In Nutella Advertising Case, Whom Is the System Protecting?

The world is full of surprises, like the fact that Nutella chocolate spread is loaded with saturated fat and sugar and is not itself healthy.

Ferrero USA, Inc., the company that makes Nutella, learned the hard way that many American parents could not survive (nor perhaps could their children) without the aid and intervention of Captain Obvious. And so, following a recent settlement agreement with some confused parents, the maker of Nutella will modify its labeling, advertising, and website to clarify its nutritional value.

The problems arose from a line of advertisements and website content suggesting that Nutella could be part of a healthy breakfast. While many of us might understand that Nutella’s contributions to a healthy breakfast are the equivalent of Cheez Whiz’s contributions to a healthy side of broccoli, a couple of California moms said they were duped. They were surprised to learn that it was other elements of a breakfast – like a glass of milk, or the whole-grain bread the Nutella would top – that were healthy and that all Nutella did was to get children to the table.

The SoCal gals took their stupefaction to court, filing a class action for violations of state consumer protection laws in the U.S. District Court for the Southern District of California in early 2011. A literal reading of the advertisements (samples of which can be found on pages 19-27 of the complaint) should make it reasonably clear that Nutella, in and of itself, is not a nutritionist’s top pick. The ads qualify Nutella as a way to get children to eat healthy foods (see again, Cheez Whiz). But those qualifications were not clear enough to the plaintiffs, who were “shocked” that Nutella had the nutritional value of a candy bar.

Ferrero attempted to get the class action transferred to U.S. District Court in New Jersey, where a follow-on suit was filed, and also attempted to get the actions dismissed. The company’s tactics failed, leaving it with little choice but to pursue costly defense or to settle. The company chose the latter course and entered into a $3million-plus settlement for both cases. While the sum may seem staggering in comparison to the allegations, most of the settlement ($2.5 million) is dedicated to reimbursing consumers, in $4/purchase increments. The company has also agreed to clarify its nutritional value in its labeling, advertising and website.

What’s troubling is that Ferrero’s advertising was full of qualifications about the role Nutella can play in nutrition. It’s only the careless or dismissive or naïve parent who could have been “duped.” In the end, this appears to be yet another example of our system protecting willful blindness.

FTC Obtains Injunction, Asset Freeze on Alleged Mortgage Scam

The Federal Trade Commission has obtained an order from the federal court for the Central District of California for a preliminary injunction and asset freeze against all the defendants in an alleged mortgage modification scam.

The complaint was filed against California-based Sameer Lakhany and a number of related corporate entities for violating the Federal Trade Commission Act and the Mortgage Assistance Relief Services Rule, now known as Regulation O. This was the first FTC complaint against a mortgage relief scheme that falsely promised to get help for homeowners who joined with other homeowners to file so-called “mass joinder” lawsuits against their lenders.

The complaint listed two separate alleged schemes that collected over $1 million in fees and used images of President Obama to urge consumers to call for modifications under the “Obama Loan Modification Programs.”

The first scheme was a loan modification plan under which the defendants allegedly promised substantial relief to unwary homeowners from unaffordable mortgages and foreclosures. Their website featured a seal indicating that it was an “NHLA accredited mortgage advocate” and that NHLA is “a regulatory body in the loan modification industry to insure only the highest standards and practices are being performed. They have an A rating with the BBB.” Unfortunately, the NHLA is not a “regulatory body” and it actually has an “F” rating with the BBB.

The defendants reinforced their sales pitch by portraying themselves as nonprofit housing counselors that received outside funding for all their operating costs, except for a “forensic loan audit” fee. According to the FTC, the defendants told consumers that these audits would uncover lender violations 90 percent of the time or more and that the violations would provide leverage over their lenders and force the lenders to grant a loan modification. The defendants typically charged consumers between $795 and $1595 for this “audit.” Also, if the “audit” did not turn up any violations, the consumers could get a 70 percent refund. Unfortunately, there were often no violations found, any “violations” did not materially change the lender’s position, and it was nearly impossible to actually get a refund for this fee.

The second alleged scheme was that the defendants created a law firm, Precision Law Center, and attempted to sell consumers legal services. Precision Law Center was supposed to be a “full service law firm”, with a wide variety of practice areas. It even claimed to “have assembled an aggressive and talented team of litigators to address the lenders in a Court of Law.” However, the FTC charged that the firm never did anything besides for filing a few complaints, which were mostly dismissed.

