Eggland's Best, Inc.; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 932 3000]

Eggland's Best, Inc.; Proposed Consent Agreement With Analysis To

Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair acts and practices and unfair methods of competition, this

consent agreement, accepted subject to final Commission approval, would

prohibit, among other things, a Pennsylvania company from

misrepresenting the amount of nutrients or other ingredients in its

eggs or foods containing egg yolks, and would require the respondent to

have competent and reliable scientific evidence to substantiate future

health-benefit claims for such foods and, for one year, to label

certain egg packages with a corrective notice stating that no studies

show Eggland's eggs are different from other eggs in their effect on

serum cholesterol.

DATES: Comments must be received on or before April 25, 1994.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

room 159, 6th Street and Pennsylvania Avenue NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

C. Lee Peeler, FTC/S-4002, Washington, DC 20580, (202) 326-3090.

Agreement Containing Consent Order To Cease and Desist

The Federal Trade Commission having initiated an investigation of

certain acts and practices of Eggland's Best, Inc., a corporation, and

it now appearing that Eggland's Best, Inc., hereinafter sometimes

referred to as proposed respondent, is willing to enter into an

agreement containing an order to cease and desist from the use of the

acts and practices being investigated,

It is hereby agreed by and between Eggland's Best, Inc., by its

duly authorized officer and attorney, and counsel for the Federal Trade

Commission that:

1. Proposed respondent Eggland's Best, Inc. is a corporation

organized, existing and doing business under and by virtue of the laws

of the State of Pennsylvania with its office and principal place of

business located at 842 First Street, King of Prussia, Pennsylvania

19406.

2. Proposed respondent admits all the jurisdictional facts set

forth in the draft complaint attached hereto.

3. Proposed respondent waives:

(a) Any procedural steps;

(b) The requirement that the Commission's decision contain a

statement of findings of fact and conclusions of law;

(c) All rights to seek judicial review or otherwise to challenge or

contest the validity of the order entered pursuant to this agreement;

and

(d) Any claim under the Equal Access To Justice Act.

4. This agreement shall not become part of the public record of the

proceeding unless and until it is accepted by the Commission. If this

agreement is accepted by the Commission, it, together with the draft

complaint contemplated thereby, will be placed on the public record for

a period of sixty (60) days and information in respect thereto publicly

released. The Commission thereafter may either withdraw its acceptance

of this agreement and so notify the proposed respondent, in which event

it will take such action as it may consider appropriate, or issue and

serve its complaint (in such form as the circumstances may require) and

decision, in disposition of the proceeding.

5. This agreement is for settlement purposes only and does not

constitute an admission by proposed respondent of facts, other than

jurisdictional facts, or of violations of law as alleged in the draft

complaint here attached.

6. The agreement contemplates that, if it is accepted by the

Commission, and if such acceptance is not subsequently withdrawn by the

Commission pursuant to the provisions of Sec. 2.34 of the Commission's

Rules, the Commission may, without further notice to proposed

respondent: (1) Issue its complaint corresponding in form and substance

with the draft complaint attached hereto and its decision containing

the following order to cease and desist in disposition of the

proceeding; and (2) make information public in respect thereto. When so

entered, the order to cease and desist shall have the same force and

effect and may be altered, modified or set aside in the same manner and

within the same time provided by statute for other orders. The order

shall become final upon service. Delivery by the U.S. Postal Service of

the complaint and decision containing the agreed-to order to proposed

respondent's address as stated in this agreement shall constitute

service. Proposed respondent waives any rights it may have to any other

manner of service. The complaint may be used in construing the terms of

the order, and no agreement, understanding, representation, or

interpretation not contained in the order or the agreement may be used

to vary or contradict the terms of the order.

7. Proposed respondent has read the proposed complaint and order

contemplated hereby. It understands that once the order has been

issued, it will be required to file one or more compliance reports

showing that it has fully complied with the order. Proposed respondent

further understands that it may be liable for civil penalties in the

amount provided by law for each violation of the order after it becomes

final.

Definition

For purposes of this Order, the phrase ``food containing egg yolk''

shall not include ``medical foods'' by 21 U.S.C. 360ee(b)(3) as

currently in effect as of the date of this Order.

