In its latest strike against fruity and boozy Four Loko, the Federal Trade Commission is forcing the malt beverage brand to slap a new warning label on its super-sized version while adding resealable caps to discourage binge drinking.
The settlement with owner Phusion Projects comes amid continued pressure from state attorneys general and health advocates over the beverage, which late last year was forced to remove caffeine as reports of dangerous binge drinking caused a stir. But the order -- which comes on the heels of an action against Reebok over ad claims -- is raising concern among industry lawyers who see it as another instance of an overly aggressive FTC.
"They are dictating conduct to prevent what they have deemed to be unfair and deceptive acts and practices, which is a bold move," said Linda Goldstein, a leading ad industry lawyer.
In the Four Loko case, the FTC alleges the beverage maker falsely claimed through its marketing and store-stocking instructions that a 23.5 ounce can of Four Loko contained the alcohol equivalent of one or two 12-ounce beers, when in fact it contains much more. "Deception about alcohol content is dangerous to consumers, and it's a serious concern for the FTC," David Vladeck, director of the FTC's Bureau of Consumer Protection, said in a statement. "Four Loko contains as much as four or five beers, but it is marketed as a single-serving beverage."
Four Loko has 11% to 12% alcohol by volume, compared with an average light beer, which has 4.2%.
In a statement, Phusion co-founder Jaisen Freeman said: "Even though we reached an agreement, we don't share the FTC''s perspective and we disagree with their allegations. We don't believe there were any violations. However, we take legal compliance very seriously and we share the FTC's interest in making sure consumers get all the information and tools they need to make smart, informed decisions."
The FTC cited implicit activities -- rather than specific labeling claims -- such as a photo contest in which it says Phusion posted on a company web site pictures of people drinking directly from the cans. The FTC also cited instructions from Phusion that urged merchants to place the cans where other single-serve beverages are displayed. Drinking a single can of Four Loko in one sitting constitutes "binge drinking," the FTC stated.
Under the settlement, any Phusion beverage containing more alcohol than what is typically in two-and-a-half regular beers must carry a message depicting the alcohol equivalent in terms of regular beers. For instance, a 23.5 ounce Four Loko can label would state: "This can has as much alcohol as 4.5 regular (12 oz. 5% alc/vol) beers." And in a move to encourage drinkers not to chug entire cans in one sitting, the FTC is requiring resealable containers for any Phusion flavored malt beverage that has "more alcohol than the equivalent of two and a half regular beers."
Phusion, which has been given time to comply, is planning to roll out first-of -its kind "push-pull-twist" mechanisms for can tops which keep the beverage's carbonation over a period of time, the company told Ad Age .
The order represents the first time the agency has forced a beverage to specifically state its equivalency in "regular beer," which has 5% alcohol by volume according to government guidelines, an FTC representative said. (In reality, beers these days are all over the map, ranging from mainstream light beers that contain 4.2% ABV to trendy craft beers that contain 8% ABV and higher.)
By prescribing such a detailed remedy, the FTC, as in other recent cases, is plowing aggressive new ground, said Ms. Goldstein, of Manatt, Phelps & Phillips. "They are dictating very precise conduct to marketers and even though these orders are only binding on companies [covered by the settlement], they are all designed to send messages to industry about what the FTC thinks is not appropriate," she said. "I would always favor a more fluid, flexible approach that would allow marketers to adopt their conduct to specific circumstances."
But the move is sure to please state attorneys general, who have called for aggressive action against flavored malt beverage makers, which they say are packaging drinks as "binge-in-a-can" beverages aimed at young drinkers. Recent targets have included a flavored malt beverage by Pabst Brewing Co. called "Blast by Colt 45," which uses Snoop Dogg as a celebrity spokesman. "At a time when law enforcement, public health professionals, communities, educators and parents are working hard to prevent the all-too-frequent injuries and deaths that result from underage drinking and binge drinking, alcohol simply is not a product that should be supersized," Maryland Attorney General Attorney General Douglas F. Gansler said in a statement earlier this year.
The pressure comes after federal regulators citing food safety rules late last year forced Four Loko and other fruity malt beverage makers to remove caffeine from their drinks, which critics called "alco-speed." Phusion complied, but sales were not immediately harmed, perhaps because of the publicity the case brought. However, sales have since slowed. As of early August, Phusion was up 8% year-to-date, but down 21% in the latest four weeks, Beer Business Daily recently reported.
In September, Phusion launched a line extension called "Poco Loko," which comes in 16-ounce can sizes with new flavors that are 8% alcohol by volume. Did the company go small in response to pressure? Spokesman Chris Short said no. "We wanted to go into other categories," he said. "There are certain stores that don't sell 23-ounce [cans]," he said, adding that it "enabled us to reach a different audience."