3 I1::zt:ii"‘”:':7I'ii::°i:1iii:7HIi‘im7i"Wilt/11:1 010-1 03860797 CHILDREN'S ADVERTISING ISSUE BRIEF NUMBER IB78089 AUTHOR: unlock, Bruce K. Economics Division THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE MAJOR ISSUES SYSTEM DATE DRIGINATED 1g;Q1 _§ DATE UPDATED gggggggg FOR ADDITIONAL INFORHATION CALL 287-5700 0225 cns- 1 1 IB78089 UPDATE-02/22/80 l§§Q§-2§EIE£I2Q!t In recent years, the effects of television advertising directed towards children have concerned citizens and their governments in most industrialized countries. In the United States, this concern has primarily centered around ya Childrens Advertising rulemaking proceeding (often referred to as "kidvid") that is being conducted by the Federal Trade Commission. In a staff report issued by the Commission in Apr. 1978, FTC attorneys‘ concluded that television commercials aimed at children may be unfair because, among other factors, youngsters frequently are not yet capable of differentiating between programming and commercials. nFurthermore, even for those children who do understand the difference, there may exist a basic "unfairness" in matching sophisticated advertising and marketing people against children. Consequently, the staff proposed a range of possible remedies, including limiting the number of such ads directed at children, controlling advertising techniques, requiring the disclosure of nutritional iinformation, and -- most drastic of all —— banning all advertising directed at children. Advertisers and broadcasters who could be substantially affected by the kidvid proceeding have found ready allies with many in the business community 'who are complaining about the excesses of Government regulation. Congress is under intense pressure to terminate the rulemaking proceeding entirely, and ,the Senate-passed version of the FTC's authorization legislation would do just that. Increasingly, the kidvid issue is being viewed as a test of how vuch Government involvement the public desires or is willing to tolerate- EAQEEEQEEQ-A!2.EQLlQI.A!ALX§l§ For the past 8 to 10 years, concern and debate have continued to increase over how television advertising affects the Nation's children. During this period hearings have been held, research conducted, reports lissued, and recommendations made. Although much is now known, a great deal remains to be learned about the subject. Nevertheless, one fact stands out: by 1977, the average American child aged 2 through 11 was exposed to more than 20,000 F television commercials annually. In February of last year, the Federal Trade Commission (FTC), responding to petitions it had received, released to the public a report prepared by its staff, This §La:f-§222;t-2n-Teleziéign Aézertiéing- :9- Children‘ concludes that a major portion of advertising to. children is unfair and decpetive within the meaning of the FTC Act. In April 1978, the Commission unanimously agreed with the staff's conclusion that the petitions were generally meritorious. Thus, rulemaking proceedings were begun under provisions of the Magnuson-Moss FTC/Improvements Act. Among the Staff Report's suggested remedies are the following three ~proposals: *(1) Ban all television advertising directed to children too young to understand the selling intent of commercials; (2) Ban the advertising d‘rected at children under age 12 of sugared products most likely to cause 1 2th decay, and (3) require that advertisers of other sugared products to children pay for separate nutritional and health messages to "balance" their ads. CRS- 2 1373039 UPDATE-O2/22/80 Although the petitions enjoy the support ‘of the American Dentalt Association, the American Academy of Pediatrics, the National Congress of Parents and Teachers, and others, there is strong opposition to the proposal from large segments of the advertising and broadcast industries, the business community in general, and the Congress. 1 The Staff Report is many steps and probably several years removed from becoming a final rule (if, in fact, it ever does). Then, of course, it would be subject to judicial review, including, almost certainly, scrutiny by the U.S. Supreme Court. Public hearings on -the FTC proposals began in San Francisco on Jan. 14, 1979, and ran through the 26th. Hearings resumed in Washington .D.C. on March 5, and ran for an additional four weeks. Altogether, over 200 witnesses testified, with more than one million words entered into the public record. The FTC administrative law judge who has presided over the extensive hearings on the controversial proposal announced at the beginning of August that he has reduced to seven the number of major issues to be considered and debated. ‘ Judge Morten Needleman has recommended to the Commission that additional hearings be held on three "disputed" issues and that written submissions be presented on four other issues. The following are the three major disputed issues upon which those who have participated in the rulemaking will be allowed to cross-examine witnesses: « To what extent can children between the ages of 2 and 11 distinguish between children's commercials and children's programs to the point that they comprehend the selling purpose of the advertising? ‘ ’ To what extent can children between the ages of 2‘and 11 defend against the persuasive techniques used in these commercials, such as fantasy or cartoon presenters, premiums, limited information, and various associative appeals? what health effects, actual or potential, attach to any proven lack of understanding of selling intent or inability to defend against persuasive techniques? » The administrative law ‘judge also has requested information on the T following four other issues: The possible consequences