Grey Advertising, Inc.; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 952-3231]

Grey Advertising, 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 or deceptive acts or practices and unfair methods of

competition, this consent agreement, accepted subject to final

Commission approval, would prohibit, among other things, the New York

City-based advertising agency from using deceptive demonstrations or

otherwise misrepresenting the performance of a toy. The consent

agreement settles allegations stemming from Grey's role in a commercial

for Hasbro, Inc.'s ``Colorblaster'' paint sprayer toy. The Commission

had alleged that the commercial represented that children can operate

the toy with very little effort when, in fact, Hasbro used a motorized

air compressor during filming to provide the pressure necessary to

operate the toy with ease and to achieve the results shown in the

commercial.

DATES: Comments must be received on or before October 18, 1996.

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

Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:

Elaine Kolish, Federal Trade Commission, 6th and Pennsylvania Avenue,

NW, S-4302, Washington, DC 20850. (202) 326-3042.

Justin Dingfelder, Federal Trade Commission, 6th and Pennsylvania

Avenue, NW, S-4302, Washington, DC 20850. (202) 326-3017.

Rosemary Rosso, Federal Trade Commission, 6th and Pennsylvania

Avenue, NW, S-4002, Washington, DC 20850. (202) 326-2174.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of

the Commission's Rules of Practice (16 CFR 2.34), notice is hereby

given that the following consent agreement containing a consent order

to cease and desist, having been filed with and accepted, subject to

final approval, by the Commission, has been placed on the public record

for a period of sixty (60) days. Public comment is invited. Such

comments or views will be considered by the Commission and will be

available for inspection and copying at its principal office in

accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of

Practice (16 CFR 4.9(b)(6)(ii)).

Agreement Containing Consent Order to Cease and Desist

The Federal Trade Commission having initiated an investigation of

certain acts and practices of Grey Advertising, Inc., a corporation

(``proposed respondent''), and it now appears that proposed respondent

is willing to enter into an agreement containing an order to cease and

desist from the acts and practices being investigated,

It is hereby agreed by and between Grey Advertising, Inc., by its

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

Trade Commission that:

1. Proposed respondent Grey Advertising, Inc. is a corporation

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

of the State of New York with its principal office or place of business

at 777 Third Avenue, New York, New York 10017.

2. Proposed respondent admits all the jurisdictional facts set

forth in the draft of complaint.

3. Proposed respondent waives:

(a) Any further procedural steps:

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

statement of findings of fact and conclusions of law; and

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

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

4. This agreement shall not become a 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 of the complaint contemplated hereby, 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 proposed

respondent, in which event it will take such action as it may consider

appropriate, or issue and serve its

[[Page 42907]]

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 that the law has been

violated as alleged in the draft complaint or that the facts as alleged

in the draft complaint, other than the jurisdictional facts, are true.

6. This 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 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 decision

containing the agreed-to order to proposed respondent's address as

stated in this agreement shall constitute service. Proposed respondent

waives any right it might 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 in the agreement may be used to vary or

contradict the terms of the order.

7. Proposed respondent has read the proposed complaint and the

order contemplated hereby. It understands that once the order has been

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

showing 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.

Order

I

It is Ordered That respondent Grey Advertising, 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

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

toy in or affecting commerce, as ``commerce'' is defined in the Federal

Trade Commission Act, do forthwith cease and desist from:

A. In connection with any advertisement depicting a demonstration,

experiment or test, making any representation, directly or by

implication, that the demonstration, experiment, or test depicted in

the advertisement proves, demonstrates, or confirms any material

quality, feature, or merit of any toy when such demonstration,

experiment, or test does not prove, demonstrate, or confirm the

representation for any reason, including but not limited to:

1. the undisclosed use or substitution of a material mock-up or

prop;

2. the undisclosed material alteration in a material characteristic

of the advertised toy or any other material prop or device depicted in

the advertisement; or

3. the undisclosed use of a visual perspective or camera, film,

audio, or video technique;

that, in the context of the advertisement as a whole, materially

misrepresents a material characteristic of the advertised toy or any

other material aspect of the demonstration or depiction.

Provided, however, That notwithstanding the foregoing, nothing in

this order shall be deemed to otherwise preclude the use of fantasy

segments or prototypes which use otherwise is not deceptive.

Provided further, however, That it shall be a defense hereunder

that respondent neither knew nor had reason to know that the

demonstration, experiment or test did not prove, demonstrate or confirm

the representation.

B. Misrepresenting, in any manner, directly or by implication, any

performance characteristics of any Colorblaster Design Toy or any other

toy.

II

It is further ordered that respondent shall notify the Commission

at least thirty (30) days prior to any proposed change in the

respondent such as a dissolution, assignment, or sale resulting in the

emergence of a successor corporation, the creation or dissolution of

subsidiaries, or any other change in the respondent which may affect

compliance obligations arising under this Order.

III

It is further ordered that respondent shall, within thirty (30)

days after service of this Order, distribute a copy of this Order to

each of its operating divisions and to each of its officers, agents,

representatives, or employees engaged in the preparation or placement

of advertisements or other materials covered by this Order.

