srowth High Prati cOMTAIMS ALCON ey et in the EB MA 4) CONFIDENTIAL PPFTOONIESE bei a at aad FTC-0001646 VOLUME 155 Complaint EXHIBIT D3 PHUSION PROJECTS, LLC 227 Decision and Order DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondents named in the caption hereof, and the respondents 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 the respondents with violation of the Federal Trade Commission Act; and The respondents, respondents’ counsel, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all of the jurisdictional facts set forth in the aforesaid draft complaint, a statement that the signing of the agreement is for settlement purposes only and does not constitute an admission by the respondents that the law has been violated as alleged in such complaint, or that any of the facts as alleged in such complaint, other than jurisdictional facts, are true, 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 respondents have violated the Act, and that complaint should issue stating its 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, and having duly considered the comments received from interested persons pursuant to Section 2.34 of its Rules, and having modified the Decision and Order in certain respects, 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 Phusion Projects, LLC is a Delaware limited liability company with its principal office or place of business at 1658 North Milwaukee Avenue, #424, Chicago, Illinois 60647.

VOLUME 155 Decision and Order 2. Respondent Jaisen Freeman is an officer and owner of the corporate respondent. His principal office or place of business is the same as that of the corporate respondent. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of the corporate respondent.

3. Respondent Christopher Hunter is an officer and owner of the corporate respondent. His principal office or place of business is the same as that of the corporate respondent. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of the corporate respondent. 4. Respondent Jeffrey Wright is an officer and owner of the corporate respondent. His principal office or place of business is the same as that of the corporate respondent. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of the corporate respondent.

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

ORDER DEFINITIONS For purposes of this order, the following definitions shall apply:

1. Unless otherwise specified:

a. “Respondents” shall mean Phusion Projects, LLC, its successors and assigns and their officers; Jaisen Freeman, individually and as an officer of the company; Christopher Hunter, individually and as an officer of the company; Jeffrey Wright, individually and as an officer of the company; and each of the above’s agents, representatives, and PHUSION PROJECTS, LLC 229 Decision and Order employees, or other persons directly or indirectly under the control of any respondent.

b. “Corporate respondent” shall mean Phusion Projects, LLC, its successors and assigns and their officers, and each of the above’s agents, representatives, and employees.

c. “Controlling respondent(s)” shall mean Jaisen Freeman, Christopher Hunter, and Jeffrey Wright, when such individual(s) is, or collectively are, a significant shareholder (5% or more equity owner) of, or when such individual(s) directly or indirectly manage(s) or control(s), any entity, and its agents, representatives, employees, and other persons directly or indirectly under its control. 2. “Commerce” shall mean as defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. § 44. 3. “Flavored malt beverage” shall mean Four Loko and any other beverage:

a. made by the alcoholic fermentation, in potable brewing water, of malted barley with hops, or their parts, or their products, and with or without other malted cereals, and with or without the addition of unmalted or prepared cereals, other carbohydrates or products prepared therefrom, and with or without other wholesome products suitable for human food consumption; and b. to which flavors containing alcohol and/or nonbeverage ingredients containing alcohol have been added; provided that, such flavors and nonbeverage ingredients may contribute no more than 49% of the overall alcohol content of the finished product unless the alcohol content is more than 6% by volume, in which case no more than 1.5% of the volume of the finished product may consist of alcohol derived from added flavors VOLUME 155 Decision and Order containing alcohol and non-beverage ingredients containing alcohol; and c. which may be filtered or otherwise processed in order to remove color, taste, aroma, bitterness, or other characteristics derived from fermentation. 4. “Covered product” shall mean any beverage product containing alcohol.

5. “Endorsement” shall mean as defined in 16 C.F.R. § 255.0.

6. “Food” shall mean as defined in Section 15 of the FTC Act, 15 U.S.C. § 55.

7. “TTB” shall mean the Alcohol and Tobacco Tax and Trade Bureau of the U.S. Department of Treasury, or any successor agency responsible for granting approval for beverage alcohol labels.