of a product or audience-related ban or other restrictions to small broadcasters; Whether there is any basis for concluding that the current volume of children's programs would be sustained if the commercial base is abolished or substantially reduced; The soundness of the opinions of those who previously commented on the impact of a ban on the’price of products advertised to children, and the soundness of the data that purported to CRS- 3 IB78089 UPDATE-02/22/80 support those opinions; and Possible alternatives to an age-related or product ban; for example, a requirement that the sugar content of all products advertised to children be plainly revealed so that parents and health professionals could use the advertisements in nutrition education. _HISTOBICAL PERSPECTIVE_ - 7..., —-‘:_ jj € Whatever the merits of the FTC staff proposal, there is widespread public concern about the effects of television and television advertising on children. Although some who oppose the FTC's investigation into this area have claimed that this issue has been recently created by consumer activists now employed by regulatory agencies, events going back at least to the beginning of the last decade indicate otherwise. In 1970, two events focused national attention on television advertising directed towards children. Robert B. Choate, head of a nonprofit consumer group, the Council on Children, Media and Merchandising, declared before a Senate consumer subcommittee that most ready-to-eat cereals consisted mainly of "empty calories" and were, in effect, worthless in terms of their nutritional value. And, Action of Children's Television (ACT), a .Boston based parents‘ organization, filed a petition with the Federal Communications »Commission (FCC) which called for the elimination of television advertising directed toward children. Despite the fact that more than 100,000 letters came in supporting the idea, the largest response in the FCC's history, the ‘agency took no substantive action. In 1971, following five weeks of "informational" hearings by the FTC, The new York Times (11/22/71, p. Lo 21) reported that "the preponderance of testimony promised to strengthen the case for expanding the commission*s regulatory function, particularly in the field of advertising addressed to children."i ' In March 1974, the Senate Commerce Committee held hearings on the subject. FTC Chairman Lewis A. Engman told the committee that his agency has the prime responsibility to take action with respect to the content, deceptiveness, and unfairness of children's advertising. while stating a preference for voluntary self—regulation on the part of advertisers and broadcasters, he said that the time had come for action on children's television advertising and that the FTC was ready to take enforcement action, if necessary. In 1975, the communications subcommittee of the House Commerce Committee held four days of hearings on broadcast advertising and children. These focused on the self-regulatory efforts of the National Association of Broadcasters (NAB) and the Council of Better Business Bureaus; the roles of the FTC and the FCC; and, some of the research studies and their findings. In all, 15 different congressional and agency hearings between 19705 and 1975 produced significant testimony on advertising to children. During this (time and subsequently a growing number of people, both within and outside the Government, have called for action on this issue. In a study conducted. in 1978 by Yankelovich, Shelly and White for the Food marketing Institute, 60% < the nationally representative sample of consumers indicated that they are in favor of stopping advertising to children even if it results in fewer children's programs. a I CRS- u IB78089 UPDATE-02/22/30 ___TELEVISION AND CHILDREN_ Q§;lQ§§E1§;§§EQ§EE§-E9.§§l_!i§iQQ.EQ!E§E§i§l§ Concern about television's impact on children is largely based on the fact that most American children spend a great deal of time watching television. The statistics that document the medium's pervasiveness are striking: The average child under the age of 12 spends approximately 25 hours per week watching television, and the vast majority of all children watch some television every day. By the time the average student graduates from high school, he or she will have spent some 22,000 hours in front of the set and may have been exposed to as many as 350,000 commercial messages. In fact, the average 18-year old has spent more time watching television than doing anything else (except sleeping): including time spent in school. IEB§§E_2§-$!.éQ!§£Ei§i£§;Q!_EiQ§ Testimony at the hearings in San Francisco during Jan. 1979, produced some very_differentlviewsrbylpsychologistsas-totheimpact onchildrenfrom their exposure to TV commercials. one psychologist who favors tougher regulations noted that children are unlike adults, not only in ghgg they think but in hgg they think ‘as well- Concluding that ability of children to think develops and changes as they mature, he referred to a classical experiment by Swiss psychologist, Jean Piaget. Those who accept the findings of that study say that it demonstrates that children under 8 cannot distinguish the difference between programs and commercials. To such children, a 30-second ad is a new, not a different kind of program. ~ Equally eminent psychologists, however, argue that the Piaget study does not take into account children's non-verbal skills. They maintain that children are capable of seeing through commercials, but that their language ability does not permit them to explain in words. 