2011-25884. Phusion Projects, LLC, et al.; Analysis of Proposed Consent Order To Aid Public Comment

AGENCY:

Federal Trade Commission.

ACTION:

Proposed Consent Agreement.

SUMMARY:

The consent agreement in this matter settles alleged violations of federal law prohibiting unfair or deceptive acts or practices or unfair methods of competition. The attached Analysis to Aid Public Comment describes both the allegations in the draft complaint and the terms of the consent order—embodied in the consent agreement—that would settle these allegations.

DATES:

Comments must be received on or before November 2, 2011.

ADDRESSES:

Interested parties may file a comment online or on paper, by following the instructions in the Request for Comment part of the SUPPLEMENTARY INFORMATION section below. Write ``Phusion Projects, File No. 112 3084” on your comment, and file your comment online at https://ftcpublic.commentworks.com/​ftc/​phusionprojectsconsent,, by following the instructions on the web-based form. If you prefer to file your comment on paper, mail or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Janet Evans (202-326-2125) or Carolyn L. Hann (202-326-2745), FTC, Bureau of Consumer Protection, 600 Pennsylvania Avenue, NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

Pursuant to section 6(f) of the Federal Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and § 2.34 of the Commission's Rules of Practice, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of thirty (30) days. The following Analysis to Aid Public Comment describes the terms of the consent agreement, and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC Home Page (for October 3, 2011), on the World Wide Web, at http://www.ftc.gov/​os/​actions.shtm. A paper copy can be obtained from the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580, either in person or by calling [phone].

You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before November 2, 2011. Write “Phusion Projects, File No. 112 3084” on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including, to the extent practicable, on the public Commission Web site, at http://www.ftc.gov/​os/​publiccomments.shtm. As a matter of discretion, the Commission tries to remove individuals' home contact information from comments before placing them on the Commission Web site.

Because your comment will be made public, you are solely responsible for making sure that your comment does not include any sensitive personal information, like anyone's Social Security number, date of birth, driver's license number or other state identification number or foreign country equivalent, passport number, financial account number, or credit or debit card number. You are also solely responsible for making sure that your comment does not include any sensitive health information, like medical records or other individually identifiable health information. In addition, do not include any “[t]rade secret or any commercial or financial information which is obtained from any person and which is privileged or confidential,” as provided in Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). In particular, do not include competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names.

If you want the Commission to give your comment confidential treatment, you must file it in paper form, with a request for confidential treatment, and you have to follow the procedure explained in FTC Rule 4.9(c), 16 CFR 4.9(c).^[1] Your comment will be kept confidential only if the FTC General Counsel, in his or her sole discretion, grants your request in accordance with the law and the public interest.

Postal mail addressed to the Commission is subject to delay due to heightened security screening. As a result, we encourage you to submit your comments online. To make sure that the Commission considers your online comment, you must file it at https://ftcpublic.commentworks.com/​ftc/​phusionprojectsconsent by following the instructions on the web-based form. If this Notice appears at http://www.regulations.gov/​#!home,, you also may file a comment through that Web site.

If you file your comment on paper, write “Phusion Projects, File No. 112 3084” on your comment and on the envelope, and mail or deliver it to the following address: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, NW., Washington, DC 20580. If possible, submit your paper comment to the Commission by courier or overnight service.

Visit the Commission Web site at http://www.ftc.gov to read this Notice and the news release describing it. The FTC Act and other laws that the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments that it receives on or before November 2, 2011. You can find more information, including routine uses permitted by the Privacy Act, in the Commission's privacy policy, at http://www.ftc.gov/​ftc/​privacy.htm.

Analysis of Agreement Containing Consent Order To Aid Public Comment

The Federal Trade Commission has accepted, subject to final approval, an agreement containing a consent order from Phusion Projects, LLC, Jaisen Freeman, Christopher Hunter, and Jeffrey Wright (the “respondents”). The proposed consent order has been placed on the public record for thirty (30) days for receipt of comments by interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will again review the agreement and the comments received, and will decide whether it should withdraw the agreement or make final the agreement's proposed order.