8. “TTB Approval Date’’ shall mean the date that TTB approves the display of the Alcohol Facts disclosure set forth in Part I.B, below, on a particular label. 9. The term “including” in this order shall mean “without limitation.”

10. The terms “and” and “or” in this order shall be construed conjunctively or disjunctively as necessary, to make the applicable phrase or sentence inclusive rather than exclusive.

I.

IT IS ORDERED that corporate respondent and controlling respondents, directly or through any corporation, partnership, subsidiary, division, trade name, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any flavored malt beverage in a container that provides 1.2 or more fluid ounces of ethanol, in or affecting commerce:

PHUSION PROJECTS, LLC 231 Decision and Order A. Shall request TTB approval to display the “Alcohol Facts” disclosure set forth in Part I.B, below, on such containers and shall use all commercially reasonable efforts to obtain such TTB approval expeditiously and in good faith.

B. Commencing no later than ninety (90) days after the TTB Approval Date, shall not offer for sale, sell, or distribute such product unless the label for such product includes an accurate “Alcohol Facts” disclosure as depicted on Attachment A1-A3 to this order; provided that:

i. The disclosure shall be boxed with all black type printed on a white ground, and shall use the format, including fonts, justification, border, lines, and spacing, depicted on Attachment A1-A3 for the various container sizes there identified, and the dimensions of the disclosure shall be no smaller than the sizes identified for those container sizes; ii. The disclosure shall appear on the back of the container, perpendicular to the top of the container, and its outside border shall be at least 2.5 centimeters from the top and bottom of the container;

iii. The serving size shall be rounded to the nearest quarter ounce and reflected as a decimal value (i.e., “.25,” “.5”, “.75,” or a whole number); and iv. The disclosure of alcohol by volume will be considered to be accurate if it complies with 27 C.F.R. § 7.71.

II.

IT IS FURTHER ORDERED that, commencing on August 6, 2013, corporate respondent and controlling respondents, directly or through any corporation, partnership, subsidiary, division, trade name, or other device, in connection with the VOLUME 155 Decision and Order manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of Four Loko or any other flavored malt beverage, in or affecting commerce, shall not offer for sale, sell, or distribute such product in a container that provides more than 1.5 fluid ounces of ethanol unless the container is resealable. III.

IT IS FURTHER ORDERED that respondents, directly or through any corporation, partnership, subsidiary, division, trade name, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any covered product, in or affecting commerce: A. Shall not misrepresent, in any manner, expressly or by implication, including through the use of a product name or endorsement, the alcohol content of any covered product; and B. Shall not depict any covered product containing 1.2 or more fluid ounces of ethanol being consumed directly from the container.

IV.

IT IS FURTHER ORDERED that nothing in this Order shall prohibit respondents from making any representation about any covered product that is specifically required by regulation or order promulgated by the U.S. Department of Treasury Alcohol and Tobacco Tax and Trade Bureau pursuant to the Federal Alcohol Administration Act.

V.

IT IS FURTHER ORDERED that respondent Phusion Projects, LLC, its successors and assigns, and respondents Jaisen Freeman, Christopher Hunter, and Jeffrey Wright shall, for five (5) years after the last date of dissemination of any representation covered by this Order, maintain and upon reasonable notice make available to the Commission for inspection and copying: PHUSION PROJECTS, LLC 233 Decision and Order A. All advertisements and promotional materials containing the representation;

B. All materials that were relied upon in disseminating the representation; and C. All tests, reports, studies, surveys, demonstrations, or other evidence in their possession or control that contradict, qualify, or call into question the representation, or the basis relied upon for the representation, including complaints and other communications with consumers or with governmental or consumer protection organizations.

VI.

IT IS FURTHER ORDERED that respondent Phusion Projects, LLC, its successors and assigns, and respondents Jaisen Freeman, Christopher Hunter, and Jeffrey Wright shall deliver a copy of this Order to all current and future principals, officers, directors, and other employees having primary responsibilities with respect to the subject matter of this Order, and shall secure from each such person a signed and dated statement acknowledging receipt of the Order. Respondents shall deliver this Order to such current personnel within thirty (30) days after the date of service of this Order, and to such future personnel within thirty (30) days after the person assumes such position or responsibilities.