0§igg;g_pQ;igi§§_;g_§9;g;gg seuntriss Concern over the effect of advertising directed at children, especially preschool children, is not an issue of concern only to 0.5. lawmakers. Governments in most of the major industrialized nations have prohibited television advertising -- for any product -- specifically directed to preschoolers. 9 In Canada, proposals are presently pending to ban such advertising. And, in Australia a new measure that further strengthens the government's control -of children's TV viewing took effect on July 1, 1979. Australian TV stations must now televise between 4 and 5 p.m. weekdays a minimum of three hours a week (soon to be increased to 5) of material approved by the government-sponsored Children's Program Committee, whose guidelines are endorsed by the statutory Australian Broadcasting Tribunal. The new children's program requirements are, not without their critics. dThe industry's Federation of Australian Commercial Television‘ Stations ‘has said the recent action is "equivalent to a government agency taking over ~compulsion one page in every newspaper, specifying the type of articles to appear and assuming the right to censor the contents before publication." CRS- 5 IB78089 UPDATE—O2/22/80 In Britain, a committee established by Parliament has recommended that "no advertisements be shown within children's programs." The committee explained that --- Children are inclined to believe that what they are told in a television program is not only true, but the whole truth. How are they to distinguish between what they are told in a children's program and what they are told in an advertisement? Yet in singing the praises, and the jingles, of a particular product, a child cannot be expected to know that other, less advertised products may be equally good ... That is why the majority of us believe that children should not be exposed during their own programs to the blandishments and subtle persuasiveness of advertisements. Lord Annan, "Report of the Committee on the Future of Broadcasting" 166 (1977). §22§ten:iel-eizer:i§in9.2r2e2Qii2re§ According to industry and FTC figures, television advertising aimed at “children amounts to $500 million to $600 million annually. Although an outright ban on commercials aimed at children is only one of a half-dozen options recommended by the commission staff, advertisers and broadcasters are .concerned about the possible economic consequences of the proposed rule. A A great deal of the discussion to date has centered around ads for -reakfast cereals, and industry that spent $172.5 million last year on television advertising. The cereal industry contends that the products involved are not harmful and that a ban would simply and needlessly harm commercial television and the companies involved. The economic evolution of children's television has passed through several very distinct phases, of development. During the formative years of “ television. the economic incentives of the industry were directed toward market development. Few people owned sets (less than 200,000 in 1909), and the creation and establishment of potential audience circulation was of primary importance. During this period specialized children's programming of high quality was viewed as a major enticement for encouraging families to purchase televisions. Shows such as Howdy Doody, and Kukla, Fran, and Ollie were among the 27 hours of children's programming weekly, and primarily at hours when children were inclined to be watching —- weekday evenings between 6:00 and 8:00 P.M. sand, during these early years of television, nearly half the combined network offerings for children were presented without advertiser sponsorship. 0 By 1952 the number of television sets in use in this country had zoomed to more than 16 million. with this greatly, increased circulation, and thus A p hential advertising revenues, the emphasis in programming shifted from a-cracting potential viewers to buy «television sets toward producing and securing programs that would appeal to sponsors -- in other words, from audiences development to creating an efficient marketing system for cns- 6 1373039 upnun-o2/22/so advertisers. over the next couple of years, the institutional strength of the advertisers (and their agencies) was felt in all areas of programming. Since sponsors buy programs that act as efficient vehicles to reach potential customers, and since at this time children were not considered to have a significant influence on family buying habits, the result was predictable- Advertisers had no incentive to program specifically for children. Consequently, when it became in their economic interest to do so, they shifted children's programming from the weekday early evening position to afternoon and morning positions. The networks readily went along with this time shift, since it was also in their economic interest to do so. with the sales of television sets rapidly approaching saturation point and with the greatly increased role of ratings in determining broadcast revenues, advertisers generally viewed audiences as reasonably homogeneous mass markets of "eyeballs." Children's programming lost its previous specialized identity because it was not warranted on the. basis of profit-making potential in comparison with mass audiences for the same time slots. ~»Th eevolutionaryprocessecontinued,ehowever,andover a periode of years children as a.specialized audience were rediscovered by advertisers and broadcasters in true economic terms, i.e., as a profitable product for sale to specialized advertisers. m ' The major shift to specialization in children's programming came with a change in perception. Advertisers increasingly began to recognize that children exert a significant influence over the purchase of products such as toys, sweets, cereals, etc. Current practices