Advertising Food Products

Advertising is subject to extensive regulation. Food products are subject to more regulation than other consumer products. This memo gives an overview of legal issues related to advertising food products.

The Federal Trade Commission Act (FTC Act) is the federal government's primary tool against false, deceptive, or unfair advertising. For food, drugs, devices or cosmetics, it prohibits giving out any false ad to induce, or which is likely to induce, any purchase. A false ad is any ad, other than labeling, that is misleading in a material way. To decide whether an ad is misleading, the FTC will take into account not only representations made or suggested by any combination of statement, word, design, device or sound, but also the extent to which it fails to reveal material facts about the product or its performance.

The FTC's authority over ads does not cover labels. The Food & Drug Aministration (FDA) regulates claims made on food product labels. The Department of Agriculture regulates claims made on meat and poultry product labels. The Food, Drug, and Cosmetic Act (FD&C Act) says labeling includes all labels and other written, printed or graphic matter upon any article or any of its containers or wrappers or accompanying the article. Labeling includes not only actual labels, but also pointofsale materials that accompany food products. The FDA has taken the position that if a product label refers consumers to a Web site, its authority extends to claims made there.

Under the FD&C Act, food labeling that is false or misleading means the product is misbranded. This is a much more rigorous standard than under the FTC Act, which prohibits only advertising claims that are misleading in a material way.

The FDA has adopted a comprehensive regulatory framework governing nutrition and health claims on food products. It both restricts the number and type of nutrition and health claims that can be made on product labels and has issued detailed definitions and guidelines that must be met with respect to the claims that are allowed. The FDA has adopted a highly technical structure characterizing different types of claims:

Health Claims

A health claim is any claim that characterizes the relationship of any substance to a disease or healthrelated condition. Heath claims can only be made on food labels if supported by the totality of publicly available scientific evidence and there must be significant scientific agreement among qualified experts that the claim is supported by the evidence. The FDA has authorized only a limited number of health claims.

Qualified Health Claims

These are claims that describe substance/disease relationships on competent and reliable scientific evidence with explicit qualifying language telling consumers that evidence supporting the claim is not conclusive.

Structure/Function Claims

These are claims that describe the effect of a particular food or nutrient on the structure or function of the body.

Dietary Guidance Statements

This is any statement that addresses the role general categories of food play in the diet.

SelfRegulation

Selfregulatory bodies play a large role in regulating foodrelated advertising. Most important is the National Advertising Division of the Better Business Bureau (NAD) and the Children's Advertising Review Unit (CARU). For foodrelated advertising, NAD has said it will harmonize its efforts with the regulatory schemes of the FDA and FTC. However, NAD rarely will refuse to decide a matter based just on the argument the subject is preempted by FDA.

NAD is the de facto regulatory authority over advertising that is national or multiregional in scope. Refusing to participate in the NAD process may mean referral to a government agency. Although challenges from competitors are the main source of NAD cases, NAD and CARU also monitor television, radio, and print advertising and respond to complaints from individual consumers, consumer groups, and others. CARU monitors advertising directed to children (under the age of 12) and published comprehensive guidelines.

If NAD or CARU decide an ad is false or misleading or that a claim is not substantiated, it will ask the advertiser to discontinue or change the ad. While NAD/CARU cannot force an advertiser to take action, if an advertiser refuses to cooperate, the matter may be referred to a regulatory agency.

Analyzing Claims

In deciding whether an ad is truthful or deceptive the first issue is deciding what claims are being made. An advertiser is responsible for express and implied claims made by its ad. What a reasonable consumer would take away from the overall ad not the literal meaning of individual words or phrases is the standard for deciding. Even if an ad is literally or technically true, if the overall message of the ad is deceptive or misleading, it is subject to challenge. Advertisers must substantiate any implied claim that can reasonably be taken from the literal language of an ad.

Here s an example of how this works. General Mills challenged Aurora Foods' claim that its Duncan Hines chocolate chip muffin mix contained "50 percent more chocolate chips" than General Mills' comparable Betty Crocker muffin mix. General Mills agreed the Duncan Hines claim was literally true. The Duncan Hines mix really did contain 50 percent more chocolate chips. However, NAD agreed with General Mills that the consumer takeaway from the claim was the Duncan Hines mix contained more chocolate than the Betty Crocker mix. In fact, because the Betty Crocker mix had larger chocolate chips, there was actually more chocolate in the Betty Crocker mix. NAD recommended discontinuing the claim and Aurora Foods did.