VII.

IT IS FURTHER ORDERED that respondent Phusion Projects, LLC, and its successors and assigns, shall notify the Commission at least thirty (30) days prior to any change in the corporation that may affect compliance obligations arising under this Order, including, but not limited to, dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the proposed filing of a bankruptcy petition; or a change in the corporate name or address. Provided, however, VOLUME 155 Decision and Order that, with respect to any proposed change in the corporation about which respondent Phusion Projects, LLC, learns less than thirty (30) days prior to the date such action is to take place, respondent shall notify the Commission as soon as is practicable after obtaining such knowledge. All notices required by this Part shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

VIII.

IT IS FURTHER ORDERED that respondents Jaisen Freeman, Christopher Hunter, and Jeffrey Wright, for a period of five (5) years after the date of issuance of this Order, shall each notify the Commission of the discontinuance of his current business or employment. This notice shall include respondent’s new business address and telephone number and a description of the nature of the business or employment and his duties and responsibilities. All notices required by this Part shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. IX.

IT IS FURTHER ORDERED that respondent Phusion Projects, LLC, its successors and assigns, and respondents Jaisen Freeman, Christopher Hunter, and Jeffrey Wright shall, within sixty (60) days after the date of service of this Order, file with the Commission a true and accurate report, in writing, setting forth in detail the manner and form in which they have complied with this Order. Within ten (10) days of receipt of written notice from a representative of the Commission, respondents shall submit additional true and accurate written reports. PHUSION PROJECTS, LLC 235 Decision and Order X.

This Order will terminate on February 6, 2033, or twenty (20) years from the most recent date that the United States or the Federal Trade Commission files a complaint (with or without an accompanying consent decree) in federal court alleging any violation of the Order, whichever comes later; provided, however, that the filing of such a complaint will not affect the duration of: A. Any Part in this Order that terminates in less than twenty (20) years;

B. This order’s application to any respondent that is not named as a defendant in such complaint; and C. This Order if such complaint is filed after the Order has terminated pursuant to this Part.

Provided, further, that if such complaint is dismissed or a federal court rules that respondents did not violate any provision of the Order, and the dismissal or ruling is either not appealed or upheld on appeal, then the Order will terminate according to this Part as though the complaint had never been filed, except that the Order will not terminate between the date such complaint is filed and the later of the deadline for appealing such dismissal or ruling and the date such dismissal or ruling is upheld on appeal. By the Commission, Chairman Leibowitz and Commissioner Wright not participating.

VOLUME 155 Decision and Order ATTACHMENT A1 ATTACHMENT A2 PHUSION PROJECTS, LLC 237 Decision and Order ATTACHMENT A3 For containers with less than 12 fluid ounces TORpt « B1 pt box, pp * sanienaiceg ogra Alcohol Facts }—M Fankin cothic heavy ispt rere Pt. veh justified ——+ Container Size af. oz. -— ae ast Spt Sptleacing Alcohol by volume 15% Pghe just TO4pt long 0.54 rule, centered ‘| Sanings par Conabar = 104pt long Tp? rule, centered ——+ Sona ue — ui Guidgiined, a perving coniaise | ~*+]——— Helvetica Bald épt. Fs leading 0.6 ounces of pure alcohol. Left Indent Spt. first ne indent -3pt Soft line ca before "1.6"