in advertising, and in motivational research for advertising, indicate that the industry's concept of children is continuing to shift. In testimony before the Senate Commerce Consumer Subcommittee in 1973, Robert B. Choate revealed that the idea was developing among advertisers and motivational research firms that children. may be the best targets of commercials for adult products as well as ones they might use themselves. He stated:’ vToday, in motivational research houses across the ~country, children are being used in laboratory situations to formulate, analyze, polish, compare, and act in wadvertisements designed to make other children salesmen within the home. Armed with one-way mirrors, hidden tape recorders, and inobtrusive video—recorders, professionally trained psycho1ogists.and experts in child behavior note every motion, phrase, and other indication of children's responses. ___;__RELATED INTEREST OF THE FEDERAL COMMUNICATIONS COMMISSION ____ __ In July 1978, the Federal Communications Commission directed its staff to ‘assemble a special task force to examine how broadcasters ‘were meeting the ‘programming needs of children. The staff was also asked to study the ‘pros and cons of further reducing the allowable commercial minutes in childrenPs TV shows. This action breathed new life into a children's TV inquiry th / had been dormant since 1974 and opened a "second front" for advertisers and television industry executives already watching the proposed kidvid rules at the Federal Trade Commission. CRS— 7 IB78089 UPDATE-02/22/80 The principle aim of the inquiry was to study how ybroadcasters had complied with the recommendations in the children's policy statement issued by the FCC when it closed its children's TV review in 1974. At that time the commission declined to issue rules of its own, saying lit would give elf-regulation a chance to function. on Oct. 30, 1979, the FCC released the Report of the special task force 'which accuses the television industry of failing to meet the 197a mandate to improve children's programming. one of the major staff recommendations would require broadcasters to air five hours of educational programs aimed at preschoolers and 2.5 hours aimed at school—age children each week. The Report also recommended that Congress should improve the present government subsidy programs for children's television by earmarking some Public Broadcasting service funding for children's programs. Although the Department of Health, Education and Welfare spent $50 million to fund children's programs, the task force found that the commercial networks will not run those programs because advertising interruptions are prohibited. The staff recommended that the prohibitions against commercial insertions into the HEW programming be lifted. The Report concluded that commercial television, as currently structured, is unlikely to increase voluntarily the amount of educational programming for -children "given the economic incentives of the broadcast industry and characteristics of the child audience." Consequently, the task force said, the FCC should mandate specific minimum children's programming requirements for commercial television until such time as pay, cable, or over-the-air subscription television can be encouraged to offer more children's television for parents to purchase for their children. Unlike the FTC, the FCC has no jurisdiction over the content of ads. Nonetheless, in addition to the power to regulate the amount of time allotted to ads and the frequency with which an ad may be shown, it has the power to issue license renewals. Although the FTC has taken the lead in the current debate, the. FCC has »been involved in certain aspects longer and may again play the major role in _ the resolution of many, if not most, of the issues. The key to they future FCC role may be reflected in a 1960 policy statement wherein the commission cited programs for children as one of fourteen elements "usually necessary to meet the public interest, needs and desires of the community.” If the issue is viewed in terms of ensuring that children are not singled out on the basis of advertising marketing icriteria fora exploitation by advertisers, but rather on the basis of their own needs and interests, then the crucial question becomes —- Can these objectives be met within the framework of an advertiser—based, commercials broadcast system? 4 some have suggested that it cannot ‘and that children's programming should be the exclusive domain of public television. However, others vsuggest that the n ‘works and the broadcasters are in good financial shape, (Senator Hollings referred to their “mammoth profits" at one point in a recent speech) and that even if they were required as part of their “public interest" responsibility to provide children's programming with gg advertising they could do so; cns- 3 1373039 UPDATE-O2/22/80 alternatives to the present approach are economically feasible. g _ _ CONSTITUTIONAL ISSUES __ \ ________________ As the FTC staff report points out, in Constitutional terms, the propose? rule is concerned with a special case within a special case. First, it involves children, who have—always been recognized as a special class of persons under the law. Second, it involves commercial speech, which has been recognized as a special class of speech under the law -- distinct from political speech. Recent Supreme Court decisions appear to leave the FTC free to go ahead with basic work to curb false and misleading advertising, gig v. §pg;;y_ § §232hin§2n-§9;. 405 U-S- 233. 