The FTC Will Make You Safe

by S.M. Oliva, Mises Economics Blog
Jul. 14, 2010

The Federal Trade Commission will order Nestle to cease making claims about the health benefits of a drink marketed to children. The FTC appears less concerned with protecting consumers from fraud than with protecting and expanding the federal government’s monopoly over food-and-drug-related speech, as the Commission’s own press release makes clear:
Under the proposed settlement, Nestle HCN has agreed to stop claiming that BOOST Kid Essentials will reduce the risk of colds, flu, and other upper respiratory tract infections unless the claim is approved by the Food and Drug Administration. Although FDA approval of health claims generally is not required for compliance with the FTC Act, in this case, the FTC determined that requiring FDA pre-approval before Nestle HCN makes claims that certain products prevent or reduce the risk of upper respiratory tract infections will provide clearer guidance. In turn, this will facilitate Nestle HCN's compliance with the proposed settlement order and will make the order easier to enforce.
It’s a nice sleight-of-hand: The law doesn’t require FDA pre-approval, but the FTC does. This is important because the FTC wants to restrict all commercial speech to only those statements pre-approved by the government, with no outside check or balance. There’s been a few roadblocks recently.

For example, last August a federal judge in New Jersey rejected the FTC’s petition to hold Lane Labs-USA in violation of a prior FTC order related to marketing of the company’s dietary supplements. Similar to the Nestle case, the FTC censored Lane Labs’s speech unless their claims were supported “competent and reliable scientific evidence.” What the FTC means by this is, “evidence supported by FTC-paid experts.” When Lane Labs produced its own expert reports in support of certain advertising claims, the FTC asked the court to hold the company in contempt -- because the FTC-paid experts had a different opinion. The judge declined to issue a contempt finding (the FTC has appealed).

That’s why the FTC pending order against Nestle expressly states all claims must be pre-approved by the Food and Drug Administration, rather then simply require “reliable” evidence; this way there’s no chance the company might find a scientist who disagrees with the government’s official position.

It also bares repeating that despite labeling these cases as “consumer protection,” the FTC need not ever allege, much less prove, any consumer injury. Indeed, the judge in the Lane Labs case noted there wasn’t even an allegation of specific consumer harm -- the issue was simply the FTC’s disagreement with the company’s speech. Nor did the FTC’s complaint against Nestle claim any consumer was injured because of misleading claims. The FTC merely substitutes its own judgment for that of consumers.

I feel obliged to emphasize this because of the recent trend of fake-libertarian groups cheerleading the FTC’s “consumer protection” activities, including the Competitive Enterprise Institute and the Progress and Freedom Foundation. Just today, PFF’s Berin Szoka gushed about the benefits of FTC consumer protection, citing the agency’s warning against a magazine not to sell its subscriber list. At best it’s a breach of contract case; it certainly doesn’t prove the need for a massive federal bureaucracy that routinely violates the civil rights of American citizens. More to the point, folks like Szoka are themselves actively deceiving the public about the true nature of the FTC’s activities.

(Postscript: PFF is hardly pro-consumer given its view that people who download songs on the Internet should be subject to six-figure civil fines. In the minds of PFF scholars, companies like Google are criminal syndicates, while the FTC is a necessary agent for protecting consumers. And they call themselves “cyberlibertarians.”)












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