I

It is ordered, That respondent Eggland's Best, Inc., a corporation,

its successors and assigns, and its officers, agents, representatives

and employees, directly or through any corporation, subsidiary,

division or other device, in connection with the labeling, advertising,

promotion, offering for sale, sale, or distribution of eggs or any food

containing egg yolk in or affecting commerce, as ``food'' and

``commerce'' are defined in the Federal Trade Commission Act, do

forthwith cease and desist from misrepresenting, in any manner,

directly or by implication, through numerical or descriptive terms or

any other means, the absolute or comparative amount of cholesterol,

total fat, saturated fat or any other nutrient or ingredient in such

food.

II

It is further ordered, That respondent Eggland's Best, Inc., a

corporation, its successors and assigns, and its officers, agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the labeling,

advertising, promotion, offering for sale, sale, or distribution of

eggs or any food containing egg yolk in or affecting commerce, as

``food'' and ``commerce'' are defined in the Federal Trade Commission

Act, do forthwith cease and desist from making any representation, in

any manner, directly or by implication, about the absolute or

comparative effect of such food and serum cholesterol, whether or not

such food is consumed as part of an unrestricted diet or as part of any

specific dietary regimen, unless at the time of making the

representation, respondent possesses and relies upon competent and

reliable scientific evidence substantiating such representation;

Provided, however, That any such representation that is specifically

permitted in labeling for such food by regulation promulgated by the

Food and Drug Administration pursuant to the Nutrition Labeling and

Education Act of 1990 will be deemed to be substantiated as required by

this paragraph. For purposes of this Order, ``competent and reliable

scientific evidence'' shall mean tests, analyses, research, studies or

other evidence based on the expertise of professionals in the relevant

area, that has been conducted and evaluated in an objective manner by

persons qualified to do so, using procedures generally accepted in the

profession to yield accurate and reliable results.

III

It is further ordered, That respondent Eggland's Best, Inc., a

corporation, its successors and assigns, and its officers, agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the labeling,

advertising, promotion, offering for sale, sale, or distribution of

eggs or any food containing egg yolk in or affecting commerce, as

``food'' and ``commerce'' are defined in the Federal Trade Commission

Act, do forthwith cease and desist from making any representation, in

any manner, directly or by implication, about the absolute or

comparative health benefits of such food, including but not limited to

its effect on heart disease, unless at the time of making the

representation, respondent possesses and relies upon competent and

reliable scientific evidence substantiating such representation;

Provided, however, That any such representation that is specifically

permitted in labeling for such food by regulations promulgated by the

Food and Drug Administration pursuant to the Nutrition Labeling and

Education Act of 1990 will be deemed to be substantiated as required by

this paragraph.

IV

It is further ordered, That respondent Eggland's Best, Inc., a

corporation, its successors and assigns, and its officers, agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the labeling,

advertising, promotion, offering for sale, sale, or distribution of any

food in or affecting commerce, as ``food'' and ``commerce'' are defined

in the Federal Trade Commission Act, do forthwith cease and desist from

misrepresenting, in any manner, directly or by implication, the

existence, contents, validity, results, conclusions or interpretations

of any test or study.

V

It is further ordered, That respondent Eggland's Best, Inc., a

corporation, its successors and assigns, and its officers, agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the labeling,

advertising, promotion, offering for sale, sale, or distribution of

eggs or any food containing egg yolk in or affecting commerce, as

``food'' and ``commerce'' are defined in the Federal Trade Commission

Act, do forthwith cease and desist from:

A. Failing to disclose clearly and prominently in any advertisement

or promotional material that refers, directly or by implication, to the

absolute or comparative amount of cholesterol, fat or saturated fat in

such food, the average cholesterol content of such food expressed in

the following terms:

1. The number of milligrams; and

2. The percentage of ``Maximum Daily Value.''

The statements required by subparagraphs A.1 and A.2 of this Part

shall appear in close proximity. For purposes of this Part, the term

``Maximum Daily Value'' shall mean: (1) The daily reference value or

other daily intake limit for cholesterol established in an effective

final regulation of the Food and Drug Administration; or (2) in the

absence of such a regulation, the daily intake limit of cholesterol

advised by any one of the following three organizations: the National

Academy of Sciences, the Surgeon General of the Public Health Service,

or the American Heart Association. In the event that the Food and Drug

Administration does not have a final effective regulation and none of

the three named organizations advises that daily cholesterol intake be

limited to a specific maximum amount, subparagraph A.2 of this Part

shall not apply. Provided, however, That this Part will not be deemed

to apply to any representation that is specifically permitted in

labeling for such food product by regulations promulgated by the Food

and Drug Administration pursuant to the Nutrition Labeling and

Education Act of 1990.

B. For a time period of one year, beginning no later than forty-

five (45) days from the date this Order becomes final, offering for

sale, selling, or distributing eggs unless the package label for such

eggs clearly and prominently states, in the exact language that

follows, that: ``There are no studies showing that these eggs are

different from other eggs in their effect on serum cholesterol.''

Provided, however, That this requirement shall apply only in those

geographic areas where respondent has disseminated or caused to be

disseminated advertising or promotional materials containing any

representation, directly or by implication, about the effect of

Eggland's Best eggs or other eggs on serum cholesterol over a period of

12 weeks or more, or at any time between January 1, 1993 and the date

of the acceptance of this Order by the Commission for public comment,

including but not limited to those geographic areas listed in

Attachment A to this Order.

For purposes of this Order, ``clearly and prominently'' shall mean

as follows:

1. In a television or videotape advertisement, the disclosure shall

be presented simultaneously in both the audio and video portions of the

advertisement. The audio disclosure shall be delivered in a volume and

cadence and for a duration sufficient for an ordinary consumer to hear

and comprehended it. The video disclosure shall be of a size and shade,

and shall appear on the screen for a duration, sufficient for a

ordinary consumer to read and comprehend it;

2. In a print advertisement, the disclosure shall be in type size

which is at least the same size as that in which the principal portion

of the text of the advertisement appears, shall be located in close

proximity to the statement or other reference requiring the disclosure

and shall be of a color or shade that readily contrasts with the

background of the advertisement;

3. In a radio advertisement, the disclosure shall be delivered in a

volume and cadence and for a duration sufficient for an ordinary

consumer to hear and comprehend it;

4. On a package label, the disclosure shall be in a conspicuous and

prominent place on the package, in a conspicuous format, and in

conspicuous and legible type in contrast by typography, layout, or

color with all other printed material on the package. Provided,

however, That if the disclosure is displayed on the top or front panel

of a standard twelve-egg carton or on the top, front or side panel of a

standard six-egg carton, is in at least ten (10) point type and is

either on a separate label or enclosed within a border, and both the

type and the border are of a color or shade that readily contrasts with

the background of the carton, the disclosure shall be deemed to have

been made clearly and prominently for purposes of this Order.

VI

It is further ordered, That for five (5) years after the last date

of dissemination of any representation covered by this Order,

respondent Eggland's Best, Inc., or its successors and assigns, shall

maintain and upon request make available to the Federal Trade

Commission for inspection and copying;

A. All materials that were relied upon in disseminating such

representation; and

B. All test, reports, studies, surveys, demonstrations or other

evidence in their possession or control that contradict, qualify or

call into question such representation, or the basis relied upon for

such representation, including complaints from consumers and complaints

or inquiries from governmental organizations.

VII

It is further ordered, That respondent Eggland's Best, Inc. shall,

within thirty (30) days after service upon it of this Order, distribute

a copy of the Order to each of its operating divisions, to each of its

franchisees, to each of its managerial employees, and to each of its

officers, agents, representatives or employees engaged in the

preparation or placement of advertising or other materials covered by

this Order and shall secure from each such person a signed statement

acknowledging receipt of this Order.

VIII

It is further ordered, That respondent Eggland's Best, Inc. shall,

notify the Commission at least thirty (30) days prior to any proposed

change in its corporate structure, including but not limited to

dissolution, assignment or sale resulting in the emergence of a

successor corporation, the creation or dissolution of subsidiaries or

affiliates, or any other corporate change that may affect compliance

obligations arising out of this Order.

