[Federal Register Volume 69, Number 112 (Thursday, June 10, 2004)]
[Notices]
[Pages 32552-32555]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13083]


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FEDERAL TRADE COMMISSION

[File No. 042-3033]


KFC Corporation; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of Federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before July 2, 2004.

ADDRESSES: Comments should refer to ``KFC Corporation, File No. 042 
3033,'' to facilitate the organization of comments. A comment filed in 
paper form should include this reference both in the text and on the 
envelope, and should be mailed or delivered to the following address: 
Federal Trade Commission/Office of the Secretary, Room H-159, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing 
confidential material must be filed in paper form, as explained in the 
SUPPLEMENTARY INFORMATION section. The FTC is requesting that any 
comment filed in paper form be sent by courier or overnight service, if 
possible, because U.S. postal mail in the Washington area

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and at the Commission is subject to delay due to heightened security 
precautions. Comments filed in electronic form (except comments 
containing any confidential material) should be sent to the following 
e-mail box: [email protected].

FOR FURTHER INFORMATION CONTACT: Shira Modell or Michelle Rusk, FTC, 
Bureau of Consumer Protection, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580, (202) 326-3116 or 326-3148.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and section 2.34 
of the Commission's Rules of Practice, 16 CFR 2.34, notice is hereby 
given that the above-captioned consent agreement containing a consent 
order to cease and desist, having been filed with and accepted, subject 
to final approval, by the Commission, has been placed on the public 
record for a period of thirty (30) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for June 3, 2004), on the World Wide Web, at http://www.ftc.gov/os/2004/06/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Written comments must be submitted 
on or before July 2, 2004. Comments should refer to ``KFC Corporation, 
File No. 042 3033,'' to facilitate the organization of comments. A 
comment filed in paper form should include this reference both in the 
text and on the envelope, and should be mailed or delivered to the 
following address: Federal Trade Commission/Office of the Secretary, 
Room H-159, 600 Pennsylvania Avenue, NW., Washington, DC 20580. If the 
comment contains any material for which confidential treatment is 
requested, it must be filed in paper (rather than electronic) form, and 
the first page of the document must be clearly labeled 
``Confidential.'' \1\ The FTC is requesting that any comment filed in 
paper form be sent by courier or overnight service, if possible, 
because U.S. postal mail in the Washington area and at the Commission 
is subject to delay due to heightened security precautions. Comments 
filed in electronic form should be sent to the following e-mail box: 
[email protected].
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    \1\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at www.ftc.gov. As a matter of discretion, the FTC makes 
every effort to remove home contact information for individuals from 
the public comments it receives before placing those comments on the 
FTC Web site. More information, including routine uses permitted by the 
Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement containing a consent order from KFC Corporation 
(``KFCC'').
    The proposed consent order has been placed on the public record for 
thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
agreement and the comments received, and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
order.
    This matter involves the advertising and promotion of KFC Original 
Recipe fried chicken. According to the FTC complaint, KFC represented 
that eating KFC fried chicken, specifically 2 Original Recipe fried 
chicken breasts, is better for a consumer's health than eating a Burger 
King Whopper. The complaint alleges that this claim is false. Although 
2 KFC Original Recipe fried chicken breasts have slightly less total 
fat (38 g. v. 43 g.) and saturated fat (12 g. v. 13 g.) than Burger 
King's Whopper, they have more trans fat (3.5 g. vs. 1 g.), more 
cholesterol (290 mg. v. 85 mg.), more sodium (2300 mg. vs. 980 mg.), 
and more calories (760 v. 710).
    The FTC's complaint also alleges that KFCC represented that eating 
KFC fried chicken is compatible with ``low carbohydrate'' weight loss 
programs. The FTC alleges that this claim is false because ``low 
carbohydrate'' weight loss programs such as the Atkins Diet and the 
South Beach Diet, for example, advise against eating breaded, fried 
foods.
    The proposed consent order contains provisions designed to prevent 
KFCC from engaging in similar acts and practices in the future.
    Part I of the order prohibits KFCC from representing that eating 
KFC fried chicken is better for a consumer's health than eating a 
Burger King Whopper, or that eating KFC fried chicken is compatible 
with ``low carbohydrate'' weight loss programs, unless the 
representation is true and, at the time it is made, KFCC possesses and 
relies upon competent and reliable evidence--which in certain specified 
cases must be competent and reliable scientific evidence--that 
substantiates the representation.
    Part II prohibits KFCC from making certain representations about 
the absolute or comparative amount of fat, cholesterol, sodium, 
calories or any other nutrient in any food it sells that contains 
chicken, about the compatibility of such food with any weight loss 
program, or about the health benefits of such food, unless the 
representation is true and, at the time it is made, KFCC possesses and 
relies upon competent and reliable evidence--which in certain specified 
cases must be competent and reliable scientific evidence--that 
substantiates the representation.
    Part II also provides that representations conveying nutrient 
content or health claims that have been defined (for labeling purposes) 
by regulations promulgated by the Food and Drug Administration 
(``FDA'') will be evaluated using the same nutrient thresholds that FDA 
has established for those claims. Furthermore, Part II provides that a 
mere numerical statement of the amount of a particular nutrient in such 
food will not, by itself, be considered to be a weight loss 
compatibility or health benefit claim covered by Part II.
    Part III permits any representation for any product that is 
permitted in labeling for such product pursuant to regulations 
promulgated by FDA pursuant to the Nutrition Labeling and Education Act 
of 1990.
    Parts IV through VII of the order require KFCC to keep copies of 
relevant advertisements and materials substantiating claims made in the

