Comparative Advertising; Issuance of a Policy Statement

Page 74

BILLING CODE 4910-13-M FEDERAL TRADE COMMISSION 16 CFR Part 14 Comparative Advertising; Issuance of a Policy Statement a g e n c y : Federal Trade Commission. „ ACTION: Issuance of a Policy Statement. SUMMARY: This Policy Statement articulates the Commission’s position on comparative advertising. It is based on an investigation which the Commission’s staff conducted of industry trade associations and the advertising media regarding their comparative advertising policies. In essence, the Commission’s Statement makes three points. First, the Commission encourages comparative advertising which names, or makes reference to, competitors. However, the Commission requires clarity and, if necessary, disclosure to avoid deception of the consumer. Second, industry codes and interpretations which prohibit certain advertising practices, such as “disparagement” or “disparagement of competitors” may operate as a restriction on comparative advertising and are subject to challenge by the Commission. Third, industry codes and interpretations which impose fr higher standard of substantiation for comparative claims than for unilateral claims are inappropriate and should be revised.

The Commission issued the Policy Statement because.it believed that the industry would benefit from a restatement of the agency’s views on the matter.

x DATES: The Policy Statement is effective on August 13,1979.

FOR FURTHER INFORMATION CONTACT: Mitchell Paul, Staff Attorney, Division of Advertising Practices, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C. 20580. (202) 724-1471.

Accordingly, § 14.15 of title 16 i8 added to the Code of Federal Regulations and reads as follows. § 1 4.15 In regard to com parative advertising.

(a) Introduction. The Commission’s staff has conducted an investigation of industry trade associations and the advertising media regarding their comparative advertising policies. In the course of this investigation, numerous industry codes, statements of policy, interpretations, and standards were examined, Many of the industry codes and standards contain language, that could be interpreted as discouraging the use of comparative advertising. This Policy Statement enunciates the Commission’s position that industry self-regulation should not restrain the use by advertisers of truthful comparative advertising. (b) Policy Statement. The Federal Trade Commission has determined that it would be of benefit to advertisers, advertising agencies, broadcasters, and self-regulation entities to resfate its current policy concerning comparative advertising.1 Commission policy in the area of comparative advertising encourages the-naming of, or reference to competitiors, but requires clarity, and, if necessary, disclosure to avoid deception of the consumer. Additionally, the use of truthful comparative advertising should not be restrained by broadcasters or self-regulation entities, (c) The Commission has supported thq. use of brand comparisions where the * For purposes of this Policy Statement, r. , comparative advertising is dèfined as advertising that compares alternative brands on objectively measurable attributes or price, and identifies the alternative brand by name, illustration or other distinctive information.

Page 75

Federal Register / Vol. 44, No. 157 / Monday, August 13, 1979 / Rules and Regulations 47329 bases of comparision are clearly identified. Comparative advertising, when truthful and nondeceptive, is a source of important information to consumers and assists them in making rational purchase decisions. Comparative advertising encourages product improvement and innovation, and can lead to lower prices in the marketplace. For these reasons, the Commission will continue to scrutinize carefully restraints upon its use. (1) Disparagement. Some industry codes which prohibit practices such as “disparagement,” "disparagement of competitors,” "improper disparagement,” “unfairly attaching,” "discrediting,” may operate as a restriction on comparative advertising. The Commission has previously held that disparaging advertising is permissible so long as it is truthful and not deceptive. In Carter Products, Inc., 60 F.T.C. 782, modified, 323 F.2d 523 (5th Cir. 1963), the Commission narrowed an order recommended by the hearing examiner which would have prohibited respondents from disparaging competing products through the use of false or misleading pictures, depictions, or demonstrations, “or otherwise” disparaging such products. In explaining why it eliminated "or otherwise” from the final order, the Commission observed that the phrase would have prevented respondents from making truthful and non­ deceptive statements that a product has certain desirable properties or qualities which a competing product or products do not possess. Such a comparison may have the effect of disparaging the competing product, but we know of no rule of law which prevents a seller from honestly informing the public of the advantages of its products as opposed to those of competing products. 60 F.T.C. at 796.

Industry codes which restrain comparative advertising in this manner are subject to challenge by the Federal Trade Commission.

(2) Substantiation. On occasion, a higher standard of substantiation by advertisers using comparative advertising has been required by self­ regulation entities. The Commission evaluates comparative advertising in the same manner as it evaluates all other advertising techniques. The ultimate question is whether or not the advertising has a tendency or capacity to be false or deceptive. This is a factual issue to be determined on a case-by­ case basis. However, industry codes and interpretations that impose a higher standard of substantiation for comparative claims than for unilateral claims are inappropriate and should be revised.

(Sec. 5, 38 Stat. 719, as amended; 15 U.S.C. 45) By direction of the Commission. Carol M. Thomas, Secretary.

[FR Doc. 79-24876 Filed 8-10-79; 8:45 am)