IX

It is further ordered, That respondent Eggland's Best, Inc. shall,

within sixty (60) days after service of this Order, and at such other

times as the Federal Trade Commission may require, file with the

Commission a report, in writing, setting forth in detail the manner and

form in which it has complied with this Order.

Attachment A.--Geographic Areas With Cholesterol-Related Advertising or

Promotion Pursuant to Paragraph V.B of Agreement Containing Consent

Order

1. Iowa

2. Maine

3. Rhode Island

4. Western and Central Pennsylvania

5. Virginia

6. Maryland

7. Washington, DC

8. Georgia

9. South Carolina

10. Alabama

11. Mississippi

12. Louisiana

13. Arkansas

14. California

15. Nevada

16. Idaho

17. Michigan

18. Colorado

19. South Dakota

20. Washington

21. Montana

22. Alaska

23. Wyoming

24. Missouri

25. Oklahoma

26. Salt Lake City, Utah

27. Raleigh-Durham, North Carolina

28. Southern Illinois (St. Louis Market)

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted an agreement to a

proposed consent order from Eggland's Best, Inc. (``Eggland's'').

The proposed consent order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

agreement and the comments received and will decide whether it should

withdraw from the agreement or make final the agreement's proposed

order.

This matter concerns claims made by Eggland's in its advertising

and promotional materials for eggs.

The Commission's complaint in this matter charges Eggland's with

engaging in unfair or deceptive practices in connection with the

advertising of its eggs. According to the complaint, Eggland's falsely

represented that it had a reasonable basis for claims that eating its

eggs will not increase serum cholesterol in an absolute sense and that

eating its eggs will not increase serum cholesterol as much as eating

ordinary eggs.

The complaint also alleges that Eggland's falsely represented that

clinical studies have proven that adding twelve Eggland's eggs per week

to a low-fat diet does not cause an increase in serum cholesterol.

Finally, the complaint alleges that Eggland's falsely represented

that its eggs are both low in saturated fat in an absolute sense, and

are lower in saturated fat than ordinary eggs.

The consent order contains provisions designed to remedy the

violations charged and to prevent Eggland's from engaging in similar

deceptive and unfair acts and practices in the future.

Part I of the order prohibits Eggland's from misrepresenting the

absolute or comparative amount of cholesterol, total fat, saturated fat

or any other nutrient or ingredient in eggs or in any food containing

egg yolk.

Part II of the order prohibits Eggland's from making any claims

about the absolute or comparative effect on serum cholesterol of eggs

or any food containing egg yolk unless, prior to making such claims.

Eggland's has competent and reliable scientific evidence to

substantiate the claims. This requirement applies to claims about the

effect of such foods on serum cholesterol when consumed either as part

of a regular, unrestricted diet or as part of a specific dietary

regimen, for instance, a low-fat diet. Part II of the order also

provides that representations that would be specifically permitted in

food labeling, under regulations issued by the Food and Drug

Administration (``FDA'') pursuant to the Nutrition and Labeling

Education Act of 1990 (``NLEA''), will be deemed to be adequately

substantiated.

Part III of the order prohibits Eggland's from making any claims

about the health benefits, including the effect on heart disease, of

eggs or food containing egg yolk unless, prior to making such claims,

England's has competent and reliable scientific evidence to

substantiate the claims. This requirement applies to claims about both

the absolute and comparative health benefits associated with consuming

such foods. Like Part II, this Part provides that claims specifically

permitted in food labeling, under regulations issued by FDA pursuant to

the NLEA, will be deemed to be adequately substantiated.

Part IV of the order prohibits Eggland's from misrepresenting the

existence, contents, validity, results, conclusions or interpretations

of any test or study.

Part V.A of the order requires a clear and prominent disclosure of

the cholesterol content of eggs or any food containing egg yolk, in any

advertisement or promotional material that references the absolute or

comparative amount of cholesterol, fat or saturated fat in such food.

This disclosure of cholesterol content must be expressed both in terms

of the number of milligrams and as a percentage of the ``Maximum Daily

Value'' for cholesterol intake as established by FDA or other specified

organizations. Part V.A exempts from this disclosure requirement any

representation that is specifically permitted in food labeling under

regulations issued by FDA pursuant to the NLEA.