To assist Precision Law Center in getting new clients, the defendants sent out direct mail from their law firm that resembled a class action settlement notice. The notice “promised” consumers that if they sued their lenders along with other homeowners in a “mass joinder” lawsuit, they could obtain favorable mortgage concessions from their lenders or stop the foreclosure process. The fee to participate in this lawsuit was usually between $6,000 to $10,000. The material also allegedly claimed that 80 to 85 percent of these suits are successful and that consumers might also receive their homes free and clear and be refunded all other charges.

The defendants’ direct mail solicitation also contained an official-looking form designed to mimic a federal tax form or class action settlement notice. It had prominent markings urging the time sensitivity of the materials and it requested an immediate response.

Obviously, these defendants employed many egregious marketing techniques that crossed the FTC’s line of permissibility. However, in light of the FTC’s renewed focus on Internet marketing, even a traditional marketing campaign should be carefully crafted with legal ramifications in mind.

As a final note, it is always smart not to antagonize the FTC by proclaiming (like the defendants here did) that they are “Allowed to Accept Retainer Fees” because it was “Not covered by FTC.” We couldn’t think of a better way to get onto the FTC’s radar screen!

Identity Theft Continues to Top FTC’s List of Consumer Complaints

For more than a decade, the Federal Trade Commission has been releasing its list of the top ten categories of consumer complaints received by the agency in the previous year. This list always serves as a good indication of the areas toward which the FTC may choose to direct its resources and increase its scrutiny.

For the 12th year in a row, identity theft was the number one complaint received by the FTC. Out of more than 1.8 million complaints the FTC received last year, 15% – or 279,156 – were about identity theft. Of those identity theft complaints, close to 25 percent were related to tax or wage-related fraud. The number of complaints related to identity theft actually declined in 2011 from the previous year, but this type of fraud still topped the list.

Most identity theft complaints came from consumers reporting that their personal information was stolen and used in government documents — often to fraudulently collect government benefits. Complaints about government document-related identity theft have increased 11% since 2009 and represented 27% of identity theft complaints last year. These numbers are likely to increase as concerns about consumer data privacy continue to garner the attention of the FTC.

After ID theft, the FTC’s top consumer complaints for 2011 were as follows:

• Debt collection complaints
• Prizes, sweepstakes, and lotteries
• Shop-at-Home and catalog sales
• Banks and lenders
• Internet services
• Auto-related complaints
• Imposter scams
• Telephone and mobile services
• Advance-fee loans and credit protection or repair

While credit cards are intertwined with many of the above complaints, complaints about credit cards themselves are noticeably absent from the 2011 list. In past years, credit card fraud was a major source of complaints from consumers. The drop in credit card-fraud-related complaints, however, is not surprising given the passage of the Credit CARD Act of 2009. This landmark federal legislation banned interest rate hikes “at any time for any reason” and limited the instances when rates on existing card balances could be hiked by issuers. The law also required lenders to give customers at least 45 days advance notice of significant changes in terms to allow card users time to shop around for better terms.

With the upcoming changes to the FTC’s advertising guidelines, there may very well be new additions to the consumer complaint list next year. Those complaints that already appear on the list are also likely to receive increased scrutiny.

Is It a Real Breast Cancer Cause – Or ‘Pinkwashing’?

October is Breast Cancer Awareness month. And pink is everywhere – all over the shelves of retail stores like Wal-Mart and adorning the backs of NFL linemen. We’ve been trained to know that the color pink represents a supporter of breast cancer awareness or research. So sporting a pink ribbon, jersey, or band should demonstrate that you have put some of your dollars toward the cause.

“Not necessarily so,” say the Better Business Bureau and other consumer groups. It should come as no surprise that many an enterprising social deviant has jumped on the pink bandwagon to profit from people’s assumptions that purchasing pink means supporting the cure. What has become known as “pinkwashing” is a growing problem that has been highlighted in the media – from Reuters, to Marie Claire (yes, a fashion magazine, but nonetheless they wrote a substantive article on pinkwashing!) to Fox News. Consumers have been urged to inquire about where proceeds go before they purchase a pink product.

With all this attention being placed on the pink ne’er-do-wells (including the recent documentary, Pink Ribbon, Inc.), you can expect the FTC to start looking into these companies for false and deceptive practices. The FTC regularly picks up issues exposed by consumer advocacy groups and news reports. Indeed, some FTC staffers have the task of reviewing such reports and researching the underlying issues. Those companies that are holding themselves out as anti-cancer champions by donning pink should be on the lookout for some regulatory attention.

