1 Differentiation and Marketing Policy Pauline M. Ippolito Federal Trade Commission* * Speaking only for myself and not the FTC. Advertising report available from author at

2 Background FTC ad policy; FDA label policy; USDA meat labels. Policy has changed markedly in 25 years. Policy deals with content of ads. Nutrition Labeling & Education Act (NLEA): proposals for claims in 1991; final in Focus: Potential consumer deception … not incentives.

3 Differentiation & Claims Do firms highlight ‘differences’ that are not differences? Under NLEA rules Processed foods: ‘NO CHOLESTEROL’ Natural foods: ‘A CHOLESTEROL-FREE FOOD’ Not “Sunkist oranges have no cholesterol.”

4 Differentiation & Claims Do firms highlight ‘differences’ that are too small? NLEA: Comparative claims only if 25% or more difference; more info required; comparisons restricted. ’Less fat’ becomes ’25% less fat than our regular brand; 8 grams of fat per ounce versus 11 grams per ounce.’ More complete claims but fewer?

5 Differentiation & Claims Do claims about ‘good’ features do harm? Does competition fill in? NLEA: Positive claim triggers reference to bad features ’Less sat fat’ can trigger ‘See nutrition information for fat content.’ More nutrients in ads?

6 Differentiation & Claims Why is so much advertising for processed foods and not for natural foods? Appropriable advertising versus nonappropriable ads NLEA restricts health claims to “good foods” More “good food” ads post NLEA? OR did commodities ride the tail wind of the big budget brands?

7 Some Evidence Collected claim data for health & nutrition-related claims in magazine ads Do NLEA requirements affect ad claims? Less potential for misleading consumers BUT less information?

8 Advertising Sample Women’s Magazines General Magazines Better Homes and GardensReaders’ Digest Good HousekeepingTime Ladies’ Home JournalNewsweek McCall’s Women’s Day Months and Years: February, June, October Foods Covered:All foods but baby food, alcohol. Sample has 11,647 advertisements.

9 Nutrient Content Claims Post NLEA, claims fall for most major nutrients except fat Comparative claims fall for all major nutrients but fat

10 Fat, Saturated Fat and Cholesterol Claims

11 Comparative Calorie Claims / All Calorie Claims

12 Comparative Claims Post-NLEA Change Fat+ Sat Fat- * Cholesterol- * Sodium- * Fiber- * Calcium- Vitamin/Mineral- * Calorie- *

13 More Nutrients After NLEA? Number of Nutrients in Ad ___________________________________________________ ___________________________________________________

14 More “good food” ads? Looked at various broad food categories Fruits, vegetables, and juice?

15 Number of Ads for the Fruit/Veg/Juice Category

16 Conclusions Many ads contain nutrition and health claims. Important source of info and competitive pressure. Rules seem to matter. Content shifts a lot. Important to get policy right.

17 Conclusions Comparative claims fell post-NLEA Lesson on triggered disclosures? Limiting health claims to ‘best’ foods did not increase advertising for those foods. Best approach for consumers?

18 Conclusions Are we worrying too much about claims that might mislead someone and not enough about the incentives to compete on nutrition? the loss of information to most consumers?