NW Ayer, Inc.; Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 952-3099]

NW Ayer, Inc.; Consent Agreement With Analysis To Aid Public

Comment

AGENCY: Federal Trade Commission.

ACTION: 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 the New York City-based advertising agency from

misrepresenting the absolute or comparative amounts of cholesterol,

total fat, saturated fat, or any other fatty acid in eggs or in any

meat, dairy, or poultry product and from misrepresenting the existence

or results of any test or study. The consent agreement settles

allegations arising from Ayer's role in creating advertisements that

conveyed allegedly deceptive claims regarding the effect of Eggland's

Best eggs on blood cholesterol.

DATES: Comments must be received on or before May 28, 1996.

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

Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

C. Lee Peeler, Federal Trade Commission, S-4002, 6th and Pennsylvania

Ave, NW., Washington, DC, 202-326-3090.

Justin Dingfelder, Federal Trade Commission, S-4302, 6th and

Pennsylvania Ave., NW., Washington, DC, 202-326-3088.

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

[[Page 13203]]

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)).

Before Federal Trade Commission

[File No. 952 3099]

In the Matter of N.W. Ayer & Son, Inc. d/b/a NW Ayer, Inc. a

corporation; Agreement Containing Consent Order to Cease and Desist

The Federal Trade Commission having initiated an investigation of

certain acts and practices of N.W. Ayer & Son, Inc. d/b/a NW Ayer,

Inc., a corporation, hereinafter sometimes referred to as proposed

respondent, and it now appearing that 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 N.W. Ayer & Son, Inc. d/b/a NW

Ayer, Inc., by its duly authorized officer and its attorney, and

counsel for the Federal Trade Commission that:

1. Proposed respondent N.W. Ayer & Son, Inc. d/b/a NW Ayer, Inc.,

is a corporation organized, existing and doing business under and by

virtue of the laws of the State of Delaware, with its office and

principal place of business located at 825 Eighth Avenue, New York, New

York 10019.

2. Proposed respondent admits all the jurisdictional facts set

forth in the draft of complaint here attached.

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 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

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 that the law has been

violated as alleged in the draft of complaint here attached, or that

the facts as alleged in the draft complaint, other than jurisdictional

facts, are true.

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 Section 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 of complaint here attached 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 right 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.

Order

Definition

For purposes of this order, the phrase ``covered food product''

shall mean only eggs and any meat, dairy, or poultry product. For

purposes of this definition, ``meat product'' shall include any food

product for human consumption that is made in whole or in substantial

part of the meat of cattle, sheep, swine, or goats; ``dairy product''

shall include any food product for human consumption that is made in

whole or in substantial part from milk; and ``poultry product'' shall

include any food product for human consumption that is made in whole or

in substantial part of the meat of any fowl.

I

It is ordered that respondent N.W. Ayer & Son, Inc. d/b/a NW Ayer,

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 covered food product in or affecting commerce, as

``commerce'' is 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 fatty acid in such covered food

product. If any representation covered by this Part either directly or

by implication conveys any nutrient content claim defined (for purposes

of labeling) by any regulation promulgated by the Food and Drug

Administration, or, if applicable, the United States Department of

Agriculture, compliance with this Part shall be governed by the

qualifying amount for such defined claim as set forth in such

regulation.

II

It is further ordered that respondent N.W. Ayer & Son, Inc. d/b/a

NW Ayer, Inc., 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

covered food product in or affecting commerce, as ``commerce'' is

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 covered

food product on serum cholesterol, whether or not such covered food

product 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

[[Page 13204]]

evidence substantiating such representation. 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 N.W. Ayer & Son, Inc. d/b/a/

NW Ayer, Inc., 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

covered food product in or affecting commerce, as ``commerce'' is

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

covered food product, 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.

IV

It is further ordered that respondent N.W. Ayer & Son, Inc. d/b/a/

NW Ayer, Inc., 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

covered food product in or affecting commerce, as ``commerce'' is

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

Nothing in this order shall prohibit respondent N.W. Ayer & Son,

Inc. d/b/a/ NW Ayer, Inc., from making any representation that is

specifically permitted in labeling for any product by regulations

promulgated by the Food and Drug Administration pursuant to the

Nutrition Labeling and Education Act of 1990, or by nutrition labeling

regulations promulgated by the Department of Agriculture pursuant to

the Federal Meat Inspection Act or the Poultry Products Inspection Act.