It seems pretty likely that a few of the companies profiled by the Marie Claire piece may be in for a thorough FTC review. One company’s website, with lots of “Donate Now” pink hyperlinks, has cleverly identified itself with established breast cancer foundations like the Susan G. Komen Foundation under its “History” tab or celebrity advocates under its “Ambassadors” tab. But a careful review of the vague representations on the site seems to indicate the organization itself is not directly affiliated with any of them.

State attorneys general are already looking into some of these breast cancer foundations. New York Attorney General Eric Schneiderman filed suit in June against Long Island-based Coalition Against Breast Cancer. That group allegedly solicited some $9.1 million over five years while spending virtually no money on breast cancer programs.

No surprises that some people want to take advantage of people’s soft and charitable spots. Pink profiteers should not be surprised if their acts result in a knock on the door from a federal or state agent who is not trick-or-treating this Halloween.

FTC Is Asked to Crack Down on ‘Supercookies’ as Data Privacy Violation

The bastard stepchild of online behavioral advertising – the supercookie – is in the hot seat.

Two members of the House of Representatives sent a letter to the FTC on September 27 calling on the commission to look into the usage and impact of supercookies on consumers. Reps. Ed Markey (D-Mass.) and Joe Barton (R-Tex.), co-chairmen of the bipartisan privacy caucus in the House, sent the letter in response to an August 18 Wall Street Journal article. The article reported on use of supercookies by major online presences like MSN.com and Hulu.com. Rep. Barton raised concerns that the existence of supercookies “eats away at consumer choice and privacy.”

Like regular cookies, supercookies (aka “Flash cookies” and “zombie cookies”) are legal means to track a user’s online activity. But there are several differences that cause supercookies to pique the concerns of data privacy advocates. Unlike regular cookies, supercookies circumvent a user’s privacy settings and are hard to detect and remove. They are located in different files on the computer, like the Flash plug-in (hence the term “Flash cookies”), and cannot be found by browsers’ cookie detectors. Moreover – and this is one of the big issues for data privacy people – supercookies can regenerate (“respawn”) user profiles after regular cookies are deleted.

After the Wall Street Journal article came out, Microsoft and other companies identified as using supercookies were quick to disavow them. Microsoft, which created the code, claimed it was “alarmed” when the supercookie was brought to its attention. Hulu said it “acted immediately to investigate and address” the issue. Other companies, like Flixter, also pleaded ignorance.

Shortly following the Barton-Markey letter, the Interactive Advertising Bureau, a trade group for online advertisers, sent a reminder to its members of their advertising code of conduct. The code, which requires online advertisers to give notice to consumers of their data tracking and collection, was largely an industry response to placate regulatory agencies and keep them from establishing the parameters of online behavioral advertising. The supercookie, though, may inspire a heavier regulatory presence. Representative Barton declared that supercookies should be outlawed and the “constant abuse of online activity must stop.”

We have been guessing that data privacy will be one of the focal points of the “Dot Com Disclosures,” the FTC’s soon-to-be-released updated online advertising guidelines. Public comment on what the revised guidelines should include was closed in August. But the congressmen’s letter to the FTC will likely have an impact.

Online advertisers may want to take a different strategy on consumer data tracking. Instead of coming up with new ways to circumvent privacy settings, why not be upfront about data tracking but make it less scary? Location services on smart phones have gained considerable consumer appeal, so users are voluntarily allowing the tracking of their physical location (arguably scarier than much online tracking). If advertisers can demonstrate to consumers that they are in fact getting a benefit and not getting abused by data tracking, then tracking opt-ins could work for both consumers and marketers.

Payday Lenders Find Themselves in FTC’s Cross Hairs

Like pawnbrokers, payday lenders cater to people in a tight squeeze. That means they can, in turn, put the squeeze on their customers, charging annual percentage interest rates above 300 percent for their short-term unsecured loans. That also means they are a popular target of federal regulators who are concerned about vulnerable consumers.

The FTC has recently brought a slew of cases against payday lenders. Some actions include one against a payday lender for allegedly tricking consumers into buying debit cards when they applied online for loans and another against a loan intermediary for allegedly tricking consumers into signing up for worthless continuity programs. The latest FTC action targeted a payday lender for garnishing borrowers’ wages.