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VOLUME 155 Analysis to Aid Public Comment ANALYSIS OF PROPOSED CONSENT ORDER TO AID PUBLIC COMMENT The Federal Trade Commission has accepted, subject to final approval, an agreement containing a consent order from Phusion Projects, LLC, Jaisen Freeman, Christopher Hunter, and Jeffrey Wright (the “respondents”). The proposed consent order has been placed on the public record for thirty (30) days for receipt of comments by interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will again review the agreement and the comments received, and will decide whether it should withdraw the agreement or make final the agreement’s proposed order. This matter involves the marketing for Four Loko, a fruitflavored malt beverage product. Four Loko contains 11% to 12% alcohol by volume (“ABV”) and is sold in a 23.5 oz can. The respondents promoted Four Loko through product packaging, Internet advertising including fan photo contests, and print solicitations to potential distributors. According to the FTC complaint, the respondents represented in its marketing materials that a 23.5 oz can of 11% or 12% ABV Four Loko: (a) contains the alcohol equivalent to one or two regular, 12 oz beers, and (b) could safely be consumed in its entirety on a single occasion. The complaint alleges that both claims are false or misleading because a 23.5 oz can of 11% ABV Four Loko contains alcohol equivalent to 4.3 regular beers and a 23.5 oz can of 12% ABV Four Loko contains alcohol equivalent to 4.7 regular beers. In addition, the complaint alleges that the respondents’ failure to disclose these facts was deceptive, in light of their representation that a can of Four Loko contained a single serving.

The proposed consent order contains provisions designed to prevent the respondents from engaging in similar acts and practices in the future. Parts I and II apply to the defined term, “covered flavored malt beverages.” Part I prohibits the corporate respondent and controlling respondents (generally defined as the individual respondents, when such individual(s) is, or collectively are, a significant shareholder or directly or indirectly manage or control any entity) from offering for sale, selling, or distributing PHUSION PROJECTS, LLC 239 Analysis to Aid Public Comment Four Loko or any other covered flavored malt beverage in a container that provides more than 1.5 oz of ethanol (approximately two and one half (2 1/2) regular beers) unless the label discloses, clearly and conspicuously, the following statement:

“This can [or bottle] has as much alcohol as [ ] regular (12 oz, 5% alc/vol) beers.”

Part I sets forth specific approved fonts and font sizes, placement requirements (for both cans and bottles larger and smaller than 12 oz), and a formula for calculating the number of regular beers in the container. This part also provides that the second set of brackets shall be replaced by the number of 0.6 oz servings of ethanol in the product. Part I is designed to address the allegedly false representation that Four Loko contains the alcohol equivalent to one or two regular, 12 oz beers. The disclosure requirement is designed to alert consumers to the actual number of servings of alcohol in the container. Part II of the proposed order further prohibits, commencing six (6) months after date of issuance of the order, the corporate respondent and controlling respondents from offering for sale, selling, or distributing Four Loko or any other covered flavored malt beverage in a container that provides more than 1.5 oz of ethanol unless the container is resealable. Together, Parts I and II of the proposed order are designed to address the allegedly false representation that Four Loko can safely be consumed on a single occasion. The disclosure requirement is designed to alert consumers to the number of servings of alcohol in the container, and the resealability requirement makes it possible for consumers to drink a portion of the container's content and to save some for later.

Part III of the proposed order prohibits the respondents from misrepresenting the alcohol content of any alcohol beverage product. Part III also prohibits the respondents from depicting in advertising any alcohol beverage product containing more than 1.5 oz of ethanol being consumed directly from the container. This provision also addresses the respondents’ representation that a can of Four Loko can be safely consumed on a single occasion. VOLUME 155 Analysis to Aid Public Comment This prohibition provides a clear standard for compliance by the respondents and for enforceability by the FTC. Part IV of the proposed order states that the order does not prohibit the respondents from making any representation about any alcohol beverage product that is specifically required by regulation or order by the U.S. Department of Treasury Alcohol and Tobacco Tax and Trade Bureau pursuant to the Federal Alcohol Administration Act.

Parts V through IX of the proposed order require the respondents to keep copies of relevant advertisements and materials substantiating claims made in the advertisements; to provide copies of the order to its personnel; to notify the Commission of changes in corporate structure that might affect compliance obligations under the order; to notify the Commission of changes in any of the individual respondents’ business or employment that might affect compliance obligations under the order; and to file compliance reports with the Commission. Part X provides that the order will terminate after twenty (20) years, with certain exceptions.

The purpose of this analysis is to facilitate public comment on the proposed order, and it is not intended to constitute an official interpretation of the agreement and proposed order or to modify in any way their terms.

IDEXX LABORATORIES, INC. 241 Complaint