How Things Work: FTC Chair to Join Procter & Gamble

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.”

Note: I serve as managing director for Commercial Alert.