Is the Four Loko/FTC Settlement on the Rocks?

by Michelle Minton on November 28, 2011 · 4 comments

in Features, Health and Illness, Nanny State, Regulation

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If you’re a regular reader of OpenMarket.org, then you know we at CEI have written quite a bit on the issue of Four Loko. In the past two years, many of us at the Institute have stepped up to defend, not the product itself, but rather the company and consumers rights to purchase the beverage. Considering that there are already laws preventing minors from purchasing alcoholic beverages, we simply don’t see a need for some nanny-state bureaucrat to step between this trade and tell us we are too dumb to understand how harmful it is to drink four cans of Four Loko back-t0-back, and that’s why it needs to be taken off store shelves.

Yet, that is in essence what happened last year. The FDA sent warning letters to the makers of various alcoholic beverages that also contained caffeine. I detailed one businesswoman’s heartbreaking ordeal as she fought for, but ultimately lost, her company in the battle against the FDA.

As for Four Loko’s makers, Phusion Projects, the company voluntarily changed the formula of their product, removing the caffeine and then reintroduced the drink at the start of 2011. However, that wasn’t good enough. At the behest of pestering parents and state attorneys general, the Federal Trade Commission (FTC) pursued the company for what it called “deceptive” advertising. The Commission alleges that the company advertises the drinks as equivalent to one or two regular beers, when in actuality they are closer to the amount of alcohol one would consume with four regular beer. The FTC also complained that the makers of Four Loko deceptively advertised that one can could safely be consumed as a single serving. Regardless of the merits of the FTC’s claims, this October the FTC announced that they had reached a settlement agreement with Phusion Projects whereby the company would add resealable tops to their cans and add another warning label that states the alcohol content of one can is actually equivalent to 4.5 ”regular” beers.

Still it’s not enough for parents and lawmakers hell-bent on beating this company (and any other beverage producer who dares to make their product look fun) out of existence. Despite the fact that Phusion Projects has agreed to once again modify their product to satisfy the squealing would-be-nanny’s to us all, a few people are speaking out against the agreement, claiming it should go further. In particular, the group Alcohol Justice (formerly the Marin Institute) has started a letter writing campaign to the FTC in opposition of the agreement.

As Greg Beato over at Reason noted:

While Alcohol Justice’s advocacy efforts appear to have inspired the FTC’s complaint against Phusion, the group is less than pleased with the agreement the two parties have reached. In a letter it sent to the FTC, the organization points out that the new disclaimer about a single can of Four Loko containing as much alcohol as four regular beers may actually backfire and “serve as a marketing device” rather than a warning. It also claims that “it’s absurd to even imagine how a [resealable] cap will deter youth from drinking an entire container at once.” And ultimately it concludes that “the high alcohol content in the large single-serving container is itself deceptive.” In other words, the only real way to make Four Loko and similar products fit for commerce is to pursue the course Alcohol Justice has already laid out it in its model legislation: Limit container sizes and alcohol content….No doubt wary of Four Loko’s growing respectability, Alcohol Justice has ratcheted up its campaign against the brand. In an August 2011 report it published,From Alcoholic Energy Drinks to Supersized Alcopops, it suggests that “supersized alcopops” like Four Loko “may be just as dangerous  as their caffeinated predecessors because of the combination of high alcohol with sweet flavors.”

Of course, as I wrote in a blog post over at BigGovernment.com, asking the FTC or any federal agency to regulate the content of alcoholic beverages is a pretty big violation of the 21st Amendment to the Constitution which gives that right to the states. Yes, the FTC is vested with power to regulate labels and advertisements while the FDA approves food and drink for safety, but limiting the contents of alcoholic beverages — whether it be size of can or amount of alcohol — is a state’s right. But there’s something even more concerning her than the federalism issue. What’s really worrying is that the federal agencies seem more and more to be bowing to cries of a few angry parents and pressure groups rather than concerning themselves with protecting consumer safety and consumers’ freedoms. If this continues on the way it is going, groups like Alcohol Justice might get what they want: a world where all tasty, colorful, or fun alcoholic beverages are banned.

If you are interested, the comment period for the FTC’s proposed settlement with Phusion Projects is open until December 2 and letters can be submitted online here.

Such Hypocrisy November 28, 2011 at 2:55 pm

It’s incredulous that you don’t consider the most important factor in this whole story. It’s not so much about the superficial reports that the media are “scapegoating” according to you and Jacob Sullum of Reason Magazine.

Get a grip! It’s about the kids!!! These drinks were never designed for adults. They are specifically produced for underage youth, sold in markets where they are readily available without much monitoring and sold cheap enough for them to buy.

You are also not recognizing the biological hazards of people under 21 and the effects of alcohol on this still growing brains and hearts.

So, rant all you want about this or that marketing and monitoring groups like Alcohol Justice which is one of the only groups left holding the torch of sunshine on these products since Big Alcohol has scared or bought off all the funders to other equally effective watchdog groups.

Michelle Minton November 28, 2011 at 4:15 pm

Are you *incredulous* about the fact that people exist who actually believe that individuals should have the right and responsibility to make their own decisions about products they buy and consume?

It doesn’t matter if the product appeals to “kids”. It can not legally be sold to minors–the problem isn’t with the makers of drinks that kids might like, but with the people who break laws by selling it. Perhaps some things that appeal to kids under 21 years old also appeals to young adults…

I recognize that there are dangers in consuming alcohol. Almost any food/drink can have negative side effects if over-consumed and the tolerance levels are different for different people–that’s why it should be up to individuals to determine what kinds of food/drinks and how much they ought to have. We shouldn’t restrict the choices of all for the irresponsibility of a few–that’s what prohibition was all about. Of course, since you are from “Alcohol Justice” that’s probably what you’d like: the new prohibition of alcohol. Or maybe you’d just like to make it so rare and expensive that only the rich can enjoy a glass of wine, a beer, or yes, a four loko–if that’s their thing.

Such Sanctimony November 28, 2011 at 4:19 pm

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