Part V.B of the Order requires Eggland's to include a clear and

prominent notice on the package label for its eggs that ``There are no

studies showing that these eggs are different from other eggs in their

effect on serum cholesterol.'' This corrective notice requirement

applies for a period of one year beginning forty-five (45) days from

the date the order becomes final in those geographic areas where

Eggland's disseminated advertising or promotional materials discussing

the effect of its eggs on serum cholesterol either for a period of

twelve (12) weeks or more, or at any time between January 1, 1993 and

to the date of the acceptance of this order by the Commission for

public comment.

Part V also includes various specific provisions as to what

constitutes a clear and prominent disclosure and corrective notice for

purposes of this order.

Part VI of the order requires Eggland's to maintain copies of all

materials relied upon in making any representations covered by the

order.

Part VII or the order requires Eggland's to distribute copies of

the order to its franchisees and to various officers, agents and

representatives of Eggland's.

Part VIII of the order requires Eggland's to notify the Commission

of any changes in corporate structure that might affect compliance with

the order.

Part IX of the order requires Eggland's to file with the Commission

one or more reports detailing compliance with the order.

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 any of

their terms.

Donald S. Clark,

Secretary.

Separate Statement of Commissioner Mary L. Azcuenaga, Concurring in

Part and Dissenting in Part, in Eggland's Best, Inc., File No. 932-3000

The Commission today accepts for public comment a consent agreement

settling charges that Eggland's Best made deceptive advertising claims

about its eggs. I agree that there is reason to believe that these

claims were deceptive and join in approving the order except for V.B.

I do not agree that the corrective advertising provision contained in

V.B. is warranted, and I dissent from the order to that extent.

In imposing a corrective advertising remedy, the Commission must

consider whether an advertisement has played a substantial role in

creating in the public's mind a false belief about a product that will

linger on after the false advertisement ceases. Warner-Lambert Co. v.

FTC, 562 F.2d 749, 762 (D.C. Cir. 1977), cert. denied, 435 U.S. 950

(1978). Corrective advertising is intended to dissipate the lingering

effects of a deceptive advertisement so that future advertisements do

not become part of a continuing deception of the public. Id. at 769.

Here, there is no direct evidence, such as the consumer surveys and

expert testimony in Warner Lambert Co., that Eggland's Best's

advertisements created a lingering false impression about the effects

on serum cholesterol of its eggs. Given the relatively short period of

time during which Eggland's Best's advertisements were run, it seems

unlikely that any such lingering false impression has been created.

Without a stronger showing of the need for corrective advertising under

the Warner-Lambert test, I cannot support including a corrective

advertising provision in the proposed order.

Statement of Commissioner Deborah K. Owen, Concurring in Part and

Dissenting in Part, in Eggland's Best Inc., File No. 932-3000

I concur in the Commission's decision to issue a complaint, and to

provisionally accept a consent agreement in this matter, except as to

section V.B. of the Order. With respect to that Section, which requires

corrective advertising, I dissent.

The seminal case on corrective advertising is the Listerine case,

Warner-Lambert Company, 86 F.T.C. 1398 (1975), where the Commission

opined:

[I]f a deceptive advertisement has played a substantial role in

creating or reinforcing in the public's mind a false and material

belief which lives on after the false advertising ceases, there is

clear and continuing injury to competition and to the consuming

public as consumers continue to make purchasing decisions based on

the false belief. Since this injury cannot be avoided by merely

requiring respondent to cease disseminating the advertisement, we

may appropriately order respondent to take affirmative action

designed to terminate the otherwise continuing ill effects of the

advertisement.

86 F.T.C. at 1499-1500.

As the complaint alleges, Eggland's ads, in my judgment, certainly

create a false impression that its eggs will not increase serum

cholesterol, or, comparatively, increase cholesterol as much as

ordinary eggs. However, we must also find that the beliefs created by

the challenged ads are likely to linger after the deceptive advertising

ceases. As to that likelihood, it seems to me important to compare and

contrast the facts in Warner-Lambert to the situation here.

