Markets Wired

The marketers of Four Loko have agreed to re-label and repackage the supersized, high-alcohol, fruit-flavored, carbonated malt beverage, to resolve Federal Trade Commission charges of deceptive advertising.

The FTC alleges that Phusion Projects, LLC and its principals falsely claimed that a 23.5-ounce, 11 or 12 percent alcohol by volume can of Four Loko contains alcohol equivalent to one or two regular 12-ounce beers, and that a consumer could drink one can safely in its entirety on a single occasion.

In fact, according to the FTC, one can of Four Loko contains as much alcohol as four to five 12-ounce cans of regular beer and is not safe to drink on a single occasion.  Consuming a single can of Four Loko on a single occasion constitutes “binge drinking,” which is defined by health officials as men drinking five (and women drinking four) or more standard alcoholic drinks in about two hours.

“Deception about alcohol content is dangerous to consumers, and it’s a serious concern for the FTC,” said David Vladeck, Director of the agency’s Bureau of Consumer Protection.  “Four Loko contains as much alcohol as four or five beers, but it is marketed as a single-serving beverage.”

The 23.5-ounce Four Loko cans are the size of about two regular beer cans and are non-resealable. The FTC complaint alleged that on one company website, consumers were encouraged to enter a “photo contest” in which they posted many photos of people drinking directly from the 23.5-ounce Four Loko cans. In stocking instructions, Phusion urged merchants to place the cans where other refrigerated, single-serve alcoholic beverages are displayed.

The administrative settlement requires Phusion Projects to include disclosures on containers of Four Loko, or any other flavored malt beverage containing more  alcohol than two and-a-half regular beers, stating how much alcohol – compared to the amount of alcohol found in regular beer – is in the drink.  The order also specifies the location and appearance of the disclosure.  For example, the disclosure for a 23.5 ounce can of Four Loko with 12 percent alcohol by volume would state:  “This can has as much alcohol as 4.5 regular (12 oz. 5% alc/vol) beers.”

Starting six months after the settlement takes effect, Phusion Projects is required to use
only resealable containers for flavored malt beverages that have more alcohol than the equivalent of two and a half regular beers.

Also, the settlement bars Phusion Projects from misrepresenting the alcohol content of any beverage, and from depicting people drinking directly from the container of any product containing more alcohol than that found in two and a half regular beers.

In November 2010, the FTC sent warning letters to marketers of Four Loko and three
other caffeinated alcohol drinks.  Citing incidents “suggesting that alcohol containing added
caffeine presents unusual risks to health and safety,” the FTC letters warned that marketing of
such beverages may constitute an unfair or deceptive practice that violates the FTC Act.    
Phusion Projects, LLC and the other companies subsequently agreed to remove the caffeine and other stimulants from the products.

The administrative complaint against Phusion Projects, LLC also names principals Jason
Freeman, Christopher Hunter, and Jeffrey Wright as respondents

The Commission vote to approve the administrative complaint and proposed consent
agreement was 5-0.  The FTC will publish a description of the consent agreement package in the Federal Register shortly.  The agreement will be subject to public comment for 30 days,
beginning today and continuing through November 2, 2011, after which the Commission will decide whether to make it final.  Interested parties can submit written comments electronically or in paper form by following the instructions in the Invitation To Comment part of the
“Supplementary Information” section.  Comments in electronic form should be submitted using
the following weblink:  https://ftcpublic.commentworks.com/ftc/phusionprojectsconsent
and following the instructions on the web-based form.  Comments in paper form should be mailed or delivered to:  Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580.  The FTC requests that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

NOTE:  The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest.  The complaint is not a finding or ruling that the respondent has actually violated the law.  A consent order is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated.  When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions.  Each violation of such an order may result in a civil penalty of up to $16,000.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.  To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call
1-877-FTC-HELP (1-877-382-4357).  The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad.  The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook and follow us on Twitter.

(FTC File No. 1123084)
(Four Loko NR)