A prohibition on advertising? (Briefly Noted).

Hemphill, Thomas A.

LAST DECEMBER, THE NATIONAL BROADcasting Company announced that it had signed a contract with the world's largest distributor of distilled spirits, Diageo PLC, to air liquor commercials for products from Diageo's Guinness UDV division. The contract included an agreement to abide by a 19-point set of guidelines intended to limit children and teenagers' exposure to the commercials. Among those guidelines is a requirement that the ads air after 9 p.m. and that they appear during programming that NBC believes would not draw a significant portion of younger viewers. (For example, the commercials went on hiatus during the network's February telecasts of the Winter Olympics.)

"We've taken a measured and steady approach to increasing our presence on television," Guinness UDV vice president Ted Hissey told the New York Times. "We want to do this in the right way, a responsible way, with pretty strict guidelines."

On December 15, during NBC's late night "Saturday Night Live" program, the broadcaster aired its first ad under the agreement: a spot promoting designated driving that was "brought to" viewers by Smirnoff vodka. The NBC contract mandates that the distributor run four months of commercials advocating responsible drinking before the network will air ads promoting Diageo products like Smirnoff, Johnnie Walker Scotch, and Captain Morgan's rum.

LIFTING THE BAN

The contract established a new precedent for American television broadcasting. Though liquor ads on the airways have grown increasingly common since the Distilled Spirits Council of the United States (DISCUS) lifted its self-imposed ban on television and radio advertising in 1996, the NBC agreement is the first arrangement by a major broadcast network to run liquor commercials.

DISCUS abandoned its radio ban (in place since 1936) and television ban (1948) in order to "level the competitive playing field" with the wine and beer sectors, which have had a regular presence on the airways since the early days of broadcasting. By 1995, liquor's share of the alcoholic beverage industry had declined from 44 percent in 1970 to 29 percent, and DISCUS members considered the advertising decision to be crucial for the industry's future. Since 1996, liquor advertising has aired on more than 400 broadcast television stations, 2,000 radio stations, and on television cable networks and systems representing 67 percent of the nation's households.

The NBC contract required more than just a change in DISCUS policy. Prior to 1982, the National Association of Broadcasters (NAB) had established radio and television codes of conduct that effectively kept liquor ads off the air. The NAB codes were subsequently eliminated because of U.S. Department of Justice antitrust concerns but, until the NBC decision, network TV remained free of liquor commercials because all the major television networks established corporate policies of not accepting them. Indeed, at the time of the December announcement, NBC officials conceded that they had not solicited any liquor advertising, but instead had been approached by Diageo.

NEGATIVE REACTION

The NBC-Diageo announcement met with immediate negative reaction from the public health community and legislators. J. Edward Hill, chairman-elect of the American Medical Association, said that NBC'S decision was "shockingly irresponsible and should be reversed immediately. It is obvious the network is putting its desire for profit far above the health of our nation -- especially young people, who develop many of their ideas and expectations about alcohol from watching TV." Joseph A. Califano Jr., president of Columbia University's National Center on Addiction and Substance Abuse and a former secretary of Health, Education, and Welfare during the Carter administration, wrote in a December 18 Washington Post op-ed piece, "The only solution now is for federal regulation, just as we have federal regulation prohibiting tobacco ads on television."

Califano's words were soon echoed in Congress. In a December 20 letter to NBC from Representatives Frank R. Wolf (R-Va.) and Lucille Roybal-Allard (D-Calif.), the lawmakers expressed "extreme disappointment" in NBC for dropping its voluntary ban on liquor advertising. They opined that the contract offered "a sad commentary that your bottom line today is more important to your company than the lives of young people tempted to drink or recovering alcoholics trying to beat their disease."

While "implor[ing] NBC to reverse its decision, reassert its social responsibility, and put back into place its self-regulated ban on liquor advertising," the lawmakers warned that "we are prepared to hold extensive hearings on alcohol advertising and to introduce legislation to replace the system of self-regulation of hard-liquor advertising with mandatory federal regulation."

INDUSTRY SELF-REGULATION

The liquor, wine, and beer sectors of the alcoholic beverage industry have longstanding voluntary codes of conduct that self-regulate advertising and marketing practices. The codes emphasize that advertising should be targeted to legal age consumers of their products. For liquor producers and distributors, DISCUS developed the Code of Good Practice for Distilled Spirits Advertising and Marketing (which is periodically revised and updated) to responsibly guide its membership. (See "Harmonizing Alcohol Ads," Regulation, Spring 1998.)