2%“ (1972) and !ir9inie_§ra£2-§22rQ_2f-£h2rna2z v- !irg;n;a-Qitizen§-§22n§ili-;ns; 425 U-S- 78“ (1976). In !ir2;n;a-2herna§z the Court concluded that advertisers have a First Amendment right to speak the truth in commercial advertising, and that the public has a corresponding right to receive this information. However, assuming that First Amendment problems are found not to exist with respect to the broad wquestions of regulation of television advertising directed toward children, and that is an assnmptionthat.maylnotAbewarranted,questionsremainconcerning rthe- commission's proposed remedies. ~Since courts do not permit more restraint on protected rspeech than is deemed absolutely necessary, a ban on all advertising of highly sugared foods to children (the most drastic action the commission has proposed) might not be upheld. That is to say, the proposed remedy may go too far, given the protection afforded by the First Amendment. INDUSTRY REACTION TO FTC STAFF PROPOSAL__ T1 The following arguments are voiced by many in the broadcast and A advertising industries, a number of newspaper editorials, and some Members of . Congress: criticism of the Federal Trade Commission for interfering in an area that is nt its responsibility and which is essentially trivial; a defense of the quality and desirability of current advertising and programming directed to children: the claim that the FTC's proposal would do more harm than good; and, the difficulties of implementing the proposal. Commenting on the FTC's proposal, a press release by ythe Chamber of Commerce of the United States states that: “The ban on product advertising is another example of too much government interference in our lives, a case of too much |Big Brother.'“ The release continues: "We strongly believe that the ultimate responsibility for deciding which products to purchase should be left to the parents, and that the FTC has no business playing a ‘loco . parentis' role. The American people are weary of too much government in their lives, too much protection, too much of what other people think is good yfor.them." ~A spokesman for one of the cereal manufacturers ithat would be greatly affected if the FTC staff recommendations were finalized says: It's advertising's job to provide, in an interesting manner, timely and relevant information about products. Television advertising to children is an effective A and efficient way to call attention to product attributes which some children will find of interest, and others will reject, since no one cereal or toy appeals to everyone. CRS- 9 IB78089 UPDATE-02/22/80 This spokesman and others point out that today's television commercials for cereals tell children that the product is just part of a balanced diet and should not be the only thing a child eats for breakfast. They say that if these commercials were taken off the air, it is possible that children's reakfast nutrition might actually suffer as a result. Defending the quality of their current offerings, a television network president said that their childrenfis TV programming was proof of how the network treats children seriously, and honestly and with special consideration" and that continued program improvement depends on advertiser support. And, there is the argument that actually trying to implement the FTC's staff proposal would be so complex that it would be all but unworkable. For example, before any action is taken, the question must be answered, What is children's television? Most commonly, children's TV is thought of as those programs aired on_Saturday and Sunday mornings and specials shown on weekday afternoons. WBut in fact, 85% of the children's viewing falls outside the Saturday-Sunday time slots. A second issue the commission will have to consider is whether it needs to draw distinctions between different age groups. Material that can be comprehended by a 10-year old, for example, would be far beyond the grasp of ymost 4-year olds. CBS network president James H. Rosenfield would undoubtedly find support _among other critics of the commission's proposal for his statement: The FTC staff report takes a collection of theories about television...the psyches of young children...parent-child relationships...American dietary habits...and consumer behavior...connects them as though they had been demonstrated in a single laboratory experiment...and arrives at a radical , conclusion that clearly will not remedy the harm * it supposes to exist. What it certainly gill do is undermine the funding for children's television. _0PPOSITION EFFORTS TO STOP KIDVID_ Opposition to the FTC's children's advertising rulemaking proceeding has taken several forms. In the Congress, efforts have been made to cut off funding for the-kidvid proceeding, to simply forbid the Commission to look into the matter, to provide either chamber with the power to veto any final rule, and to take away the agency's jurisdiction over "unfair“ advertising upon which its legal theory in the~ proceeding is based. In the courts, kidvid opponents attempted to disqualify FTC Chairman Pertschuk from any further role in .the rulemaking. Finally, opponents shave undertaken a multi-million dollar campaign to influence the media and public opinion. ;n-§2n9ress F Principal opposition efforts to kidvid have centered on the Congress where pressure for some type of action effectively halting the rulemaking proceeding has become intense. These efforts began in the summer of 1979 [CBS-10 IB78089 UPDATE—02/22/80 with attempts to delete line items from the agency's appropriations bills for the children's advertising proceeding. Then, an amendment to the FTC authorization bill (H.R. 2313) was prepared that would have, quite simply, forbidden the Commission to continue the rulemaking. 