The FTC's Reliance on Extrinsic Evidence in Cases of Deceptive Advertising: A Proposal for Interpretive Rulemaking. Kraft, Inc. v. FTC, 970 F.2d 311 (7th Cir. 1992), cert. denied, 113 S. Ct. 1254 (1993)
The Federal Trade Commission's ("Commission”) decision in In re Kraft, Inc., shocked many members of the legal community. The decision reasserted the Commission's long dormant authority to disregard relevant extrinsic evidence and rely solely on its own reasoned analysis in determining whether an advertisement implicitly conveys deceptive claims. Viewed by many as an example of the Commission flexing its regulatory muscle, the decision was reminiscent of the expansive discretion asserted during the Commission's pre-Reagan era. On appeal, the Seventh Circuit reluctantly upheld the Commission's decision, solidifying the Commission's broad discretion to determine when commercial speech is deceptive and thereby exclude such speech from full constitutional protection. This Note analyzes the dilemma the Seventh Circuit faced in Kraft, Inc. v. FTC as it heard arguments that were compelling as a matter of policy but weak as a matter of law and suggests that the Commission should clearly define the parameters of its reliance on extrinsic evidence through administrative rulemaking. Part II begins by describing the basis of the Commission's authority to regulate advertising and how that authority is implemented, and then provides the factual background and procedural history of Kraft. Part III first provides an analysis of the standard for deception implemented by the Commission in advertising cases. Next, it provides an analysis of Kraft's principle arguments regarding extrinsic evidence and why those arguments succeed as a matter of policy but fail as a matter of law. Finally, it suggests that both the development of precedent and the issuance of policy statements have failed to adequately restrain the Commission's discretion in the area of extrinsic evidence, and that administrative rulemaking would provide a more efficient and effective means of restraining the Commission's discretion. Part IV concludes the note with a suggestion that the Commission initiate a rulemaking proceeding to clarify the area of reliance on extrinsic evidence.
Dennis P. Stolle,
The FTC's Reliance on Extrinsic Evidence in Cases of Deceptive Advertising: A Proposal for Interpretive Rulemaking. Kraft, Inc. v. FTC, 970 F.2d 311 (7th Cir. 1992), cert. denied, 113 S. Ct. 1254 (1993),
74 Neb. L. Rev.
Available at: http://digitalcommons.unl.edu/nlr/vol74/iss2/5