An implied claim also may be made by leaving certain information out which is needed to prevent an affirmative representation from being misleading. Claims must be both accurate and complete. In the same way, when the overall impression of an ad is misleading, it will not be fixed by a tiny footnote. Disclaimers, footnotes, and information boxes are appropriate only to explain language that could have more than one meaning or to provide additional information, not to contradict messages primarily conveyed by the ad.

Only Material Claims Count

An advertiser is only responsible for deceptive claims that are material. A claim is material if it is likely to affect a consumer's choice or use of a product or service. Even if a particular claim or statement is incorrect, if it would not affect a reasonable consumer's purchase decision, it is not actionable. Express claims, intentional implied claims, and claims involving health or safety are presumed material.

Some Claims Don t Need Substantiation

Puffing is a statement of exaggeration that is (1) obviously a subjective opinion; (2) a statement of broad generality, impossible to verify; or (3) so extreme or outrageous that reasonable consumers would not rely on the statement in making a purchase decision. Puffing claims do not require substantiation.

The line between puffing and a claim that needs substantiation can sometimes be fine, and it is constantly changing and may be drawn differently by different persons. Although no hard rule can identify precisely where the boundary is, the following qualities could influence the outcome:

General claims are more likely to be puffing than specific claims.

The more obvious the exaggeration, the safer the claim will be.

Statements about health, safety or nutrition, no matter how soft or generalized, are generally more vulnerable to challenge.

The content of an ad can influence the interpretation of a claim. A humorous setting can soften specific claims, while a serious figure can make general statements seem more objective.



Food Pictures

Advertisers want to show their products in the most appealing light: they want fat and juicy hamburgers, crisp, green vegetables, and chunky soups. Food stylists are commonly used in commercial filming or photo shoots to ensure food products look their best. The law requires photographs, pictures, or models used in an ad accurately reflect the product. Colors should not be enhanced, product consistency should not be changed, and quantity or concentration of ingredients should not be adjusted to make the product look better.

An exception to this rule is when a product is changed for purposes unrelated to appearance or performance. Mashed potatoes can be substituted for ice cream in a television ad where real ice cream would melt under the lights.

How Fresh Is "Fresh"?

Fresh is a word food marketers love to use. So much so that the FDA has rules on using fresh and NAD frequently has cases involving improper use of the word. The FDA says fresh cannot be used on food product labels in a way that suggests or implies the food referred to is unprocessed or unpreserved unless the food is raw and has not been frozen, subjected to any kind of thermal processing or any other form of preservation. An ad generally cannot use fresh to describe a food that has been thermally processed or subject to preservation unless it does not suggest the food is unprocessed. It is OK to claim a thermally processed product is made from fresh ingredients if true.

Organic, Natural, Sustainable

More and more food companies use green labeling claims. Differences of opinion as to whether particular foods should have these claims have led to trade complaints by competitors, lawsuits by public interest groups and consumers, and regulatory action by agencies.

Organic

The most tightly regulated of all green marketing claims is organic. Any food labeled or marketed as organic must meet standards set by the USDA National Organic Program (NOP).

NOP applies to only agricultural products and focuses on the production of raw materials, although it also addresses finished food products. NOP standards specify the methods, practices, and substances that can be used to produce and handle organic foods. It requires certification of producers and handlers. A producer is any person in the business of growing or producing food or feed. A handler is any person in the business of selling, processing, or packaging agricultural products, except retailers. NOP standards require organic production and handling operations be certified in compliance by a USDAaccredited inspector.

Under NOP regulations, using a nonagricultural substance or a synthetic substance in a food product labeled organic is prohibited, unless it is on the National List of Substances. Although nonagricultural substance and synthetic are defined, the definitions are difficult to interpret and apply. To complicate matters, NOP has classified numerous seemingly nonagricultural substances, color extracts, as agricultural. Once something is classified as an agricultural substance, the nonorganic version can be used only if an organic version is not available.

NOP also prohibits certain practices and requires others. Organic operations cannot use ionizing radiation or other excluded methods like genetic engineering. Production and handling requirements include land requirements for crop production, practices to maintain soil fertility, health care practices and living conditions for livestock, and the prevention of commingling.

