Advertising Trends and Consumer Protection
Total Page:16
File Type:pdf, Size:1020Kb
S. HRG. 111–484 ADVERTISING TRENDS AND CONSUMER PROTECTION HEARING BEFORE THE SUBCOMMITTEE ON CONSUMER PROTECTION, PRODUCT SAFETY, AND INSURANCE OF THE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION UNITED STATES SENATE ONE HUNDRED ELEVENTH CONGRESS FIRST SESSION JULY 22, 2009 Printed for the use of the Committee on Commerce, Science, and Transportation ( U.S. GOVERNMENT PRINTING OFFICE 55–980 PDF WASHINGTON : 2010 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Nov 24 2008 14:46 Jun 15, 2010 Jkt 055980 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 S:\WPSHR\GPO\DOCS\55980.TXT SCOM1 PsN: JACKIE SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION ONE HUNDRED ELEVENTH CONGRESS FIRST SESSION JOHN D. ROCKEFELLER IV, West Virginia, Chairman DANIEL K. INOUYE, Hawaii KAY BAILEY HUTCHISON, Texas, Ranking JOHN F. KERRY, Massachusetts OLYMPIA J. SNOWE, Maine BYRON L. DORGAN, North Dakota JOHN ENSIGN, Nevada BARBARA BOXER, California JIM DEMINT, South Carolina BILL NELSON, Florida JOHN THUNE, South Dakota MARIA CANTWELL, Washington ROGER F. WICKER, Mississippi FRANK R. LAUTENBERG, New Jersey JOHNNY ISAKSON, Georgia MARK PRYOR, Arkansas DAVID VITTER, Louisiana CLAIRE MCCASKILL, Missouri SAM BROWNBACK, Kansas AMY KLOBUCHAR, Minnesota MEL MARTINEZ, Florida TOM UDALL, New Mexico MIKE JOHANNS, Nebraska MARK WARNER, Virginia MARK BEGICH, Alaska ELLEN L. DONESKI, Chief of Staff JAMES REID, Deputy Chief of Staff BRUCE H. ANDREWS, General Counsel CHRISTINE D. KURTH, Republican Staff Director and General Counsel BRIAN M. HENDRICKS, Republican Chief Counsel SUBCOMMITTEE ON CONSUMER PROTECTION, PRODUCT SAFETY, AND INSURANCE MARK PRYOR, Arkansas, Chairman ROGER F. WICKER, Mississippi, Ranking BYRON L. DORGAN, North Dakota OLYMPIA J. SNOWE, Maine BARBARA BOXER, California JIM DEMINT, South Carolina BILL NELSON, Florida JOHN THUNE, South Dakota CLAIRE MCCASKILL, Missouri JOHNNY ISAKSON, Georgia AMY KLOBUCHAR, Minnesota DAVID VITTER, Louisiana TOM UDALL, New Mexico (II) VerDate Nov 24 2008 14:46 Jun 15, 2010 Jkt 055980 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 S:\WPSHR\GPO\DOCS\55980.TXT SCOM1 PsN: JACKIE C O N T E N T S Page Hearing held on July 22, 2009 ............................................................................... 1 Statement of Senator Pryor .................................................................................... 1 Statement of Senator Wicker .................................................................................. 2 Statement of Senator Klobuchar ............................................................................ 45 Statement of Senator McCaskill ............................................................................. 51 WITNESSES David Vladeck, Director, Bureau of Consumer Protection, Federal Trade Com- mission .................................................................................................................. 4 Prepared statement .......................................................................................... 6 Sally Greenberg, Executive Director, National Consumers League .................... 14 Prepared statement .......................................................................................... 16 Urvashi Rangan, Ph.D., Director of Technical Policy, Consumers Union of U.S. Inc. ................................................................................................................ 21 Prepared statement .......................................................................................... 23 C. Lee Peeler, President and CEO, National Advertising Review Council and Executive Vice President, Advertising Self-Regulation Council of Better Business Bureaus ................................................................................................. 25 Prepared statement .......................................................................................... 27 Greg Renker, Co-Chair, Guthy-Renker LLC ......................................................... 32 Prepared statement .......................................................................................... 33 Jon Congdon, President and Co-Founder, Product Partners LLC/Beachbody .... 35 Prepared statement .......................................................................................... 38 APPENDIX Hon. John D. Rockefeller IV, U.S. Senator from West Virginia, prepared statement .............................................................................................................. 59 Response to written questions submitted by Hon. Tom Udall to: Sally Greenberg ................................................................................................ 