In Warner-Lambert, decided in 1975, the Commission noted that the

challenged advertising claims had been made directly to the consuming

public since 1921, and involved expenditures of large sums in print and

television media. 86 F.T.C. at 1501. The Commission cited to the ALJ's

Findings of Fact, which noted that Listerine had made the contested

representations since the product went on the market almost a century

before; that cold and sore throat claims had been made continuously on

its labelling since prior to 1938; and that over the ten years

preceding the decision, Listerine had spent several million dollars on

its colds advertising, the vast majority occurring on network and spot

television, covering all parts of the day and evening and particularly

in network prime time. Id. at 1468 (IDFF 219-220); see also id. at

1407-1408 (IDFF 5-8). The Commission pointed to record testimony

indicating the high percentage of consumers taking such claims that

would remain as long as five years after the ads ended. It concluded:

``The record demonstrates that long after Listerine cold efficacy

advertising ceased, a substantial proportion of the public would

continue to believe in Listerine's efficacy for the treatment and

prevention of colds and sore throats.'' Id. at 1503 (emphasis

supplied).

If we contrast the length in time, and the magnitude of Listerine's

advertising to the instant case, Eggland's advertising would hardly

appear to rise to even a two-digit percentage thereof. We have no

evidence that Eggland's campaign was so similarly saturated and

extended that long after it ceases, a substantial portion of the public

will continue to believe the challenged claims in the absence of the

corrective advertising that the Commission has provisionally accepted.

Moreover, one significant factor is in evidence here that was not

present in the Listerine case: the barrage of contrary information to

which the public is exposed.

While the public received little, if any, information from sources

other than the advertiser about the true effect of Listerine on colds

and sore throats, the vast majority of information available to

consumers challenges the Eggland claims, and links egg consumption with

increased serum cholesterol. Articles in the popular press, television

and radio programs, and many cookbooks recommend that consumers lower

their consumption of eggs. Doctors and the American Heart Association

advise people to limit their egg consumption for health reasons. The

general ambient information and perception is that eggs are unhealthy,

and this climate is highly relevant in determining whether the false

beliefs created by Eggland's Best advertisements will likely linger.

Eggland's Best advertisements attempted to counteract the common

wisdom, but ran for only a short time. Because the information that

eating eggs is likely to increase serum cholesterol will continue to be

widely disseminated to consumers through media sources, it is unlikely

that the false beliefs regarding the effects of Eggland's Best eggs on

serum cholesterol, or their comparative benefits to other eggs, will be

maintained. In sum, the half-life of Eggland's advertising campaign is

probably very short.

This is not to suggest, however, that corrective advertising is

only appropriate where the ad campaign is decades-old and swamps the

public. A classic opportunity for appropriately imposing the remedy was

the Sun Company case two years ago. File No. 902-3268. There, the

Commission challenged claims linking octane and automobile engine

performance made by a company that was previously under a Commission

order for earlier false performance and uniqueness claims for its

gasoline. Sun Oil Co., 84 F.T.C. 247 (1974). Nonetheless, the

Commission agreed to merely a cease-and-desist order, despite the fact

that the challenged claims took advantage of, and further contributed

to, widespread consumer misperception about the relationship between

octane and performance. The contrast between the Commission's decision

there, and here, suggests that the Commission's current posture on

corrective advertising may be more a function of respondents'

willingness to agree to the remedy, rather than of a well defined and

implemented policy.

Finally, a comment on the remedy itself. The corrective advertising

is ordered to be placed on Eggland's Best carton label. Due to other

legal limitations, Eggland's Best has not made serum cholesterol or

heart health claims on the carton. Thus, while the attempt to limit the

breadth of the remedy may be well-intentioned, I find it highly ironic

that corrective advertising has been mandated in a medium where the

original deceptive claims were never made.