Organic is used in different ways on different products. The composition of a product determines how organic can be used. A product that is made of 100 percent organic ingredients can claim "100 percent organic," can use the term "organic" to modify the product's name on its label, and can use the USDA organic seal. A product that is made of 95 to 100 percent organic ingredients can use organic to modify the product's name and can display the USDA organic seal. A product made of more than 70 percent organic ingredients can use the claim "made with organic " but cannot use the USDA organic seal. A product made of less than 70 percent organic ingredients can use the claim "X percent organic ingredients" if it also identifies the ingredients. It cannot use the USDA organic seal.

Given the premium paid and the emotional commitment many consumers make to the organic sector, producers alleged to misuse the organic label can incur significant liability.

Natural

FDA and USDA have different policies on using natural. FDA permits a claim of natural if the food does not contain an added color, synthetic substance, or flavor, or anything artificial or synthetic that would not normally be expected in the food. FDA puts emphasis on the nature of the substance and consumer expectation. FDA has no preapproval authority over labeling. If FDA objects to a use of natural, its only recourse is to take enforcement action against the product.

Different groups have tried to convince FDA to define natural. It has not worked. Powerful interests have lined up in opposing camps on particular ingredients.

Using natural on USDAregulated products, including meat, poultry, and egg products has also been controversial. Under USDA policy, natural is permitted in labeling if no artificial flavor, color, chemical preservative, or any other artificial or synthetic ingredient is added and if the product and its ingredients are not more than minimally processed. USDA policy emphasizes the degree of processing of the product and its ingredients. It does not explicitly concern itself with consumer expectation. USDA does have premarket authority over labeling.

USDAregulated industries have pressured it to include or exclude substances from products eligible to be called natural.

Given the ambiguity and lack of clear standards, companies should make decisions on a casebycase basis. For USDAregulated products, because labeling is preapproved by USDA, there is a margin of comfort. For FDAregulated products, challenges are more likely to come from competitors and consumer groups.



Sustainability

Sustainability has special meaning in food production. The importance of the concept has been recognized by Congress, which defined "sustainable agriculture" in the 1990 Farm Bill.

The definition is:

An integrated system of plant and animal production practices having a sitespecific application that will, over the long term (1) satisfy human food and fiber needs, (2) enhance environmental quality and the natural resource base upon which the agricultural economy depends, (3) make the most efficient use of nonrenewable resources and onfarm resources and integrate, where appropriate, natural biological cycles and controls, (4) sustain the economic viability of farm operations, and (5) enhance the quality of life for farmers and society as a whole.

Neither FDA nor USDA has defined terms like "sustainably produced" for food marketing. There is a private standardsetting effort under the auspices of the Leonardo Academy, a nonprofit American National Standards Institute (ANSI) standards developer. That has resulted in publication of a Draft Sustainable Agriculture Practice Standard (Draft Standard). If finalized, it would be a voluntary ANSI standard that could be used to help support claims of sustainability.

Even though voluntary, the effort to develop the standard may be at least as controversial as FDA's and USDA's attempts to regulate the use of natural. The dispute escalated to the point that USDA asked ANSI to revoke the Leonardo Academy's standing as an ANSIaccredited standards developer, a request ANSI denied.

The major elements of the Draft Standard include (1) sustainable crop production, (2) ecosystem management and protection, (3) resource conservation and energy efficiency, (4) integrated waste management, (5) fair labor practices, (6) community benefits, (7) product quality, and (8) product safety and purity. The inclusion of energy efficiency and community benefits as elements is notable, given increasing consumer interest in locally produced foods. The Draft Standard also includes annexes that address specific sectors, like biofuels and cut flowers.

Outside the Draft Standard, general guidance on sustainability claims are in the Federal Trade Commission (FTC) Environmental Marketing Guides (the Green Guides). Although these were last revised in 1988, they continue to provide a point of reference. As a point of departure, all claims made in advertising must have a reasonable basis, or what FTC calls substantiation, in the form of competent and reliable evidence. Beyond that, the Green Guides discuss both general principles and specific categories of claims (e.g., biodegradable, compostable, recyclable).