In response to criticism of those self-regulation regimes, the House and Senate Appropriations Committees requested that the Federal Trade Commission undertake a study to evaluate their effectiveness. The FTC released the results of that study in 1999. The report verified that the industry generally complies with guidelines covering advertising content and placement, product placement, online advertising, college marketing, and code enforcement.

The report positively cited DISCUS for prohibiting its members from marketing on college campuses, even though the practice is not specifically mandated in its code. The FTC also noted that the liquor industry, unlike the wine and beer industries, operates a code review board within its organization. The report recommended that each sub-sector of the industry take an evolutionary step beyond that board and establish external advertising and marketing review boards with responsibility and authority to address complaints from the public or other industry members. Finally, the FTC recommended that all alcoholic beverage industry members should build on their self-regulation best practices to avoid promoting alcoholic beverages to underage consumers.

UNDERAGE DRINIKING

According to the 2000 "Monitoring the Future" study by University of Michigan researchers, the percentage of high school seniors consuming alcohol has fallen over the past quarter-century. In 1975, surveyors found that 84.5 percent of seniors drank an alcoholic beverage at least once a year, 68.2 percent drank at least once a month, and 5.7 percent drank daily. By 2000, those percentages had declined to 73.2 percent for annual usage, 50 percent for monthly usage, and 2.9 percent for daily usage.

Although those results are encouraging, the attendant problems are still considerable, with underage drinking levels increasing since the mid-1990s. According to a 2000 survey commissioned by the U.S. Department of Health and Human Services, about 9.7 million persons age 12 to 20 report drinking alcohol in the month prior to the survey. Of those, 6.6 million were binge drinkers and 2.1 million were heavy drinkers. Furthermore, alcohol-related car crashes are the leading cause of death among young people ages 15 to 24, more than 43 percent of teenagers who began drinking before age 14 later became alcoholics, and underage drinking costs Americans nearly $55 billion annually. Alcohol is also a contributing factor in illegal drug use, premarital sex, and sexual abuse among teenagers and college students.

The advertising connection

Given the consequences of alcohol abuse by underage drinkers, one can understand the reaction to NBC's announcement. But does alcoholic beverage advertising contribute to those consequences?

A 1985 FTC review of econometric studies concluded that there was no reliable evidence that alcohol advertising contributes to aggregate or individual consumption of alcoholic beverages, let alone abuse. Yet, the 1999 FTC report noted that "the econometric research focuses only on the effect of advertising on population-wide alcohol consumption and thus it may not effectively test for the small part represented by underage consumption. In short, the generally inconclusive nature of the empirical research does not rule out the existence of a clinically important effect of advertising on youth drinking decisions."

Indeed, an earlier study by Joel Grube and Lawrence Wallack of the Prevention Research Center of the University of California, Berkeley, indicated that there are statistically significant correlations between alcohol advertising and youths' likelihood to drink. The study, which was published in the February 1994 American Journal of Public Health, found that awareness of television beer advertising was related to more favorable beliefs about drinking, greater knowledge of beer brands and slogans, and increased intentions to drink as an adult.

UNSETTLED ISSUES

The Grube-Wallack study offers evidence of a link between advertising and young people's attitudes towards drinking. But the guidelines established voluntarily by NBC and Diageo should limit the ads' contribution to youth "awareness" of alcohol. Perhaps that self-regulation will satisfy the concerns raised by Wolf and Roybal-Allard when they threatened legislation.

Of course, there is a third issue at play besides underage drinking and industry self-determination: Does the liquor industry have the right to exercise free speech in the form of advertising for its products? Two recent U.S. Supreme Court rulings -- Liquormart vs. Rhode Island and Greater New Orleans Broadcasting Association vs. the United States -- have supported that right over government claims to social welfare concerns. Will Congress attempt to restrain that right? Or will the liquor industry assuage those concerns and promote public confidence in self-regulation, perhaps by being the first alcoholic beverage sector to create an external advertising review board as recommended by the FTC?

On March 20th, NBC announced that it would end its agreement with Diageo. In explaining the decision, NBC cited congressional and special interest pressure. DISCUS responded that NBC's change was the result of pressure from another group: beer makers.

Thomas A. Hemphill is a former fiscal officer for the New Jersey Department of State who is now pursuing his Ph.D. in business administration, with a primary field of strategic management and public policy, at The George Washington University. His current research involves strategy, technology, and innovation policy.