VI

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

of dissemination of any representation covered by this order,

respondent N.W. Ayer & Son, Inc. d/b/a NW Ayer, 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 tests, 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 N.W. Ayer & Son, Inc. d/b/a

NW Ayer, 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, each of its managerial employees, and 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 N.W. Ayer & Son, Inc. d/b/a

NW Ayer, 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 N.W. Ayer & Son, Inc. d/b/a

NW Ayer, 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.

X

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 if 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 ruling and the date such

dismissal or ruling is upheld on appeal.

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 from NW Ayer & Son, Inc. d/

b/a/ NW Ayer, Inc. (``Ayer'').

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

sixty (60) days for the 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.

This matter concerns advertising claims made by Ayer, an

advertising agency, for eggs marketed by Eggland's Best, Inc. Eggland's

Best, Inc. is subject to a Commission consent order (Docket No. C-

3520), issued on August 15, 1994. A separate consent decree with

Eggland's Best regarding alleged violations of that consent order

relating to the same advertisements will be filed in United States

District Court.

The Commission's complaint in this matter charges Ayer with

engaging in unfair or deceptive practices in

[[Page 13205]]

connection with the advertising of Eggland's Best eggs. According to

the complaint, Ayer represented, without adequate substantiation, that

eating Eggland's Best eggs (1) will not increase serum cholesterol, and

(2) will not increase serum cholesterol as much as eating ordinary

eggs. The complaint also alleges that Ayer falsely represented that (1)

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

week to a low-fat diet does not increase serum cholesterol, (2)

Eggland's Best eggs are low in saturated fat, and (3) Eggland's Best

eggs are lower in saturated fat than ordinary eggs.

Finally, the complaint alleges that Ayer knew or should have known

that these claims were false and misleading.

The consent order contains provisions designed to remedy the

violations charged and to prevent Ayer from engaging in similar

deceptive and unfair acts and practices in the future.

Part I of the order prohibits Ayer from misrepresenting the

absolute or comparative amount of cholesterol, total fat, saturated

fat, or any other fatty acid in eggs, or any meat, dairy, or poultry

product (``covered food product''). Part I also requires that any

representation covered by that Part that conveys a nutrient content

claim defined for labeling by any regulation of the Food and Drug

Administration (``FDA'') or United States Department of Agriculture

(``USDA'') must comply with the qualifying amount set forth in that

regulation.

Part II of the order prohibits Ayer from making any representation

about the absolute or comparative effect of any covered food product or

serum cholesterol unless it possesses and relies upon competent and

reliable scientific evidence substantiating the representation at the

time it is made.

Part III of the order prohibits Ayer from making any representation

about the absolute or comparative health benefits of the covered food

product unless it possesses and relies upon competent and reliable

scientific evidence substantiating the representation at the time it is

made.

Part IV of the order prohibits Ayer from misrepresenting the

existence, contents, validity, results, conclusions or interpretations

of any test or study.

Part V of the order provides that representations that would be

specifically permitted in food labeling, under certain regulations

issued by the FDA or USDA are not prohibited.

Part VI of the order requires Ayer to maintain copies of all

materials relied upon in making any representation covered by the order

for five years.

Part VII of the order requires Ayer to distribute copies of the

order to its operating divisions and to various officers, agents and

representatives of Ayer.

Part VIII of the order requires Ayer to notify the Commission of

any changes in corporate structure that might affect compliance with

the order.

Part IX of the order requires Ayer to file with the Commission one

or more reports detailing compliance with the order.

Part X of the order is a ``sunset'' provision, stating that the

order will terminate twenty years from the date it is issued unless a

complaint is filed in federal court, by either the United States or the

FTC, alleging any 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.

Donald S. Clark,

Secretary.

[FR Doc. 96-7291 Filed 3-25-96; 8:45 am]

BILLING CODE 6750-01-M