Given the goal of avoiding deception, all qualifications and disclosures in an advertisement should be clear, prominent, and understandable. It should be clear whether an environmental attribute or benefit claimed in an advertisement refers to the product or the packaging. Broad claims can be especially tricky, as these tend to overdo green attributes or benefits, and often are not supported by a life cycle analysis. Comparative claims can also be knotty if the basis for the comparison is unclear, or if the claimed comparative advantages are not substantiated.

International Distribution

Not all countries regulate food products the same way. Generally, a form of registration of the new food, ingredient, or additive, frequently supported by safety testing or certifications is used. This can be complicated when a product is launched in multiple countries with different rules. Expensive food safety studies adequate in one country might be unsatisfactory in the next.

It might be easy because the product is already recognized as approved. Some countries regulate with positive lists. Anything listed is acceptable. No testing is needed. The product must match the specifications of the listed product. Others use negative lists where listed ingredients are prohibited. If your product is not on a negative list, it is presumed safe. Again, safety testing is not required.

Not all countries have a list system. A novel product might not be included in a list or might not meet the specifications for a listed product. In those cases, specific approval must be gotten. The approvals required may depend on whether the product is an ingredient, an additive, or a food. Safety testing is generally required.

Health Claims and Labeling

Each country also will likely have specific laws about product labeling and health claims (e.g., "promotes digestive health"). Definitions vary from country to country. For example, if you wish to know whether your product can be marketed as a fiber or as natural, you need to understand how "fiber" and "natural" are defined in each country. At times, these definitions might be at odds, making consistent global marketing difficult. At other times, the definitions and requirements may be unclear or inconsistent, or may be guided at least in part by public sentiment.

Timing

The timing of approvals also can vary from months to years. In companies without internal resources, food regulatory issues must be balanced against the need to control spending. This calls for a global strategy with a detailed commercial marketing plan that allows prioritization of efforts based on market attractiveness and planned launch dates.

European Markets

Many U.S. companies view Europe as a priority. Consumers share similar preferences in food and beverage products.

The Codex Alimentarius Commission was formed in 1963. It is a joint commission of the United Nations Food and Agriculture Organization and the World Health Organization. Codex is responsible for the development of international food standards, with scientific expertise provided by the Joint FAO/WHO Expert Committee on Food Additives (JECFA).

These international standards do not replace or create national rules. Each EU member has its own food regulatory system. The European Food Safety Authority (EFSA) cooperates with similar bodies in each member state to provide scientific analysis. EFSA operates independently of JECFA and Codex and does its own scientific research.

Once a product is approved in a EU member state, there are protocols for reciprocal recognition. Strategic decisions must be made on where safety testing should be done some regulators have a bias toward testing done in their own jurisdiction and in which EU member state to initiate testing. The choices are (1) in those with the most rigorous standards, (2) with the least rigorous standards, or (3) where language concerns are limited.

Other Markets

A global launch will not be limited to the United States and EU. This adds significant complexity. For example, in Argentina, standards are set in the Codigo Alimentario Argentino according to specifications issued by the MERCOSUR countries (Argentina, Brazil, Uruguay, and Paraguay). Brazil also has specific national standards. In Australia and New Zealand, national standards are compiled by Food Standards Australia/New Zealand. In each country, products not listed must be specifically authorized.

In Asia, Malaysia uses a negative list system, creating a presumption that all foods not listed are permitted. South Korea uses a positive list, so any foods not listed are prohibited.

Culture also influences food regulation. In Pakistan there are prohibitions against products containing pork and alcohol. As in many countries, the Pakistani food ordinance also prohibits products considered unwholesome, injurious to health, or unfit for human consumption.

Local regulatory approval may be easier if a product has already been approved in the United States or EU. Both Argentina and Brazil will look to Codex for guidance. In some cases, the failure of a product to obtain GRAS or Codex approval might be seen as evidence of a violation of general prohibitions against unwholesome or unfit foods. Frequently, testing must be done to directly overcome the negative perception.

GMO s

The use of genetically modified organisms (GMOs) in food shows the challenges surrounding international food marketing. The science of inserting specific genes into different organisms, allowing the organism to produce proteins not previously produced with new traits has been around since the 1960s. Genetic modification is seen as a way to improve crop yields; create resistance to insects (reducing the need for chemical pesticides) and disease; and increase tolerance to climatic conditions like drought or flood. Genetic modifications are also seen as providing potential health benefits.