Statement of Roscoe B. Starek, III, in Eggland's Best, Matter No. 932-

3000

After very careful deliberation, I have decided to support the

corrective advertising provision in this order. I arrived at this

decision somewhat reluctantly, since I think this remedy should be used

sparingly. The appeals court decision in Warner-Lambert accords the

Commission substantial discretion in applying such a remedy.\1\ The

Commission must take great care, however, to exercise such broad

discretion judiciously. Thus, the question I had to answer was whether

corrective advertising is appropriate in the absence of an extended

period of deceptive advertising or extrinsic evidence demonstrating

that the false impressions will persist in consumers' minds after the

ads cease.\2\

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\1\Warner-Lambert Co. v. F.T.C., 562 F.2d 749 (D.C. Cir. 1977).

The court suggested that the purpose of advertising is to create

enduring beliefs in consumers' minds, such that the FTC might well

presume in some cases that the standard for imposing corrective

advertising had been met. It stated that it need not rely upon such

a presumption in Warner-Lambert, however, because the record

contained evidence that the Listerine ads had created, in the minds

of consumers exposed to the advertising, false beliefs that would

persist after the ads ended. Id., 562 F.2d at 762-63; see, 86 F.T.C.

1398 (1975), at 1471 n.23 (data relied upon was survey of

``consumers who have seen or heard a lot of advertising for

Listerine'').

\2\It is certainly unrealistic to think that we will have this

data when the respondents enter into a consent agreement before a

complaint is filed.

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I have determined that a limited corrective advertising requirement

is an appropriate remedy here. First, I have reason to believe that the

Eggland's ads have created in consumers' minds enduring false

impressions about these eggs. Because Eggland's is able to charge for

its eggs about 200% of the typical price per dozen, we have strong

evidence that the company's ads have been successful in creating in the

minds of their consumers a belief that their eggs are meaningfully

superior to other eggs. Second, the superiority touted by Eggland's

ads--ads disseminated as recently as two months ago--pertains to their

effect on serum cholesterol. Common sense tells me that this belief is

not going to disappear overnight, simply because advertising making

that claim ceases. Third, consumers who continued to believe that

Eggland's had a demonstrated superiority over typical eggs would suffer

an identifiable injury, again due to the price differential. Corrective

advertising placed on the egg package would enable consumers to avoid

further injury.

Finally, I am persuaded by the careful crafting of the corrective

remedy. In my view, corrective advertising should educate, not punish.

The instant notice is designed to reach the Eggland's target (those who

are preparing to purchase the product) rather than the population at

large. It has a limited dissemination schedule and will not be

unreasonably costly. Moreover, the notice itself is a statement of fact

that is neither derogatory of Eggland's eggs nor implies criticism of

other companies' products.

Although I support the very narrow corrective advertising provision

in this case, I am not an advocate of this type of remedy.

Statement of Commissioner Dennis A. Yao, in Eggland's Best, Inc.

I voted to accept the proposed consent agreement for public

comment. Although I support the terms of the consent agreement, I would

have preferred that the complaint include an implied heart disease

allegation.

The Commission alleges in its complaint that, among other things,

Eggland's Best falsely represented that it had a reasonable basis for

claims that eating its eggs will not increase serum cholesterol in an

absolute sense and that eating its eggs will not increase serum

cholesterol as much as eating ordinary eggs. I believe that reasonable

consumers would interpret the express claim that Eggland's eggs will

not increase serum cholesterol to imply that those eggs would therefore

not increase the risk of heart disease--especially when the express

claim was made for eggs, a product notoriously well known for its

negative impact on heart health. Although the proposed order does

include a requirement that health claims, including claims about heart

disease, be substantiated by competent and reliable scientific

evidence, I believe that industry and the public would best be served

if the Commission communicated its belief that an implied health claim

has been made here.\3\

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\3\I would note that the complaint also alleges that Eggland's

Best falsely represented that its eggs are low in saturated fat in

an absolute sense, and are lower in saturated fat than ordinary

eggs. Although I agree that the implied saturated fat claims

challenged in the complaint were made, in my view this claim is

further down the spectrum of implied claims towards those needing

extrinsic evidence than the implied heart disease claim I discuss

here. I thus can discern no reason for excluding the implied heart

disease claim from the proposed complaint while including the

saturated fat claims.

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[FR Doc. 94-4044 Filed 2-22-94; 8:45 am]

BILLING CODE 6750-01-M