One thing to glean from these actions is that the FTC is focused on the payday loan industry as a whole and not on some specific type of bad behavior by these lenders. In a twist on “if you build it, they will come,” if you have a payday lending operation, plan on a visit by the FTC. And any level of questionable behavior could very well become the basis of further FTC involvement.

The latest case, in which the FTC filed suit based upon Payday Financial LLC’s practice of garnishing borrowers’ wages, has an interesting twist: the FTC alleges that the payday lender deceived the borrowers’ employers.

The FTC goes after people and companies for false and deceptive practices affecting commerce – that’s its jurisdiction. Normally, its lawsuits allege practices that deceive consumers. So you would think in this case that the FTC would allege that the lender deceived borrowers, tricking them into giving permission for their wages to be garnished. Instead, the FTC alleges that Payday Financial deceived the borrowers’ employers, causing them to believe that Payday Financial was authorized to garnish the borrowers’ wages. The FTC alleged that the defendant’s notice to employers for wage garnishment looked “very similar, in both form and substance, to the documents sent by federal agencies when seeking to garnish wages for nontax debts owed to the United States.”

There are two unusual elements to this action. First, the FTC takes a bit of a circuitous route to get at jurisdiction, arguing that deceiving the borrowers/consumers’ employers impacted commerce. It makes sense when the FTC alleges that consumers’ actions, as a result of deceptive practices, impact commerce; it’s a bit of a stretch to move to a third party’s actions.

Secondly, the  FTC argues that employers, normally considered sophisticated parties, were deceived. As we talked about earlier – the FTC focuses on protecting vulnerable consumers. Sophisticated parties are often held to a different standard.

So if you are a payday lender, a lesson from this may be: dot your I’s and cross your T’s. Your industry is not popular with the FTC. The agency is highly motivated to find that you have done something wrong.

Prepaid Phone Companies Dial a Wrong Number at the FCC

Companies marketing prepaid phone cards should be on the lookout: the Federal Communications Commission is threatening more-severe penalties for deceptive advertising.

The prepaid phone card business is pretty profitable, with the industry raking in billions every year. Plastering phone cards with names like “Africa Magic” and “Hola Amigo,” prepaid calling card companies target immigrant populations, advertising thousands of minutes of talk time to immigrants’ native countries for just a few dollars.

The problem is that there are tons of hidden costs that erode the value of these cards before the card user can say “adios.” So while a card purchased for $2 or $5 may say in a big font that it will provide 1000 minutes of talk time, in a tiny font on the detachable “hanger” for the card are additional fees that may reduce the talk time by 45 percent or more.

The major discrepancies between the big-font value and the small-font reality of these prepaid calling cards have made the industry a popular target for state and federal regulators as well as plaintiffs’ attorneys. State attorneys general, the Federal Trade Commission, the FCC, and class action attorneys have pursued prepaid calling card companies for deceptive advertising.

Year after year there are announcements of companies paying out hefty multi-million dollar sums. But the marketing techniques continue. And many of these companies are repeat players. For instance, the company Epana Networks has been pursued in – and settled or been fined in – federal, state, and private actions.

Perhaps prepaid calling card companies have considered responding to legal actions for deceptive advertising as part of the cost of doing business. Getting people to buy their cards under misleading pretenses and paying a fine or settlement is a lot more lucrative than just being more up front about calling fees.

These companies may not be able to make the “cost-of-doing-business” decision for long, though. The FCC announced forfeitures by four different telecommunications companies earlier this month. Each of the companies was fined $5 million. The notice for each forfeiture, in the form of a No Action Letter (NAL), was almost a mirror of the next. One thing that bears repeating is how the FCC could have calculated the fines against these companies: $150,000 for each violation AND each card purchased as a separate violation. The FCC opted not to calculate out these prospective sums and instead determined that a $5 million fine would be sufficient to protect consumers and deter future bad behavior.

But, in each NAL, the FCC also noted that should the company continue to engage in “unjust and unreasonable practices” (deceptive advertising), the FCC would issue more NALs imposing substantially greater forfeitures and revoking each company’s operating authority. The takeaway here: current practices of hidden fees may be a thing of the past if prepaid calling card companies want to have a future.

What Priorities Will FTC Stress in Its Impending Online Advertising Guidelines?

If you advertise or sell over the Internet, be aware that changes are afoot at the FTC that will affect your business. The Commission is in the midst of revamping its Dot Com Disclosures, guidelines it prepared back in 2000 regarding online advertising. It issued a request for public comment on prospective revisions in late May. Now that the comment period has ended in early August, we are in a wait-and-see period until the new guidelines are published.

