[corp-focus] How Things Work: FTC Chair to Join Procter & Gamble

[robert weissman]

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How Things Work: FTC Chair to Join Procter & Gamble
By Robert Weissman
March 26, 2008

The chair of the Federal Trade Commission (FTC), Deborah Platt Majoras, 
is leaving her job. She's going to become vice president and general 
counsel for Procter & Gamble (P&G).

Should it raise eyebrows for the head of the leading U.S. consumer 
protection agency to leave and take a job with the largest consumer 
products company?

Not in Washington, D.C.

Asked about the propriety of the move, FTC spokesperson Nancy Judy 
explains that Majoras will need to abide by a year-long "cooling off" 
period. She'll never be able to represent P&G before the Commission on 
matters on which she worked while at the FTC. And once she announced 
that she would be taking a job with P&G, she removed herself from any 
matters that might affect the company.

Shira Mintz, who is the assistant general counsel for ethics at the FTC, 
says that Majoras is "extremely conscientious" about ethical matters, 
and that everything she has done is above board.

OK, but is there any concern about appearances here? Or is this just how 
things work?

"It is how things work," says Mintz. "The nature of the business is the 
revolving door."

Wow.

"You get extremely qualified people to come into government, and then 
they go back into the real world," says Mintz. "Real world" means 
well-paying corporate work.

Majoras came to the FTC from the Bush Justice Department. Prior to that, 
she worked for the corporate law firm Jones Day. Jones Day claims more 
than half of the Fortune 500, including P&G, as clients.

Procter & Gamble is the largest consumer goods company in the United 
States (not counting Altria/Philip Morris, which is breaking itself 
apart later this week). It makes Old Spice deodorant, Charmin toilet 
paper, Pampers diapers, Duracell batteries, Ivory soap, CoverGirl 
cosmetics, Dawn dish washing soap, Clairol hair dye, Pepto-Bismol, Tide 
laundry detergent, Crest toothpaste, Bounty paper towels, Gillette 
shaving products, Folgers coffee and Pringles potato chips, among many 
other products.

The FTC is an independent federal agency with authority over both 
consumer protection and competition policy. Given the breadth of the 
FTC's jurisdiction and the breadth of P&G's product line, what the FTC 
does -- and does not do -- is of potentially enormous importance to P&G.

Under the Bush administration, including the period since 2004, when 
Majoras became chair, the FTC hasn't done much.

Consider just a few of the issues that touch on Procter & Gamble's 
interests:

* P&G is the leading company involved in "buzz marketing" -- employing 
regular people to talk up company products, often in exchange for free 
merchandise. P&G says it has 250,000 teens working for its Tremor 
division. P&G sends them stuff, and they are supposed to talk to friends 
about the products.

The head of the Tremor division told USA Today in 2005, “If we’ve done 
our work correctly, they talk to their friends about" the gifts. Tremor 
doesn’t tell members to say they are part of Tremor, he explained, 
“because you never tell a [panelist] what to say.”

An organization with which I work, Commercial Alert, petitioned the FTC 
in 2005 to investigate whether buzz marketing operations violate federal 
rules on deceptive advertising. The basic FTC rule is that paid 
marketers must disclose that they are paid.

The Commercial Alert petition asked the FTC to review evidence that 
“companies are perpetrating large-scale deception upon consumers by 
deploying buzz marketers who fail to disclose that they have been 
enlisted to promote products. This failure to disclose is fundamentally 
fraudulent and misleading.”

The petition specifically focused on P&G, arguing that “the Commission 
should carefully examine the targeting of minors by buzz marketing, 
because children and teenagers tend to be more impressionable and easy 
to deceive. The Commission should do this, at a minimum, by issuing 
subpoenas to executives at Proctor & Gamble’s Tremor and other buzz 
marketers that target children and teenagers, to determine whether their 
endorsers are disclosing that they are paid marketers.”

