Souped Up Affirmative Disclosure Orders of the Federal Trade Commission

Under section 5(b) of the Federal Trade Commission Act the Commission is given authority to conduct hearings, make findings and issue cease and desist orders requiring any person, partnership or corporation to cease and desist from use of unfair methods of competition or unfair or deceptive practices in commerce. The Commission also issues consent orders in cases which are concluded by agreement between the Commission and the allegedly offending party. Consent orders have the same force and binding effect as those issued after hearings and findings. Although it is well established that the Commission has very broad discretion and authority in framing the scope of its orders, there are limits on its power. It is the thesis of this paper that the Federal Trade Commission has exceeded its broad authority to fashion cease and desist orders in its recent proposal to include in some cease and desist orders a requirement that the respondents against whom the orders are issued must disclose in their subsequent advertising that a cease and desist order is standing against them because of claims they made in prior advertising. One of these is Standard Oil Company of California, where the Federal Trade Commission has issued a complaint challenging certain advertising claims made by Standard for its Chevron brand gasoline. The gasoline has an additive known as F-310, which is claimed by Standard to have significant effect in reducing the amount of unburned hydrocarbons and carbon monoxide emissions in automotive exhaust fumes, thereby contributing to the reduction of air pollution. The Commission has challenged the F-310 claims as unfounded and deceptive. It has proposed a cease and desist order which, in addition to requiring Standard to cease and desist from use of the allegedly misleading F-310 claims, would require it to disclose in all gasoline advertisements, for the period of one year, that former advertising for its gasoline had contained false, misleading and deceptive statements, representations and demonstrations. The Commission would require that not less than twenty-five percent of the space or exposure time devoted to each subsequent advertisement be used for the purpose of making the affirmative disclosure. The other case involves the Coca-Cola Company’s advertising for Hi-C fruit drinks, where similar affirmative disclosure requirements are proposed by the Commission. The proposed cease and desist order would bar Coca-Cola from making nutrient claims for any of its products unless it disclosed that the Hi-C advertising had been questioned by the Commission.