The original guidelines were pretty broad, generally providing that advertising standards that applied to more traditional media also applied to advertising over the Internet.

Acknowledging the vast technological developments in marketing since the Dot Com Disclosures were published over a decade ago — e.g., mobile marketing, the app economy, pop-up blockers and social networking – the FTC requested comment on a number of issues, in 11 questions. For instance, it requested comment on (1) what issues have been raised by new technologies or Internet features, (2) what should its staff consider regarding online advertising techniques or consumer online behavior, and (3) what issues have arisen from multi-party selling arrangements.

As we wait for the FTC’s revisions, we can anticipate several areas that the new guidelines will address. Generally speaking, the FTC likely will express interest in two broad categories affected by new technology: (1) what is conveyed and (2) what is collected.

What is conveyed. A general concern with disclosure standards since the earlier guidelines were published is how disclosure applies to marketing through new media. How do traditional “clear and conspicuous” standards (such as proximity of a disclosure to the relevant claim, prominence of the disclosure, or duration of the disclosure) play out on a small mobile device such as a smartphone? How can advertisers effectively disseminate disclosures on such devices?

What is collected. A greater concern, as expressed in many of the public comments submitted to the FTC, is the development of consumer tracking online and online behavioral advertising. Something that can be a great boon to sellers, who can now tailor their advertising to an individual user’s interests, or to advertisers who collect and sell that consumer data, can become a privacy nightmare. One group that made a comment to the FTC noted the development of technologies that can track consumer behavior both on and offline.

Recent enforcement actions as well as informal initiatives by the FTC and consumer groups demonstrate the likelihood that the Commission will address consumer privacy in the new guidelines. For instance, the FTC just settled charges with W3 Innovations, a mobile app company, for alleged violations of the Children’s Online Privacy Protection Act. The action, based on the company’s failure to obtain parental consent before collecting children’s personal information, was the first of its kind. The FTC has also been promoting its Do Not Track program, which calls for enhanced consumer controls over online data tracking.

It’s worth noting the likelihood that the FTC will devote a part of its new guidelines to multi-party selling arrangements. Affiliate marketing-related issues involve both broad categories above, impacting both what is disseminated and what is collected. The Commission may highlight the importance of effective disclosure at all levels when multi-party selling arrangements are involved. It may also address privacy concerns along the various levels of the advertising chain. And there are good indications the FTC will take the view for enforcement purposes that all parties along the advertising chain are subject to FTC standards.

For-Profit Colleges Challenge Education Department’s Rules

The Association of Private Sector Colleges and Universities is taking on the Department of Education. The organization, which represents some 1500 for-profit education institutions, filed its second lawsuit this year to contest the agency’s new regulations aimed at career colleges. The ASPCU won one and lost two in the first suit, and is currently appealing the rulings against it. The most recent suit, filed last week in federal district court in D.C., challenges the DOE’s “gainful employment” rule (as well as two related regulations).

The rule requires colleges to demonstrate that at least 35 percent of students are repaying their loans, or that loan repayments do not exceed either 30 percent of students’ discretionary income or 12 percent of their total earnings. Schools failing to meet all of these requirements in three out of four years will no longer be able to accept student payment with federal loans.

In a hefty complaint, ASPCU attacks the rule on a number of grounds, contending flaws in the regulatory process and agency overreach. The complaint notes that the DOE’s Inspector General is investigating problems with the rulemaking, while members of Congress have called for congressional investigations and review by the DOJ and the SEC regarding allegations of insider trading involving DOE officials. And the complaint’s allegations come a day before the Daily Caller’s release of an email suggesting potential witness tampering by Senator Tom Harkin’s office during congressional hearings into (or rather, against) for-profit education institutions.

Never mind the questions of impropriety…From a policy perspective, two of the more interesting arguments in the complaint involve the gainful employment rule’s anticipated consequences:

(1) The rule could lead to an unfair and disparate impact on prospective students from low-income, minority and other traditionally underserved student populations. APSCU argues that the rule, which ties federal funding to the financial success of graduates, will force institutions to restrict enrollment, eliminating education opportunities for those students least apt to obtain profitable jobs post graduation. Those most affected likely will be students from economically underserved areas “because it is those student populations who are the most at risk for failing the Department’s arbitrary tests.”