A year later, the FTC responded. The Commission agreed with the thrust 
of Commercial Alert's argument: "In some word of mouth marketing 
contexts, it would appear that consumers may reasonably give more weight 
to statements that sponsored consumers make about their opinions or 
experience with a product based on their assumed independence from the 
marketer." But then the Commission declined to undertake an 
investigation or rule-making, saying it would consider matters only a 
case-by-case basis. The P&G case -- involving a quarter of a million 
teens who are not instructed to disclose their relationship to the 
company -- apparently was not noteworthy enough.

Said Gary Ruskin, Commercial Alert's executive director at the time, 
"Instead of acting like a watchdog, the Commission is more like a docile 
lapdog nestled in the lap of its corporate masters."

* A major emerging technology for consumer products is RFID (Radio 
Frequency Identification) systems. These systems, involving the 
attachment of tiny, trackable electronic chips to products (or people, 
pets and cars), offer the possibility of precise inventory control and 
management. They also portend some major privacy concerns.

The Electronic Privacy Information Center (EPIC) warns of the 
possibility of "an Orwellian world where law enforcement officials and 
nosy retailers could read the contents of a handbag -- perhaps without a 
person's knowledge -- simply by installing RFID readers nearby." There 
are concerns about retailers and manufacturers being able to track 
consumers once they leave the store.

These issues are being taken seriously in Europe. There, says EPIC 
executive director Marc Rotenberg, "the European Commission has 
undertaken an extensive public consultation and has recently held 
several high-level events." The European Commission is now soliciting 
comments on proposed privacy standards for RFID technologies.

In the United States, in 2004, the Federal Trade Commission held a 
workshop on RFID issues. P&G presented at the workshop, detailing the 
company's privacy policies and how it would ensure that RFID 
technologies were not abused. EPIC also presented.

"EPIC submitted very detailed comments with clear recommendations," says 
Rotenberg. "No action since."

* Childhood obesity rates in the United States have more than tripled 
over the past four decades. The childhood rate of type 2 diabetes, once 
known as "adult-onset" diabetes, has more than doubled in the past 
decade. No serious person believes skyrocketing childhood obesity rates 
are unrelated to the onslaught of junk food marketing targeting kids. 
The staid Institute of Medicine finds, "food and beverage marketing 
practices geared to children and youth are out of balance with healthful 
diets and contribute to an environment that puts their health at risk."

It has been impossible for the FTC to completely ignore this issue. But 
the FTC has doubly worked to protect the junk food marketers. It 
emphasized that many factors besides marketing are driving the obesity 
epidemic -- which is true, but a way to divert attention from the 
agency's regulatory role. And, as Majoras said in 2007, "the focus of 
the FTC/HHS [Department of Health and Human Services] joint initiative 
on childhood obesity has been on marketing and industry self-regulation."

In recent years, facing the threat of litigation, federal legislation, 
state and local regulation, and citizen pressure campaigns -- just about 
everything but serious FTC action -- the junk food companies have 
adopted some modestly helpful marketing guidelines to curb some of their 
most aggressive practices. But the guidelines remain voluntary and are 
non-enforceable. Although it has held some interesting meetings, the FTC 
has been absent on the regulatory front.

These are just three among many examples. Other FTC policy issues 
implicating Procter & Gamble include online marketing to kids, product 
placement on TV, and mergers (the FTC in 2005 approved a controversial, 
$57 billion P&G takeover of Gillette, a decision from which Majoras 
recused herself.) There are many others.

There's no reason to suspect Majoras is violating any laws in going to 
work for Procter & Gamble, or that she will in the future. There is no 
reason to believe she did favors for P&G in anticipation of a job with 
the company. From her new, high post, she personally may never take up a 
matter before the FTC.

But the deep corruption inside the beltway is not the illegal, 
Jack-Abramoff stuff. The real corrupting influences are the things that 
are legal. The things that Washington insiders view as just "how things 
work."


Robert Weissman is editor of the Washington, D.C.-based Multinational 
Monitor, <http://www.multinationalmonitor.org> and managing director of 
Commercial Alert <http://www.commercialalert.org>.

(c) Robert Weissman

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