For the most part, the U.S. eagerly accepted GMOs. In 1994, the Flavr Savr tomato was genetically modified to resist rotting. It was sold commercially in the United States with FDA approval. By 2006, the USDA estimated 90 percent of soybeans, 90 percent of cotton, and 73 percent of corn grown in the U.S. was genetically modified. GMO crops are now grown in Argentina, Brazil, Canada, China, India, and South Africa.

GMOs have detractors and here, as in many areas of food regulatory law, public perception played a role in the creation of local regulatory regimes. In 1999, protestors in the U.S. dressed in monarch butterfly costumes to dramatize what they viewed as negative environmental consequences. Organizations like Greenpeace took a strong stance against GMOs:

The introduction of genetically modified (GM) food and crops has been a disaster. The science of taking genes from one species and inserting them into another was supposed to be a giant leap forward. Instead, they pose a serious threat to biodiversity and our own health.

Consumer groups also challenged the introduction of what they viewed as science with unknown consequences. Countries around the world began regulating GMOs. They generally came in one of two forms, although in some cases both types coexist. The first form of regulation, used in the U.S. and EU, is the designation of approved and unapproved varieties of GMO. Only approved varieties are acceptable for human food.

Labeling is the second key form of regulation. The EU and Japan, for example, mandate products with GMOs be specifically labeled. Many countries' labeling laws, however, contain exceptions. For example, in South Korea, only food ingredients that might contain residual proteins must be labeled. Many countries' regulations also contain exceptions for adventitious, or accidental, contamination, provided that it does not reach certain thresholds, which vary by jurisdiction.

A product might require labeling in one country but not in another; a real problem if a company has export sales or sells ingredients that are incorporated into consumer products. Proponents of labeling argue consumers have a right to know and to choose between GMO and nonGMO products. Opponents maintain there are no known health risks and labeling increases costs to consumers.

Practical Concerns

In 1999, commercially growing GMOs in Brazil was banned. By 2001 corn grown in Brazil demanded a $67 premium per ton, resulting from the country's strict nonGMO policy. Between 2002 and 2005, in spite of the government's ongoing prohibition, genetically modified corn and soy were repeatedly found in southern Brazil. Between 2003 and 2005, the government began relaxing its restrictions on soy, and by 2007, GMO corn was allowed.

Practical issues exist everywhere. The food industry infrastructure in many countries generally does not support separation of GMO and nonGMO varieties. Crops are often commingled after harvest. A 2007 survey found only 26 percent of U.S. grain elevators were segregating GMO and nonGMO corn, making it difficult to source nonGMO varieties with any degree of certainty. Even if a crop is delivered direct from farm to factory, the food company relies on certifications provided by the farmer. While it may be possible to get written certifications from large corporate growers, when small family farms or individuals are involved, certifications are difficult to get and even harder to enforce. Crosspollination makes it hard to guarantee GMO status based on the boundaries of a particular farmer's land.

The science surrounding GMO crops continues to evolve. New GMO crops might arise at any time and companies must stay uptodate on the current status of their raw materials. Companies also struggle with the ability of scientific testing to keep pace with the law.

One way companies try to prevent these risks and comply with the many labeling laws is establishing identity preservation programs. These programs demonstrate diligence in the procurement and manufacturing of product from nonGMO raw materials. They involve a variety of good manufacturing practices and controls, as well as testing of both raw materials and finished product.

The identity preservation approach, as with other food regulatory issues, requires companies to balance risks and rewards. First, the company must decide to what standards it wants to be held. It must then decide how far it can go to show falling in line with those standards. For example, many customers are not willing to pay increased ingredient prices that would result from testing every ingredient batch produced. This is especially true in today's economy, with rising commodity and food prices of global concern.

A Successful Global Launch

The global GMO regulatory patchwork shows the challenges in the international food regulatory arena. To some degree, the challenges depend on the nature of the product. It also helps to have local personnel, even if not experts in the regulatory arena, do initial fieldwork on government requirements. They can monitor any public sentiment about the proposed product. Marketing or scientific testing can be designed to address any concerns. When this is not possible, or if dealing with a particularly unique product or one regarding which regulatory hurdles are anticipated, it might make sense to partner with a local agent who can assist with the regulatory process.