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FTC REJECTS COMMERCIAL ALERT PRODUCT PLACEMENT PETITION

Finds Existing Disclosure Rules Adequate

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WASHINGTON (AdAge.com) --The Federal Trade Commission today rejected a petition from a consumer group asking that product placement on TV be clearly labeled as such. The Commission said it found little evidence that the marketing practice misleads or confuses consumers.
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In a letter to Gary Ruskin, executive director of Commercial Alert, which filed the complaint, the FTC's associate director for advertising practices, Mary Engle, said that paid product placement doesn't violate deceptive practices statutes as outlined by the FTC.

No objective claims
The FTC said that the use of products by characters in fictional shows or contestants on reality programming does not constitute any objective claims to the quality of the product.

"In most instances, the product placement appears on-screen or is mentioned, but the product's performance is not discussed. Therefore, the rationale for disclosing that an advertiser paid ... is absent."

Commercial Alert had asked that a prominent superscript with the word "Advertisement" appear onscreen during each instance of a paid product placement, disclosing that the product's use is a paid ad.

Infomercial as journalism
Despite rejecting Commercial Alert's complaint, the FTC outlined what it considers to be deceptive ad practices by marketers. The agency cited one case involving the marketer of BluBlocker sunglasses. The marketer created a 30-minute infomercial that was disguised as an investigative report, called "Consumer Challenge," meant to objectively rate the product's claims. The commission alleged the marketer committed deceptive practices.

The commission went on to say that if "false or misleading objective, material claims" about a product's attributes are made in a program, the FTC will investigate the matter. The FTC said its practice of evaluating on a case-by-case basis whether an ad format is deceptive remains the best way to protect consumers, including children, from misrepresentation.

Additionally, the FTC said it would reexamine requirements for disclosures of payments to spokespeople who appear on entertainment and news shows. Commercial Alert had complained that NBC didn't disclose that Lauren Bacall was paid by a pharmaceutical company when she talked about a drug on NBC's Today Show, one of several similar incidents on TV.

Reality shows
Commercial Alert filed its complaint in September 2003, calling for a broad FTC probe into various product placement practices. The complaint cited examples ranging from Fox Broadcasting's American Idol show to ABC's Who Wants to Be a Millionaire. Commercial Alert said advertisers "must be honest with viewers," saying that they "must not pretend their ads are something else."

The group's petition to the FTC prompted a major offensive by a coalition of advertising groups to defend product placement.

Mr. Ruskin said he was surprised by the FTC's decision.

"We think the claim is excellent on the law and today the FTC has essentially endorsed deceptive and dishonest practices on the product placement industry and turned its back on children who are suffering from an epidemic of marketing-related diseases," he said.

Lobbying for legislation
"We are actively lobbying [Congress] for a product placement disclosure act, which would require product placement in all media and is part of the parents bill of rights."

Dan Jaffe, executive vice president of the Association of National Advertisers, which was one of the member groups of the Freedom to Advertising Coalition, said his group is "very pleased" with the ruling.

"We felt [Commercial Alert's] proposals were radical and misguided, counterproductive and unnecessary," he said.

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