1 However, the House eventually began debate under a rule (H.Res. 456) that limited consideratior of amendments to those concerning funeral homes,‘ agricultural cooperatives, and the cereal industry. Nevertheless, while the House bill (which passed Nov. 26 by a 321-63 vote) does not specifically address the kidvid rule, it does subject FTC actions to a congressional veto. The focus on the kidvid rule then shifted to the Senate. There, in a series of moves that would rein in the Federal Trade Commission, it voted, on Feb. 14, to kill the Commission's children's advertising proceeding. By a vote of 77 to 13, the Senate approved 51 1991, the FTC's authorizing legislation. But the final vote came after the Senate had rejected a number of amendments (including the controversial one-house veto) that would have all but crippled the agency in the opinion of many observers. Nevertheless, by a 2-1 margin, the senate voted down an amendment that would have authorized the FTC to proceed with the kidvid case. As approved, the bill mandates that the Commission may write rules governing only false or deceptive advertising -- not "unfair" advertising, a standard on which the children's inquiry is based. \The amendment, offered on the Senate floor by Senators warren Hagnuson and Robert Packwood would have removed that section from the bill, but it was rejected by a vote of 67 to 30. The death of the kidvid proceeding, however, is not a foregone conclusion. The House does not have a similar provision in its FTC authorization bi] (H.R. 2313) as discussed above. A House-Senate conference committee will now have to work out a compromise. Whether the House will go along with the move to kill the children's inquiry is uncertain. V 1 I£-EE§-§9E££§ The participation of the FTC's chairman, Michael Pertschuk, in the kidvid rulemaking has been a point of controversy for over a year. Advertisers and others who have a stake in the outcome have argued that Pertschuk prejudged important issues in the rulemaking. A Federal district court judge didqualified Pertschuk in Nov. 1978 saying that "a very substantial showing has been made showing that the chairman has ‘ conclusively prejudiced factual issues which will be disputed, in the rulemaking proceeding and whose resolution will be, necessary for a fair 'determination of the rulemaking as a whole.“ This ruling was overturned on Dec..27, 1979, when a 0.5. Court of Appeals voted 2-1 to permit Pertschuk's participation. 0n Jan.* 7,‘ 1980,; however, Pertschuk voluntarily withdrew’ from the rulemaking, citing, a desire to counter criticism in Congress. In a prepared statement *the FTC ‘chairman commented that his prior statements "however appropriate the court has judged them, have given those urging Congress to‘ terminate the« rulemaking a diversionary issue." He said further, "I am concerned that the continui controversy regarding my participation could become a focus of thé”gdebate, instead of the far more important issues - whether the proceeding; itself should be allowed to continue." 1 “ ‘ CRS—11 IB78089 UPDATE-02/22/80 Chairman Pertshuk's withdrawing from the rulemaking leaves only three, commissioners to decide the case - Paul Band Dixon, David Clanton, and Patricia Bailey. The other commissioner, Robert Pitofsky, withdrew because of his previous involvement with a public interest group concerned about the ssue. I In another ’action, advertisers filed suit in Sept. 1978 seeking =interlocutory review by a district court of special rules adopted by the FTC for its rulemaking proceedings.. The advertisers alleged that the Commission failed to comply with the notice and comment provisions of the Administrative ‘Procedure Act in adopting the special rules. The district court granted the FTCFS motion for summary judgement and held that the challenge was premature. on Oct. 2, 1979, the Court of Appeals for the District of Columbia Circuit ruled that the advertisers must .wait until the FTC issues its trade regulation rule before contesting Commission procedures. while it expressed "serious doubts about the validity of some of the Commission's actions," the federal appeals court concluded that the procedures are not ripe for review at this time (Association of National Advertisers, Inc. v. FTC). 132hl.i.2-.13§.l2.1.*.=i.<2r.1..§-§-1I;2ai9.;1. A coalition of the country's three major advertising associations, with ’help from the National Association of Broadcasters, the Cereal Institute and other trade groups, has been active in fighting the proposed children's ad rule. The full cost of this effort is not known but reports in advertising ipublications have placed the amount at perhaps ranging somewhere between $15 million and $30 million. The industry coalition has claimed success in several instances in connection with the FTC hearings. For example, it says that its issuance of daily summaries of testimony and rebuttal at the San Francisco hearings "conditioned many activist witnesses to be more cautious than they would have been" and the coalition's "substantial legal presence was a strong influence on FTC Administrative Law Judge (Horton) Needleman's performance." COHPROHISE DEEMED POSSIBLE since the opening barrage of statements was issued in the spring of 1978 following the release of the FTC Staff Report, a growing number of observers and participants began predicting that a compromise solution was probable- As the strength of the coalition opposed to the proposed rule has grown, even FTC staffers acknowledge that there is scant hope" for implementing their suggested remedy calling fort a total ban on television advertising to children supposedly’ too myoung to understand. the difference between advertising and programming. More and more it"hasi seemed probable that networks, broadcasters, ad