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advertisements; to provide copies of the order to certain of its 
current and future personnel for three years; to notify the Commission 
of changes in corporate structure; and to file compliance reports with 
the Commission. Part VIII provides that the order will terminate after 
twenty (20) years under certain circumstances.
    The purpose of this analysis is to facilitate public comment on the 
proposed order, and it is not intended to constitute an official 
interpretation of the agreement and proposed order or to modify in any 
way their terms.

    By direction of the Commission.
C. Landis Plummer,
Acting Secretary.

Statement of Commissioner Pamela Jones Harbour

    The Commission has entered into a consent agreement with KFC Corp. 
(``KFCC'') to settle allegations that the company deceptively 
advertised its fried chicken as being compatible with low-carbohydrate 
weight loss programs, among other claims. I concur with the 
Commission's admirable results in obtaining strong injunctive relief, 
and I applaud staff for bringing a national advertising case. I 
believe, however, that an even stronger remedy is warranted. KFCC is 
fully aware of our nation's struggle with obesity, yet has cynically 
attempted to exploit a massive health problem through deceptive 
advertising. Companies should not be allowed to benefit monetarily from 
this kind of deception, especially where the health and safety of 
consumers are compromised. Therefore, I encourage the Commission to 
find ways to seek monetary relief in future cases like this one.
    Our nation's obesity rate has ``reached epidemic proportions, 
afflicting 6 out of every 10 Americans.'' \1\ Being overweight or obese 
is ``the second leading cause of preventable death, after smoking, 
resulting in an estimated 300,000 deaths per year. The costs, direct 
and indirect, associated with [being] overweight and obes[e] are 
estimated to exceed $100 billion a year.'' \2\ Obesity has been 
described as both an ``epidemic'' and a ``crisis.'' \3\ Many consumers 
are interested in controlling their weight, and they rely heavily on 
the nutritional information in food advertisements to help them make 
choices about which foods to eat.
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    \1\ Weight-Loss Advertising: An Analysis of Current Trends, A 
Report of the Staff of the Federal Trade Commission (Sept. 2002), at 
vii (``Executive Summary''), available at http://www.ftc.gov/bcp/reports/weightloss.pdf.
    \2\ Id.
    \3\ See The Time/ABC News Summit on Obesity (Preliminary Agenda 
for June 2-4, 2004), available at http://www.time.com/time/2004/obesity; America's Obesity Crisis, Time (June 7, 2004).
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    In the fall of 2003, KFCC apparently was suffering from decreased 
fried chicken sales, perhaps as a result of consumers' interest in a 
healthier diet.\4\ In October 2003, KFCC embarked on an ad campaign in 
which it deceptively advertised that eating KFC fried chicken is 
compatible with a ``low carbohydrate'' weight loss program, even though 
``low carbohydrate weight loss programs such as the Atkins Diet and the 
South Beach Diet advise against eating breaded, fried foods.'' \5\ In 
another ad, KFCC advertised that eating two of its ``Original Recipe'' 
fried chicken breasts was better for a consumer's health than eating a 
Burger King Whopper--even though the chicken is nearly equivalent to 
the Whopper in fat grams and is actually higher in trans fat, 
cholesterol, sodium and calories.\6\ Both ads also promote an entire 
bucket of chicken, even though the voiceovers in the ads referenced one 
or two-piece servings.\7\
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    \4\ See 20/20: Fast Not Fat: Fast Food Chains Will Go to Any 
Lengths to Keep People Eating Their Food (ABC News television 
broadcast, Oct. 31, 2003); Editorial, KFC blunders in ``health'' 
ads, Advertising Age (Nov. 3, 2003), at 22; Bob Garfield, Garfield's 
AdReview: KFC serves big, fat bucket of nonsense in ``healthy'' 
spots, Advertising Age (Nov. 3, 2003), at 61.
    \5\ In the Matter of KFC Corporation, File No. 042-3033, 
Complaint at ]] 5, 8-9 (June 2, 2004).
    \6\ Id. at ] 7 (``While compared to Burger King's Whopper, two 
KFC Original Recipe fried chicken breasts have slightly less total 
fat (38 g. v. 43 g.) and saturated fat (12 g. v. 13 g.), they have 
more trans fat (3.5 g. vs. 1 g.), more cholesterol (290 mg. v. 85 
mg.), more sodium (2300 mg. vs. 980 mg.), and more calories (760 v. 
710).'').
    \7\ See, e.g., World News Tonight with Peter Jennings: Good for 
You? KFC Adverts (ABC television broadcast, Nov. 19, 2003); NBC 
Nightly News with Tom Brokaw: Federal Trade Commission Wanting Proof 
That KFC's Chicken Can Be Called a Health Food in TV Commercials 
(NBC television broadcast, Nov.18, 2003); KFC Corporation, Complaint 
at ] 5 (setting forth voiceovers).
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    KFCC knew (or certainly should have known) that its ads were false 
and deceptive, and that the ads would encourage consumers to believe 
that KFC fried chicken was much healthier for them that it actually is. 
Only a few days after the ads aired, an Advertising Age editorial 
strongly criticized KFCC for running them, describing the ads as 
``desperate and sleazy tactics.'' \8\ In an interview on National 
Public Radio, the executive editor of Advertising Age stated that it 
was ``very unusual'' for the publication to run such a staff editorial, 
but justified it by saying that ``[i]nstead of being truth well told, 
which is what advertising should be, it seems like not only an 
exaggerated claim, but basically an effort to deceive.'' \9\ Consumer 
advocacy groups complained about the ads as well, and the ads were the 
subject of much discussion until they stopped airing in late November 
2003.\10\
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    \8\ Garfield, supra note 4.
    \9\ Day To Day: Jonah Bloom Discusses Advertising Age Magazine's 
Editorial Criticism of KFC's New Ad Campaign (National Public Radio 
broadcast, Nov. 6, 2003).
    \10\ See, e.g., Bruce Schreiner, KFC Ends Healthy Fried Chicken 
Ad Blitz, Assoc. Press Online (Nov. 19, 2003); 20/20, supra note 4.
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    I have voted to accept the proposed settlement because it contains 
very strong injunctive relief that will go a long way toward preventing 
KFCC from engaging in similar deceptive advertising in the future. In 
addition to addressing the specific claims made in the KFCC ads, the 
proposed consent agreement also contains more general language 
prohibiting KFCC from making representations about the absolute or 
comparative amount of fat, cholesterol, sodium, calories, or any other 
nutrient in any food it sells that contains chicken; about the 
compatibility of such food with any weight loss program; or about the 
health benefits of such food, unless the representation is true and, at 
the time it is made, KFCC possesses and relies upon competent and 
reliable evidence--which in certain specified cases must be competent 
and reliable scientific evidence--that substantiates the 
representation.\11\
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    \11\ In the Matter of KFC Corporation, File No. 042-3033, 
Analysis of Proposed Consent Order to Aid Public Comment (June 2, 
2004).
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    Accepting injunctive relief alone is reasonably consistent with the 
Commission's prior settlements in similar cases. However, where a 
company appears to have exploited a national health crisis, an even 
stronger response from the Commission is warranted. While I recognize 
that it may be difficult to calculate monetary relief in these kinds of 
cases, I would like to see the Commission develop methodological 
approaches that would support seeking such remedies in future cases of 
similar types of deceptive advertising, as the Commission has done in 
the past. For example, in 1995, the FTC settled charges with The Dannon 
Company that it had made false or misleading claims for its Pure 
Indulgence line of frozen yogurt. As part of the consent agreement, 
Dannon agreed to pay $150,000 in disgorgement.\12\ Similarly, in 1983, 
the FTC settled charges with Estee Corporation that it had misled