This potential consequence demonstrates the importance of carefully analyzing the impact of any new law or regulation while in the drafting phase. Certainly advocates of the gainful employment rule have the intention of helping traditionally underserved students; they are undoubtedly thinking of those students when devising a rule to address the problem of students being saddled with unreasonable debt. But this rule may have unintended consequences. Students won’t have to worry about student loan debt when deprived of the opportunity to invest in an education.

(2) The rule will bind educational institutions to the future employment decisions of their graduates, decisions that are beyond the institutions’ control. The gainful employment rule ties access to federal funding to graduates’ actual repayment of federal loans or to their ability to repay those loans (the latter being a reflection of how much money the graduate makes in their post-education career). The tricky part is, colleges do not have power over a graduate’s actions – they can’t control whether a graduate defers loan repayment where able, defaults, or … backpacks across Europe instead of accepting a lucrative job.

Educational institutions prepare students for employment; they cannot guarantee employment (a thing impossible, especially in this economy) or compel employment. The gainful employment rule puts colleges in the untenable position of warranting students’ future behavior. Such an obligation would be problematic in the context of a voluntary agreement between parties; with a federal mandate, it places the schools in an impossible position.

Those ‘Voluntary’ Rules for Food Companies are Anything But Voluntary

There’s been a lot of talk of late about the cost to industry of government regulation. The president of the U.S. Chamber of Commerce, Tom Donohue, asserted at a job summit on Monday that recent government initiatives are “unjustified and uncalled for in a free society and a free economy” and are “killing American jobs.”

Case in point: a recent set of proposed “voluntary” principles for food manufacturers set out by the FTC and three other government agencies. The proposed guidelines have caused quite a stir in the food industry for their breadth, their impending chilling effect on commercial speech, and their likely economic costs (one analysis suggested the guidelines would do away with 75,000 jobs annually). In fact, in response to the “voluntary” principles, food manufacturers themselves have just announced their own, less stringent guidelines, in an effort to supplant the government’s efforts.

The government’s proposed principles were put together by the Interagency Working Group (IWG), a group established by congressional directive and composed of representatives from the FTC, Food and Drug Administration, Department of Agriculture and Centers for Disease Control. The IWG was directed by Congress to develop principles to “guide industry efforts to improve the nutritional profile of foods marketed directly to children ages 2 to 17 years.”

Hence, a sweeping set of principles was published at the end of April “suggesting” that “[b]y the year 2016, all food products within the categories most heavily marketed directly to children should meet two basic nutrition principles. Such foods should be formulated to: (A) make a meaningful contribution to a healthful diet; and (B) minimize the content of nutrients that could have a negative impact on health and weight.” The report comes with detailed formulations of how to arrive at Principles A and B. It also comes with “proposed definitions of advertising, promotion, and other marketing activities targeting children ages 2-11 years and adolescents ages 12-17 years to which the nutrition principles would apply.”

The IWG report and principles clearly are directed at food manufacturers’ commercial speech. And were the “principles” labeled “regulations” instead, there’s little question that they wouldn’t pass muster under the First Amendment. That is perhaps why the report and FTC statements regarding it repeat the term “voluntary” with annoying frequency. But how voluntary are these proposed guidelines? Dan Jaffe, of the Association of National Advertisers, has asked, “Can anyone doubt that these proposals are not ‘voluntary’ but thinly veiled governmental commands?” And ever thin is the veil: just how voluntary is a guideline that comes with a five-year implementation period?

David Vladeck, the FTC’s consumer protection director, tried to dispel concerns over the force and impact of the report with a nonchalant blog post in which he suggested those concerned over the guidelines “switch to decaf.” Vladeck maintained the government position that the guidelines are merely voluntary. His statements do nothing to change a reality well understood by industry execs that “suggestions” by regulators come with consequences.

Fortunately, food manufacturers are not standing down…entirely. The Sensible Food Policy Coalition, which includes General Mills, Kellogg and PepsiCo, recently hired former Obama White House Communications Director Anita Dunn for this food fight, spending some $6.6 million in lobbying efforts regarding obesity in the first quarter of this year alone.

Industry leaders have just announced they will establish their own standards. Though less stringent than those proposed by the government, the companies’ announcement could be seen as a concession, bowing to pressure from the feds. It will be interesting to see what happens to a company that listens neither to the government nor to these food companies’ guidelines. Will consumer groups be after them, armed with a new standard of “reasonableness”?