This matter involves the marketing for Four Loko, a fruit-flavored malt beverage product. Four Loko contains 11% to 12% alcohol by volume (“ABV”) and is sold in a 23.5 oz can. The respondents promoted Four Loko through product packaging, Internet advertising including fan photo contests, and print solicitations to potential distributors.

According to the FTC complaint, the respondents represented in its marketing materials that a 23.5 oz can of 11% or 12% ABV Four Loko: (a) Contains the alcohol equivalent to one or two regular, 12 oz beers, and (b) could safely be consumed in its entirety on a single occasion. The complaint alleges that both claims are false or misleading because a 23.5 oz can of 11% ABV Four Loko contains alcohol equivalent to 4.3 regular beers and a 23.5 oz can of 12% ABV Four Loko contains alcohol equivalent to 4.7 regular beers. In addition, the complaint alleges that the respondents' failure to disclose these facts was deceptive, in light of their representation that a can of Four Loko contained a single serving.

The proposed consent order contains provisions designed to prevent the respondents from engaging in similar acts and practices in the future. Parts I and II apply to the defined term, “covered flavored malt beverages.” Part I prohibits the corporate respondent and controlling respondents (generally defined as the individual respondents, when such individual(s) is, or collectively are, a significant shareholder or directly or indirectly manage or control any entity) from offering for sale, selling, or distributing Four Loko or any other covered flavored malt beverage in a container that provides more than 1.5 oz of ethanol (approximately two and one half (21/2) regular beers) unless the label discloses, clearly and conspicuously, the following statement:

“This can [or bottle] has as much alcohol as [ ] regular (12 oz, 5% alc/vol) beers.”

Part I sets forth specific approved fonts and font sizes, placement requirements (for both cans and bottles larger and smaller than 12 oz), and a formula for calculating the number of regular beers in the container. This part also provides that the second set of brackets shall be replaced by the number of 0.6 oz servings of ethanol in the product. Part I is designed to address the allegedly false representation that Four Loko contains the alcohol equivalent to one or two regular, 12 oz beers. The disclosure requirement is designed to alert consumers to the actual number of servings of alcohol in the container.

Part II of the proposed order further prohibits, commencing six (6) months after date of issuance of the order, the corporate respondent and controlling respondents from offering for sale, selling, or distributing Four Loko or any other covered flavored malt beverage in a container that provides more than 1.5 oz of ethanol unless the container is resealable.

Together, Parts I and II of the proposed order are designed to address the allegedly false representation that Four Loko can safely be consumed on a single occasion. The disclosure requirement is designed to alert consumers to the number of servings of alcohol in the container, and the resealability requirement makes it possible for consumers to drink a portion of the container's content and to save some for later.

Part III of the proposed order prohibits the respondents from misrepresenting the alcohol content of any alcohol beverage product. Part III also prohibits the respondents from depicting in advertising any alcohol beverage product containing more than 1.5 oz of ethanol being consumed directly from the container. This provision also addresses the respondents' representation that a can of Four Loko can be safely consumed on a single occasion. This prohibition provides a clear standard for compliance by the respondents and for enforceability by the FTC.

Part IV of the proposed order states that the order does not prohibit the respondents from making any representation about any alcohol beverage product that is specifically required by regulation or order by the U.S. Department of Treasury Alcohol and Tobacco Tax and Trade Bureau pursuant to the Federal Alcohol Administration Act.

Parts V through IX of the proposed order require the respondents to keep copies of relevant advertisements and materials substantiating claims made in the advertisements; to provide copies of the order to its personnel; to notify the Commission of changes in corporate structure that might affect compliance obligations under the order; to notify the Commission of changes in any of the individual respondents' business or employment that might affect compliance obligations under the order; and to file compliance reports with the Commission. Part X provides that the order will terminate after twenty (20) years, with certain exceptions.

The purpose of this analysis is to facilitate public comment on the proposed order, and it is not intended to constitute an official interpretation of the agreement and proposed order or to modify in any way their terms.

By direction of the Commission.

Donald S. Clark,

Secretary.

Footnotes

1.  In particular, the written request for confidential treatment that accompanies the comment must include the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. See FTC Rule 4.9(c), 16 CFR 4.9(c).