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consumers by falsely claiming that the sweeteners in its foods had been 
accepted by the American Diabetes Association and the Food and Drug 
Administration. Estee Corporation agreed to pay $25,000 in cy pres 
relief to the American Diabetes Association or the Juvenile Diabetes 
Foundation.\13\
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    \12\ FTC Press Release, Dannon Agrees To Settle FTC Charges That 
Low-Fat Ad Claims for Frozen Yogurt were False and Misleading (Nov. 
25, 1995); In the Matter of The Dannon Company, Inc., Dkt. No. C-
3643, 121 F.T.C. 136, 139 (March 18, 1996) (consent order).
    \13\ In the Matter of Estee Corporation, Dkt. No. C-3126, 102 
F.T.C. 1804, 1812 (Nov. 16, 1983) (consent order). Cy pres relief, 
also known as indirect restitution or fluid recovery, is used in 
situations where injured persons cannot be directly compensated. 
Instead, under cy pres, restitutionary funds are awarded in some 
alternate way that indirectly benefits the injured persons.
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    While injunctive relief is important in deceptive advertising cases 
such as this one, monetary relief may further serve to correct unlawful 
conduct, reverse its ill effects, and deter future violations of the 
law. Well-formulated cy pres relief, in particular, may provide real 
benefits to consumers. It is not only reasonably related to the 
violation, but also reasonably likely to reach the individuals most 
injured by a particular deceptive advertisement. Should the appropriate 
case present itself in the future, I strongly encourage the Commission 
to consider the applicability and effectiveness of cy pres and other 
potential monetary remedies.

Statement of Commissioner Mozelle W. Thompson

    I have voted to accept the consent agreement with KFC Corp. in this 
matter and I concur with Commissioner Harbour's statement.

[FR Doc. 04-13083 Filed 6-9-04; 8:45 am]
BILLING CODE 6750-01-P