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Although the alcohol industry generally complies with existing self-regulatory standards intended to prevent alcohol advertising that appeals to underage consumers, industry self-regulatory efforts should be improved, a report by the Â鶹´«Ã½ Trade Commission released today states. The report, "Self-Regulation in the Alcohol Industry," reviews voluntary efforts by alcohol companies and trade associations to engage in self-regulation to avoid promoting alcohol to teenagers and young adults. It examines alcohol ad placement and content, product placement, online advertising and college marketing, and highlights "best practices" currently followed by some companies, which if more widely adopted, would improve overall self-regulation efforts. The report recommends that industry improve enforcement by adopting third-party review of compliance, and reduce underage exposure to alcohol ads by changing the current placement standards that allow advertising in media when as much as 50 percent of the audience is under 21.

"Underage alcohol use and abuse are significant national concerns," said FTC Chairman Robert Pitofsky. "Last year, a third of twelfth graders reported binge drinking. Finding ways to deter alcohol use by those under 21 is a challenge for government agencies, consumer organizations and the beverage alcohol industry."

"This report offers insights into the self-regulatory system the industry uses to reduce the likelihood that alcohol advertising will reach and appeal to underage consumers," Pitofsky said. "Self-regulation can deal quickly and flexibly with a wide range of advertising issues and brings the accumulated experience and judgment of an industry to bear. While we found that the alcohol industry, for the most part, complies with its existing codes, our review also identified steps the industry can and should take in this area."

The report, prepared in response to a joint request from the House and Senate Committees on Appropriations, is based on "special reports" filed with the Commission by eight key alcohol industry members, discussions with industry trade associations, a review of alcohol company web sites, and information provided by interested government agencies and consumer groups. It describes key provisions of the industry's voluntary advertising codes and identifies strengths and weaknesses in the current system.

The report recommends that all industry members adopt and build upon the industry's current best practices--enforcement policies that go beyond minimum code requirements. The best practices identified by the report are as follows:

• For ad placement: Reduce the percentage of the underage audience, bar placement on television series and in other media with the largest underage audiences, and conduct regular audits of previous product placements.
• For ad content: Prohibit ads with substantial underage appeal, even if they also appeal to adults; or target ads to persons 25 and older.
• For product placement in movies and television: Restrict the promotional placement of alcohol products to "R" and "NC-17" rated films (or, if unrated, to films with similarly mature themes) and apply the standards for placing traditional advertising to product placement on television.
• For online advertising: Use available mechanisms to reduce underage access and avoid content that would attract underage consumers.
• For college marketing: Curb on-campus and spring break sponsorships and advertising.

The special reports were filed by the beverage alcohol companies in response to Commission orders issued in August 1998. The eight companies are: Anheuser-Busch, Inc.; Bacardi-Martini USA, Inc.; Brown-Forman Corporation; Coors Brewing Company, Inc.; Diageo plc; Miller Brewing Company, Inc.; Stroh Brewery Company, Inc.; and Joseph E. Seagram & Sons, Inc.

The three trade associations are: The Beer Institute, which represents the interests of more than 200 brewers that produce more than 90 percent of the beer brewed in the U.S. and comprises a majority of the imported beer consumed here; the Distilled Spirits Council of the United States, which represents most of the major U.S. distilled spirits marketers--its members produce over 85 percent of the distilled spirits sold here; and the Wine Institute, which represents over 300 California vintners--its members market over 75 percent of the wine sold in the United States, as well as most of the American wines sold abroad.

ADVERTISING CODES

All three associations have voluntary codes with similar provisions about the placement and content of ads designed to prevent the marketing of alcohol to underage consumers. Some companies also have individual guides that, in most cases, parallel those of the trade associations.

Advertising Placement

In general, the codes currently require that more than 50 percent of the audience for their advertising be over 21.

The report reflects mixed compliance with the codes' requirement. "Half of the companies were able to show that nearly all of their ads were shown to a majority legal-age audience," the report notes. The other four companies did not fare as well. Two companies' data showed weeks when many ads (as high as 25 percent) were shown to majority underage audiences. Two others failed to provide reliable information showing the audience for their ads, and thus could not demonstrate whether or not they complied with the codes' placement provisions.