agencies, advertisers, code authorities, etc. would take steps Ito preempt major government involvement. Industry self-regulation frequently functions in a meaningful way when the threat of government involvement is strong, as it is in the present case. Already there have been« indications that some it remental changes would. be wforthcoming. For example, during the San Francisco Hearings the American Broadcasting Company announced that by the end of thefiyear it will cut back advertising during children's programming by cns-12 IB78089 UPDATE-02/22/80 20%. (The other two major networks, however, were criticafl 6f?the‘move.) However, any compromise on the children's television advertising issue depends first and foremost on the Federal Trade Commission's being allowed to icontinue the rulemaking proceeding. If the conference committee on the fTC's authorization legislation agrees with the Senate's provision which substitutes "false or deceptive" advertising for "unfair" advertising as a basis for rulemaking, the Commission would have to begin its investigation from scratch; ' L§§I§Lé1lQ! LEE;SL3219E-£E.Ifl§.2§E!-Q9E§§E5§ H.R. 2313 (Scheuer) Amends the Federal Trade Commission Act to authorize appropriations for the Federal Trade Commission for FY80 and FY81. 1- S. 1020 (Ford) Amends the Federal Trade Commission Act to authorize appropriations to carry out the functions, powers, and duties of the Federal Trade Commission 5. 1823 (Heinze) Establishes a National Endowment for Children's Television.1 Authorize’ such Endowment to enter into contracts and provide grants to individuals o- groups engaged in upgrading children's programming. Establishes within such Endowment a National Council on Children's Television. S. 1991 (Cannon) Amends the Federal Trade Commission Act to change procedures for agency investigations and rulemaking, and to extend authorizations for FY80 and FY81. ‘ ‘ Efiéfilflfié U.S. Congress. House. Committee on Interstate and Foreign ‘Commerce. Subcommittee on Communications. Broadcast advertising and children. Hearings, 9uth Congress, 1st session. July 1n-17, 1975. Washington, 0.5. Govt. Print. Off., 1976. #95 p. "Serial no. 94-53- ---- Federal Communications Commission oversight. Hearings, 9uth congress, 2d session, on the functions and duties ‘of the Federal Communications Commission. Mar. 2-3, 1976. Washington, u.s. Govt. Print. Off., 1976. 105 p. "serial no. 9H-89" w 0.5. Congress. House. Committee on Government Operations. Commerce, Consumer, and Monetary Affairs Subcommittee. CRS-13 IB78089 UPDATE—OZ/22/80 Oversigmt hearings into the Federal Trade Commission -- Bureau of Consumer Protection (delays in rulemaking regulation of advertising). Hearings, 94th Congress, 2d session. Washington, 0.3. Govt. Print. Off., 1976. 297 p. Hearings held Feb. 25; June 22 and 24, 1976. u.s. Congress. Senate. Committee on Commerce. Advertising --1971. Hearings, 92d Congress, 1st session, on S. 1461 and S. 1753. Oct. 4, 1971. Washington, U.S. Govt. Print. Off., 1971. 86 p. “Serial no. 92-31" -—-- Federal Trade Commission oversight. Hearings, 93d Congress, 2d session. Washington, U.S. Govt. Print. off., 1974. 404 p. Hearings held Mar. 1—May 9, 1974. "Serial no. 93-78* U.S. Congress. Senate. Committee on Commerce. Subcommittee ,on Communications. Scientific Advisory Committee on TV and social behavior. Hearing, 92d Congress, 1st session. Sept. 28, 1971. Washington, 0.5. Govt. Print. off., 1971. 80 P0 ‘ “Serial no. 92-32" U.S.» Congress. Senate. Committee on Commerce. Subcommittee on Communications. overview of the Federal Communications Commission. Hearing, 93d Congress, 2d session. mar. 26 and 27, 1974. Washington, 0.8. Govt. Print. Off., 1974. 164 p. 1 "Serial no. 93-70“ Impact of television on children. Hearing, 94th Congress, 2d session. Feb. 13, 1976. Washington, 0.5. Govt. Print. Off-, 1976. 162 p. "Serial no. 94-62" U.S. vcongress. Senate. Committee on Commerce, Science and Transportation. Subcommittee on Communications. Television broadcast policies. Hearings, 95th Congress, 1st session. May 9, 10, and 11, 1977. §§£Q§$§-AE2-§QE§£§§§lQEAL-2Q§Q§§!.§ U.S. Congress. House. Committee on Government Operations. Federal Trade Commission oversight -- rulemaking, advertising, and consumer access; fourth report toegther with additional views. Washington, U.S. Govt. Print. off., 1977. 107 p. (95th Congress, 1st session. House. Report no. 95-472) CHBONOLOGY OF EVENTS O2/O7/80 —- senate passed FTC authorization bill that would stop the Commission from completing its proposed kidvid rule. 4 01/O7/80 -- FTC Chairman Michael Pertschuk withdrew voluntarily pfrom children's television advertising proceeding 12/27/79 10/30/79 07/02/79 03/30/79 01/25/79 01/15/79 11/09/78 11/02/78 07/26/78 ggoz/27/752 04/26/77 ' OH/16/77 cas-1a 137eoa9 upnamr-02/22/ao and indicated that "...the public intefiefifiiisffietter served if I remove any issue of my personalféit? participation from the legislative debate." C - 0.5. Court of Appeals voted 2-1 to permit Pertschuk's participation in the kidvid rulemakingalt C -- Federal Communications Commission released Report of special task force accusing television industryw of failing to meet government mandate to improve children's programming. Staff Report recommended FCC mandate specific minimum children's programmin requirements for commercial television. u -—-Federal Trade Commission administrative lamwjudge narrows focus of issues in dispute in proposed trade regulation rule. » ’ -"Federal Trade Commission completed four weeEs’of hearings in Washington, D.C. on its n- r* » mcontroversial children's advertising proposal. V —— FTC concluded two weeks of hearings in San Francisco on proposed kidvid rule. ~ -—-Federal Trade Commission opened hearings in ‘San Francisco on its controversial children's‘ "advertising proposal. ‘F -- Calling on the Federal Government to recognize “the enormous cultural influence of television on the minds and spirits of young children," the president of a major advertiser on children's shows called for the FCC to work towards a complete restructuring of Saturday morning programming. -.A Federal Judge disqualified FTC Chairman Hichael Pertschuk from any further participation in the commission's rule—making proceeding on ‘ childrenfis television advertising. ~HFCC directed its staff to study the pros and cons ‘of further reducing the allowable commercial minutes on children's TV shows and to examine how broadcasters are meeting the programming needs of children. iL FTC released staff report on TV Advertising to vthirdren recommending that rulemaking proceedings be commenced under the nagnuson-Moss FTC Improvements Act.i v-- FTC received petition from Center for Science in the Public Interest seeking bans and limitations on television advertising for certain between—meal F snacks. -— FTC received petition from Action for Childrents 07/14/75‘ 11/06/7“ 08/05/73 03/05/73 03/07/73 01/01/73 11/21/71 09/15/71 o1/11/71 cns-15 IB78089 UPDATE-02/22/80 nmekevision (ACT) seexing certain bans. on televised "candy" advertising addressed to . children. wflearings opened before House Subcommittee on Communications on Broadcast Advertising and Children. FCC published its Children's Television Programs Report and Policy Statement which says in conclusion, "we believe that in these areas every opportunity should be accorded to the broadcast industry to reform itself because self-regulation preserves flexibility and an opportunity for xadjustment which is not possible with per se rules.“ FTC Chairman Lewis A. Engman asked members of the advertising, broadcasting and public interest communities to meet with the FTC to develop a code for television advertising aimed at children. Hearings opened on TV advertising of food to i .children before the Senate Select Committee on Nutrition and Human Needs. Action for Children's Television (ACT) fileda,, complaints with the FTC against cereal and candy manufacturers and urges Congress to impose a tax on broadcast advertising to pay for the making of counter commercials. ~ . T Effective date of changes in the National, Association of Broadcaster's (NAB) Code . Authority. In or adjacent to children's » shows, commercials by hosts or primary cartoon characters forbidden. Reduces from 16 to 12 the allowable commercial minutes during weekend programs. Rejcted a CBS proposal that the reduction apply also to weekly programs. FTC completed five weeks of hearings on regulation of TV ads. N.I. Times reports, “the preponderance of testimony promised to strengthen the case for expanding the commission's regulatory function, particularly in the field of advertising addressed to children." :,n» FCC Chairman Dean Burch announced the formation of permanent Children's unit in the Broadcast bureau. Also announces that the FCC and FTC have initiated formal liaison agreement to "devise an affirmative regulatory policy that will not undermine the commercial base of our broadcasting system, but will protect a uniquely impressionable audience." FCC issued a notice of inquiry and proposed rulemaking "looking toward the elimination of :sponsorship and commercial content in children's CBS-16 ~ IB78089 UPDATE—02/22/80 programming.a..W- 10/16/70 -- The first yational;Symposium on Children andv Televisiongis held,ibringing together a wide range of authorities on the subject.€ O2/10/70 -- Action for Children's Television (ACT) petitioned FCC to eliminate advertising from children's television. O0/00/60 —- Federal Communications Commission (FCC) cited programs for children as one of fourteen elements "usually necessary to meet the public interest, needs and desires of the community.“ 00/O0/52 - Code Authority of the National Association of Broadcasters issued standards and detailed guidelines on television advertising, including major explicit regulation of commercials directed to children. 22lILQ!AL_§§§§§§!Q§_§Q“RQ§§ Charren, Peggy. Children's TV: sugar and vice and nothing nice. Business and society review, no. 22, summer 1977: 65-70. Cole, Barry, and Hal Oettinger. Reluctant regulators: the FCC and the broadcast audience. Reading, Massachusetts, Addison-Wesley Publishing Company [1978] 310 p. Culley, James D., William Lazer, and Charles K. Atkin. The experts look at children's television. Journal of broadcasting, v. 20, winter 1976: 3-21. Demkovich, Linda B. Pulling the sweet tooth of children's TV advertising. National journal, v. 10, January 7, 1978: 24-26- Eckinger, Robert D. Recent development: first amendment restrictions on the FTC's regulation of advertising. Vanderbilt law review, v. 31, March 1978. 349-373. _Federal Trade Commission staff report on television advertisin to children. February 1978. 3u6 p. . Melody, William H. Children's television. New Haven, Yale University Press [1973] 164 p. Research on the effects of television advertising on children; a review of the literature and recommendations for future research. Washington, National Science Foundation, 1977. 229 p. Sklar, William. Ads are finally getting bleeped: Federal regulation hits the ad industry. Business and society review, no. 26, summer 1978: 38-#6. CBS-17 IB78089 UPDATE°O2/22/80 Thain, Gerald. Suffer the hucksters to come unto the little children? Possible restrictions of television advertising to children under eection 5 of the Federal Trade ”* Commission Act..:Boston University iaw review, v. 56,a July 19?6£ 651«68u. -‘ ‘“ia ~