59 David Vladeck ................................................................................................... 61 (III) VerDate Nov 24 2008 14:46 Jun 15, 2010 Jkt 055980 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 S:\WPSHR\GPO\DOCS\55980.TXT SCOM1 PsN: JACKIE VerDate Nov 24 2008 14:46 Jun 15, 2010 Jkt 055980 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 S:\WPSHR\GPO\DOCS\55980.TXT SCOM1 PsN: JACKIE ADVERTISING TRENDS AND CONSUMER PROTECTION WEDNESDAY, JULY 22, 2009 U.S. SENATE SUBCOMMITTEE ON CONSUMER PROTECTION, PRODUCT SAFETY, AND INSURANCE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. The Subcommittee met, pursuant to notice, at 10:04 a.m. in room SR–253, Russell Senate Office Building, Hon. Mark Pryor, Chair- man of the Subcommittee, presiding. OPENING STATEMENT OF HON. MARK L. PRYOR, U.S. SENATOR FROM ARIZONA Senator PRYOR. I’ll go ahead and call our meeting to order, here. Thank you all for being here in our Subcommittee today. And I just want to say, I appreciate the prepared testimony and the ef- forts all of you made to get here, and also members of the audience for being here and paying attention to these important issues. Today, we’re talking about advertising trends and consumer pro- tection, in our Subcommittee. And we will have a few Senators who will be coming in and out, due to activities on the floor, and various other committees that are meeting right now. We’re going to have a group of Senators that are coming and going, and it looks like were going to have a little bit of that as we go. What I’d like to say is, we have assembled a very strong panel of witnesses today representing the Federal Trade Commission, the consumer advocacy community, and the advertising community. And I think we all look forward to their testimony. And during last week’s hearing on frauds and scams tied to the economic downturn, we focused on the FTC’s enforcement actions and statutory authority. Today, we’ll examine current trends in de- ceptive advertising and the Federal Government’s effort to protect consumers. Over and over again, consumers purchase products from compa- nies that claim to make us a little trimmer, stronger, or healthier. If these advertising claims were just about eliminating pimples or fat, it would be one thing. However, many of the deceptive prac- tices employed today are increasingly putting safety at risk. I particularly want to commend the FTC and the FDA’s sweep, last year, that brought down several companies advertising a fake cancer cure. These companies preyed on vulnerable patients, and sometimes desperate patients, to put these individuals’ lives on the (1) VerDate Nov 24 2008 14:46 Jun 15, 2010 Jkt 055980 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\WPSHR\GPO\DOCS\55980.TXT SCOM1 PsN: JACKIE 2 line just to make a quick buck. Today, companies are even more desperate for sales, as families cling a little tighter to their dollars. Today, we’ll explore the negative impact deceptive advertising can have on customers in the marketplace. We’ll hear about new trends in advertising, including bait-and-switch techniques, adver- tisements portrayed as news articles, bloggers paid by advertisers to publish positive reviews, false or ‘‘testimonial’’ advertising, free- product advertising, and false or deceptive advertising of ‘‘green’’ products. I hope that, through testimony and questioning, we can deter- mine the extent that consumers are harmed by deceptive adver- tising, whether the connections between the advertisers and en- dorsers are transparent enough for consumers, how to improve the coordination between Federal and State governments, and, finally, what Congress can do to strengthen the FTC’s ability to protect consumers all across the Nation. We cannot allow the customer in the marketplace to be in confu- sion. If dishonest companies insist on bogus claims about their products, the Federal Government must step up and ensure infor- mation on our airwaves or the Internet is accurate and truthful. This allows individuals to make informed decisions, and it pre- serves the overall integrity of our marketplace. Again, I want to thank our panel. I want to introduce our panel, here, in just a few moments, but first I’d like to ask Senator Wicker to make his opening statement. STATEMENT OF HON. ROGER F. WICKER, U.S. SENATOR FROM MISSISSIPPI Senator WICKER. Thank you, Mr. Chairman, and thank you all. The Federal Trade Commission has protected American con- sumers for almost a century. In 1914, Congress created the Com- mission by passing the Federal Trade Commission Act, and tasked the new entity with authority over anticompetitive practices. Later, Congress expanded the authority of the Commission to include the