IV

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

of dissemination of any representation covered by this Order,

respondent, or its successors and assigns, shall maintain and upon

request make available to the Federal Trade Commission for inspection

and copying:

1. All materials that were relied upon in disseminating such

representation;

2. All tests, reports, studies, surveys, demonstrations, or other

evidence in its 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; and

3. Any and all affidavits or certificates submitted by an employee,

agent, or representative of respondent to a television network or to

any other individual or entity, other than counsel for respondent,

which affidavit or certification affirms the accuracy or integrity of a

demonstration or demonstration techniques contained in a toy

advertisement.

V

This Order will terminate twenty years from the date of its

issuance, or twenty years from the most recent date that the United

States or the Federal Trade Commission files a complaint (with or

without an accompanying consent decree) in federal court alleging any

violation of the Order, whichever comes later; provided, however, that

the filing of such a complaint will not affect the duration of:

A. Any paragraph in this Order that terminates in less than twenty

years;

B. This Order's application to any respondent that is not named as

a defendant in such complaint; and

C. This Order if such complaint is filed after the Order has

terminated pursuant to this paragraph.

Provided further, that if such complaint is dismissed or a federal

court rules that the respondent did not violate any provision of the

Order, and the dismissal or ruling is either not appealed or upheld on

appeal, then the Order will terminate according to this paragraph as

though the complaint was never filed, except that the Order will not

terminate between the date such complaint is filed and the later of the

deadline for appealing such dismissal or

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ruling and the date such dismissal or ruling is upheld on appeal.

VI

It is further ordered that respondent shall, within sixty (60) days

after service of this Order, and at such other times as the 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.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted an agreement, subject to

final approval, to a proposed consent order Grey Advertising, Inc.

(``Grey'') in connection with its advertising of the Colorblaster

Design Toy (the ``Colorblaster''), manufactured by Hasbro, Inc. In a

related matter, the Commission has also accepted, subject to final

approval, and separately placed on the public record, an agreement to a

proposed consent order from Grey involving claims made in advertising

created by Grey for Dannon Pure Indulgence frozen yogurts.

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 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.

According to the complaint, the Colorblaster is a spray painting

toy consisting of a plastic drawing tray with an oblong plastic air

tank underneath. An attached handle is used to pump up pressure inside

the air tank. Special color pens are inserted into a sprayer connected

to a hose attached to the air tank. The enclosed instructions state:

``Fully extend handle and pump it quickly 50 strokes * * * The more you

pump, the more you spray.''

The complaint alleges that television advertisements for the

Colorblaster represented that the demonstrations of the toy were

unaltered and the results shown accurately represent the performance of

actual, unaltered toys under the depicted conditions. This

representation is alleged to be false and misleading. According to the

complaint, the Colorblaster depicted in the advertisements was not

manually pumped to provide the air pressure necessary to operate the

paint sprayer. Instead, a motorized air compressor was attached to the

toy to provide the air pressure necessary to operate the paint sprayer,

making it appear that children can operate the toy and complete multi-

part stencils with a small amount of pumping and little effort.

The complaint also alleges that the advertisements for the

Colorblaster misrepresented that children can operate the toy and

complete multi-part stencils with a small amount of pumping and little

effort.

The proposed consent order contains provisions designed to remedy

the violations charged and to prevent Grey from engaging in similar

acts and practices in the future.

Part I.A. of the proposed order prohibits Grey from misrepresenting

that a demonstration, experiment, or test depicted in an advertisement

proves, demonstrates, or confirms any material quality, feature, or

merit of any toy when it does not do so. Part I.A. enumerates examples

of such misrepresentations, including:

1. The undisclosed use or substitution of a material mock-up or

prop;

2. the undisclosed material alteration in a material characteristic

of the advertised toy or any other material prop or device depicted in

the advertisement; or

3. the undisclosed use of a visual perspective or camera, film,

audio, or video technique;

that, in the context of the advertisement as a whole, materially

misrepresents a material characteristic of the advertised toy or any

other material aspect of the demonstration or depiction.

Part I.A. does not preclude the use of fantasy segments or

prototypes which use is otherwise not deceptive. Part I.A. provides

Grey with a defense liability if it neither knew nor had reason to know

that a demonstration, experiment or test did not prove, demonstrate or

confirm a representation.

Part I.B prohibits Grey from misrepresenting any performance

characteristic of the Colorblaster Design Toy or any other toy.

The proposed order also requires Grey to maintain certain materials

relating to advertisements covered by the order, to distribute copies

of the order to its operating divisions and certain company officials,

to notify the Commission of any changes in corporate structure that

might affect compliance with the order, and to file one or more reports

detailing compliance with the order. The order also contains a

provision stating that it will terminate after twenty (20) years absent

the filing in federal court, by either the United States or the FTC, of

a complaint against Grey alleging a violation of 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.

Benjamin I. Berman,

Acting Secretary.

[FR Doc. 96-21030 Filed 8-16-96; 8:45 am]

BILLING CODE 6750-01-M