In addition to reporting on the industry's compliance, the report points out that only 30 percent of the U.S. population is under the age of 21, and only 10 percent is age 11 to 17. "The 50 percent standard, therefore, permits placement of ads on programs where the underage population far exceeds its representation in the population."

The report recommends that the industry raise the current standard to reduce underage alcohol ad exposure. For example, it notes that some companies restrict advertising to shows in which underage consumers represent not more than 40, 30 or even 25 percent of the audience. To ensure compliance with the higher placement standard, companies should measure their compliance against the most reliable up-to-date audience composition data available, according to the report's recommendations.

Advertising Content

The codes prohibit alcohol advertisers from using advertising content that is more appealing to underage consumers than to adults, including 21 year olds. Each of the three codes also expressly prohibits the use of certain characters or people in alcohol ads such as: actors under 25 (Beer); children (Spirits); Santa Claus (Beer and Spirits); and sports celebrities or "current or traditional heros of the young" (Wine).

The report notes that industry members appear to make significant efforts to comply with the codes' standards, instructing their staffs and ad agencies to avoid content with greater appeal

to kids than to adults. At the same time, it notes that the standard permits ads targeted at 21-year olds, although they might also have "overflow" appeal to younger consumers, and that existing research raises the question whether some recent campaigns indeed have high underage appeal. Again, the report identifies best practices that some companies follow that reduce the likelihood that an ad will have substantial appeal to underage consumers.

PRODUCT PLACEMENT

Product placement is the practice of getting an alcohol beverage brand used as a prop in a film or television show. Many alcohol companies hire an agent or use internal staff to seek product placements. According to the report, in 1997-98 the eight reporting companies placed products in 233 motion pictures and in one or more episodes of 181 different television series.

The report states that "alcohol placement has occurred in 'PG' and 'PG-13' films with significant appeal to teens and children; in films where the advertiser knew that the primary target market included a sizeable underage market; and on eight of the 15 television shows most popular with teens." The report notes that a few companies have taken steps to reduce the likelihood that a substantial underage audience will see their products promoted in movies and on television.

ONLINE ADVERTISING

"Members of the beverage alcohol industry have created over 100 commercial web sites to promote their products," the report states. While the Wine Institute's code does not address online advertising, the Beer code and Spirits code do, and most companies comply with the provisions of these two codes.

"There are, of course, no foolproof measures to prevent underage access to inappropriate web sites," the report states. "Companies therefore need to give special attention not only to restricting access, but to ensuring that web site content is not attractive to underage consumers."

The report outlines the best practices that some companies have taken to attempt to address concerns about online alcohol sites. For example, it notes that some have discontinued the use of content that may appeal to underage users.

COLLEGE MARKETING

"Advertising on campuses remains a source of concern given the presence of a significant underage audience on most campuses and the high incidence of abusive college drinking," the report states. The Distilled Spirits Council of the United States and a growing number of colleges and universities prohibit marketing activities on campus, and most companies have stopped sponsoring special spring break activities, although not mandated by the code. The report urges more alcohol companies to curb campus advertising and marketing.

CODE ENFORCEMENT

While the report notes that most industry members seek to comply with current code requirements, compliance is not universal. Currently, complaints regarding alcohol advertising practices are considered by the company itself, in the case of beer and wine industries; and by a review board within the trade association, in the case of the distilled spirits industry. The report recommends that the industry should provide for third-party review by creating independent external review boards with responsibility and authority to address complaints from the public or other industry members.

"Experience in other industries suggests that independent mechanisms for evaluating compliance, particularly in the face of complaints from the public or competitors, ensure that industry members are held to reasonably consistent standards," the report points out.

According to the report, "the recommended changes would promote the goals underlying the codes, as well as improve public confidence in industry's efforts to self-police."

The Commission vote to authorize release of the report was 4-0.

Copies of the report are available from the FTC's web site at and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 984503)