Commentary

Advertising and Alcohol

The federal government is now following the states in seeking to extort billions from the tobacco industry. Cigarette companies aren’t the only targets: gun makers are currently seeking to settle a pack of municipal lawsuits, and alcohol producers, too, could find themselves in lawyers’ legal gun sights.

Yet, a new Federal Trade Commission report concludes that when it comes to advertising, at least, self-regulation is the best means of addressing the problem of alcohol abuse.

The states’ success in using litigation to loot the tobacco industry has spurred copycat suits. Already, one case has been filed against the alcohol industry by a Florida group, ”Victory Over Addiction International.” The plaintiffs sought $1 billion in restitution, unspecified punitive damages, and severe limits on advertising and marketing.

The latter remedy is a goal of even those who aren’t suing. When the American Medical Association hosted an International Alcohol Policy Conference, participants charged alcohol makers with using ”frogs, lizards, dogs and cartoonlike characters that appeal to youth to promote alcoholic beverages.”

Similarly, the Marin Institute, a major federal grantee, promoted efforts to stop Anheuser-Busch from using cartoons in its beer ads. More threatening was the short-lived political campaign against liquor advertising three years ago. When Joseph E. Seagram’s & Sons abandoned its voluntary ban on broadcast ads, some people reacted as if cocaine merchants had taken over Madison Avenue. The Federal Trade Commission and Federal Communications Commission launched investigations. Congressmen introduced legislation. Commentators fulminated and activists raged.

The protests never made any sense. If products can be legally sold, they can be advertised. Indeed, at the very moment then-FCC Chairman Reed Hundt was attacking makers of distilled spirits for planning to advertise, the beer industry was spending more than $600 million annually on television ads. Yet, no one, least of all Hundt, complained about the latter.

Moreover, it isn’t clear that advertising has a substantial impact on the demand for alcohol (as opposed to brand preference). More than a decade ago, the FTC admitted that there was ”no reliable basis to conclude that alcohol advertising significantly affects consumption, let alone abuse,” and that ”absent such evidence, there is no basis for concluding that rules banning or otherwise limiting alcohol advertising would offer significant protection to the public.”

However, threats from Congress and the FCC alike to investigate and legislate made networks reluctant to run any ads. The result has been a de facto advertising ban.

The political furor eventually died down, but not before Congress instructed the FTC to review the effectiveness of industry self-regulation in preventing alcohol advertising and marketing to those below the age of 21. Two years later, the commission has released its report.

The result is a sharp rebuff to industry critics. Concluded the FTC: ”Self-regulation is a realistic, responsive and responsible approach to many of the issues raised by underage drinking. It can deal quickly and flexibly with a wide range of advertising issues and brings the accumulated experience and judgment of an industry to bear without the rigidity of government regulation.”

The commission indicated that such an approach was particularly important given the First Amendment protections afforded advertising. All three alcohol industry associations the Distilled Spirits Council of the United States, Wine Institute and Beer Institute have voluntary advertising codes covering content and placement. Most individual companies implement similar guidelines.

Despite the lack of government enforcement, the FTC reports that ”for the most part, members of the industry comply with the current standards.” Indeed, adds the commission, ”many individual companies follow their own internal standards that exceed code requirements.”

The FTC did recommend that the industry tighten its restrictions, such as avoiding advertising in media that reaches even a small percentage of underage consumers. The commission also advocated creation of an outside, independent review panel, along the lines of the National Advertising Review Board of the Council of Better Business Bureaus.

Nevertheless, the agency’s report offers a dramatic contrast to the usual attempt of government agencies to forever expand their power over private industry.

When the controversy first arose, the FCC, led by Hundt, seemed eager to regulate alcohol advertising. It only reluctantly concluded that it lacked the legal authority to do so.

Not so the FTC, which now emphasizes that self-regulation is better than government intervention. The commission’s new, responsible stance should encourage the networks to accept ads from distillers, thereby treating them like any other companies.

Litigation is an awful way to make national policy. Almost as bad is regulation or the threat of regulation by largely unaccountable bureaucracies. As the FTC acknowledges, the alcohol industry has shown how private companies can cooperate, voluntarily, to better protect the public interest.

Doug Bandow is a senior fellow at the Cato Institute.